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Does Paying the Minimum Hurt Your Credit Score

Credit card bills can be confusing. If everything was straightforward and clear, credit card debt wouldn’t be such a big issue. But it’s not clear, and debt is a massive issue for millions of consumers. 

One of the most confusing aspects is the minimum payment, with few consumers understanding how this works, how much damage (if any) it does to their credit score, and why it’s important to pay more than the minimum.

We’ll address all of those things and more in this guide, looking at how minimum credit card payments can impact your FICO score and your credit report.

What is a Credit Card Minimum Payment?

The minimum payment is the lowest amount you need to pay during any given month. It’s often fixed as a fraction of your total balance and includes fees and interest.  

If you fail to make this minimum payment, you may be hit with late fees and if you still haven’t paid after 30 days, your creditor will report your activity to the major credit bureaus and your credit score will take a hit.

When this happens, you could lose up to 100 points and gain a derogatory mark that remains on your credit report for up to 7 years. Making minimum payments will not result in a derogatory mark, but it can indirectly affect your credit score and we’ll discuss that a little later.

Firstly, it’s important to understand why you’re being asked to pay a minimum amount and how you can avoid it.

How Much is a Minimum Credit Card Payment?

Prior to 2004, monthly payments could be as low as 2% of the balance. This caused all kinds of problems as most of your monthly payment is interest and will, therefore, inflate every month so that every time you reduce the balance it grows back. 

Regulators forced a change when they realized that some users were being locked into a cycle of credit card debt, one that could see them repaying thousands more than the balance and taking many years to repay in full.

These days, a minimum payment must be at least 1% of the balance plus all interest and fees that have accumulated during that month, ensuring the balance decreases by at least 1% if only the minimum payment is met.

Do I Need to Make the Minimum Payment?

If you have a rolling balance, you need to make the minimum monthly payment to avoid derogatory marks. If you fail to do so and keep missing those payments, your account will eventually default and cause all kinds of issues.

However, you can avoid the minimum payment by clearing your balance in full.

Let’s assume that you have a brand-new credit card and you spend $2,000 in the first billing cycle. In the next cycle, you will be required to pay this balance in full. However, you will also be offered a minimum payment, which will likely be anywhere from $30 to $100. If this is all that you pay, the issuer will start charging you interest on your balance and your problems will begin.

If you spend $2,000 in the next billing cycle, you have just doubled your debt (minus whatever principal the minimum payment cleared) and your problems.

This is a cycle that many consumers get locked into. They do what they can to pay off their balance in full, but then they have a difficult month and that minimum payment begins to look very tempting. They convince themselves that one month won’t hurt and they’ll repay the balance in full next month, but by that point they’ve spent more, it has grown more, and they just don’t have the funds.

To avoid falling into this trap, try the following tips:

  • Only Spend What You Have: A credit card should be used to spend money you have now or will have in the future. Don’t spend in the hope you’ll somehow come into some money before the billing period ends and the credit card balance rolls over.
  • Get an Introductory Interest Rate: Many credit card issuers offer a 0% intro APR for a fixed period of time, allowing you to accumulate debt without interest. This can help if you need to make some essential purchases, but it’s important not to abuse this as you’ll still need to clear the full balance before the intro period ends.
  • Use a Balance Transfer: If you’re in too deep and the intro rate is coming to an end, consider a balance transfer credit card. These cards allow you to move your full balance from one card (or cards) to another, taking advantage of yet another 0% APR and essentially extending the one you have.
  • Pay the Minimum: If you can’t pay the balance in full, make sure you at least pay the minimum. A missed payment or late payment can incur fees and may hurt your credit score. 

Why Pay More Than the Minimum?

You may have heard experts recommending that you pay more than the minimum every month, but why? If you’re locked into a cycle of credit card debt, it can seem counterproductive. After all, if you have a debt of $10,000 that’s costing you $400 a month, what’s the point of taking an extra $100 out of your budget?

Your interest and fees are covered by your minimum payment and account for a sizeable percentage of that minimum payment. By adding just 50% more, you could be doubling and even tripling the amount of the principal that you repay every month.

What’s more, your interest accumulates every single day and this interest compounds. Imagine, for instance, that you have a balance of $10,000 today and with interest, this grows to $10,040. The next day, the interest will be calculated based on that $10,040 figure, which means it could grow to $10,081, which will then become the new balance for the next day. 

This continues every single day, and the larger your balance is, the more interest will compound and the greater the amount will be due over the term. By paying more than your minimum payment when you can, you’re reducing the balance and slowing things down.

Does Paying the Minimum Hurt My Credit Score?

Paying the minimum amount every month ensures you are doing the bare minimum to avoid hurting your credit history or accumulating fees. However, it can indirectly reduce your score via your credit utilization ratio.

Your credit utilization ratio is a score that compares the credit limit of all available credit cards to the total debt on those cards. It accounts for 30% of your credit score and is, therefore, a very important aspect of the credit scoring process.

The more credit card debt you accumulate, the lower your credit utilization rate will be and the more your score will be impacted. If you only pay the minimum, this rate will become stagnant and may take years to improve. By increasing the payment amount, however, you can bring that ratio down and improve your credit score.

You can calculate your credit utilization score by adding together the total amount of credit limits and debts and then comparing the latter to the former. A combined credit limit of $10,000 and a balance of $5,000, for instance, would equate to a 50% ratio, which is on the high side.

Can Credit Card Fees Hurt My Credit Score?

As with interest charges, credit card fees will not directly reduce your score but may have an indirect effect. Cash advance fees, for instance, can be substantial, with many credit card companies (including Capital One) charging 3% with a $10 minimum charge. This means that every time you withdraw cash, you’re paying at least $10, even if you’re only withdrawing $10.

What many consumers don’t realize is that these fees are also charged every time you buy casino chips or pay for some other form of gambling, and every time you purchase money orders and other cash products. 

Along with foreign transaction fees and penalty fees, these can increase your balance and your minimum payment, making it harder to make on time payments and thus increasing the risk of a late payment.

Does Paying the Minimum Hurt Your Credit Score is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

Truth About Reward and Store Credit Cards

On the surface, reward cards are a great way to make a few extra dollars or grab some air miles without increasing your spending or your debt. If you spend a lot of money at a particular shop, store cards will seem like an equally beneficial prospect. But these cards exist for a reason—they’re there to make more money for the providers and the retailers, not you.

Sure, reward/store cards have other benefits if you use them properly, but there are a host of disadvantages and hidden terms that you need to be aware of before signing on the dotted line. 

What are Store Cards?

Store cards are tied to specific stores and offered by chains of retailers. These cards work just like traditional cards and are often branded by networks like Visa and MasterCard. The difference is that they can only be used in the issuing stores and their rewards are tied to those stores.

In essence, they are store loyalty cards that come with a lien of credit attached. 

What are Reward Cards?

Reward cards are also tied to credit card networks, including American Express and Discover, as well as Visa and MasterCard. They award points every time they’re used for qualifying purchases and these points can then be swapped for air travel and other benefits. 

Some reward schemes award a specific amount of cash back, often fixed to 1% or 2% of purchases made on specific items, such as groceries or utility bills.

How Can Providers Offer These Rewards?

If a provider offers you cash back every time you spend money on your credit card, someone has to foot the bill. Many consumers assume that the credit card network covers the cost, and to an extent, they do. But it’s not quite as simple as that.

Every time you use your credit card to make a purchase, the retailer is charged a fee, often between 1% and 3% of the purchase. This is the network’s charge. With reward cards, this fee increases, and the extra money is used to fund the rewards program.

As a result, retailers are not exactly happy with these programs as they drive their costs up and reduce their profits. The only way around this, is to increase the cost of the product or, more likely, to reward customers who pay with cash/debit. Retailers are not allowed to add a surcharge for credit card use, but there’s nothing stopping them from choosing which cards they do and don’t accept.

Your local Mom & Pop enterprise isn’t being antiquated and old-fashioned by refusing credit cards. They just can’t cover the costs. 5% may not sound like a big deal, but for retailers with minimal buying power and the massive overheads of running a brick-and-mortar store, 5% can be a deal breaker.

Smaller retailers are fighting back against reward cards while bigger ones are embracing them by adopting their own store cards. With a store card, they have more say, more control, and they know that those small losses will be offset by the increased purchases.

Issues with Store Credit Cards

Store cards carry a big risk and have far few benefits than reward cards. The advantages of these cards are obvious: If you shop a lot in a particular place, you can save money via the cash back schemes. 

They can also help with emergency purchases, providing you clear the balance in full. But, while the benefits are obvious, the same can’t be said about the disadvantages.

Con 1: They Have High Interest Rates

The average credit card interest rate in the United States is around 16%. The average rate for store cards is over 20%. That 4% may not seem like much, but if you don’t repay your balance every month that interest will compound, grow, and cost you a small fortune. 

At 16% with a $10,000 balance and a 60-month repayment term, you’ll pay $243 a month and over $4,000 in total interest.

Increase that rate to 20% and your monthly payment grows by $20 while your total interest increases by nearly $1,500. The longer you leave it and the smaller your monthly payments are, the greater that difference will be.

For example, if you repay just $200 a month on that balance, the difference between 16% and 20% is 26 extra months and close to $5,000. Of course, store cards rarely offer such high limits, but this is just as example to show you how much of a difference even the slightest percentage increase can cause.

It’s worth keeping this in mind if you ever apply for a traditional rewards card. Getting rewards in return for a higher APR is great if you repay your balance in full every month and terrible if you don’t.

Con 2: They Have High Penalty Rates

If you miss a payment on your store credit card you could be hit with a penalty APR as high as 29.99%, as well as a late payment fee of $39. The rates are high to begin with, but these penalty rates are astronomical and will make a bad situation worse.

That’s not all, as some providers are known to be very unforgiven when it comes to missed and late payments. In some cases, your account will default even if you underpay just once and just by a few dollars. 

Con 3: They Have Low Credit Limits

Retailers are not lenders. They don’t have the time, funds or patience to chase debts and deal with collection agencies. As a result, they don’t offer high credit limits and generally you’ll get a fraction of what an unsecured credit card might provide you with.

This might not seem like much of an issue. After all, a smaller credit limit means you’re less likely to accumulate large amounts of debts. However, this has a massively negative impact on your credit score that few borrowers consider.

30% of your credit score is based on something known as a credit utilization ratio. This looks at the total available credit and compares it to the debt that you have accumulated. If you have several cards with a combined credit limit of $10,000 and a balance of $5,000, then your ratio is 50%, which is considered to be quite high.

If a store card is your only account and you spend $450 on a $500 limit, then you have a credit utilization ratio of 90%, which will reduce your score. Your credit report is also negatively affected by maxed-out credit cards, a feat that’s much easier to achieve when you have a low credit limit.

Con 4: There Are Better Options

It’s better to have one good reward card than multiple store cards. The former will provide you with far better interest rates and terms, while the latter will hit your credit report with several hard inquiries and new accounts. 

A rewards card will still benefit you when shopping at those stores and will also provide you with a wealth of other benefits.

Con 5: You May Spend More

Store cards are not designed to make your life easier and give you a few freebies. Regardless of what the store tells you, they’re not made to reward loyalty, they’re made to encourage spending. 

This doesn’t always work, and research suggests that many individuals use reward cards just like they would normal cards. But for a small minority, the idea of acquiring points is enough to convince them to spend more than they usually would.

Some good can be good debt, such as when it’s used to acquire an asset or something that won’t depreciate. But very rarely do we use credit cards for this purpose and generally, if you’re spending more on a store card it means you’re wasting more money on things you don’t need.

Con 6: You Can’t Use Them Anywhere Else

A store card can only be used in that particular store. This renders it redundant as an emergency card and also means you’re encouraged to shop in that one place. You don’t have a chance to shop around and find the cheapest price; you may spend more just to use your card and get the benefits, with those benefits rarely covering the additional money you spend.

What About Reward Cards?

Some reward cards have very high rates as these rates are used to offset the rewards program. However, this isn’t always the case, because, as discussed above, networks often charge retailers more to offset these purchases and therefore don’t always need to cover the costs themselves.

Some credit cards, such as the Discover It, offer solid reward schemes and would also be included on any list of the best non-reward credit cards. It’s a solid all-rounder and it’s not alone. However, many reward cards charge high annual fees and penalty rates, just like you’ll find with a store card.

It’s important to study the small print and make sure the card is viable. If you’re going to clear the balance every month, a slightly higher interest rate won’t hurt, especially if it comes with some generous rewards. But if there is any doubt and even the slightest chance that you won’t clear the balance, it’s always best to focus on a low-interest rate first.

Even the most generous 5% cash back reward card will not offset the losses occurred by paying a few more percentage points of interest.

Will Reward/Store Cards Affect my Credit Score?

Credit cards trigger hard inquiries, which can reduce your credit score by up to 5 points. This is true for every credit card that you apply for. Rate shopping can combine multiple inquiries into one if they are for the same type of credit, but this doesn’t apply to credit cards.

A new account will also impact your score. This impact is often minimal and if you keep up with your repayments then it will vanish in time. However, if you miss a payment, max-out your card or increase your credit utilization score, it could have a detrimental effect on your score and your finances.

Keep store cards to a minimum and only sign up if you’re 100% sure you’re getting a good deal that will benefit you in the short-term and the long-term.

Truth About Reward and Store Credit Cards is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

The Average Salary of a Pharmacist

The Average Salary of a Pharmacist.

If you’ve been to the pharmacy lately, you may have found yourself wondering how much pharmacists make. Being a pharmacist, at least at the retail level, involves a lot of standing, long shifts and dealing with customers. In other words, it might not be for everyone. On the plus side, salaries in the field are on the high side, with an average annual salary of $123,670. 

The Average Salary of a Pharmacist: The Basics

The Bureau of Labor Statistics (BLS) reports that the mean annual salary of a pharmacist in May 2018 was $123,670 per year. The highest-paid 10% of pharmacists earn a mean annual wage of $161,250. The lowest-paid 10% of pharmacists make an average of $87,790. So, no matter where you end up on the pharmacist income scale your annual wage is likely to be much higher than the annual income of the average American.

The BLS also provides a job outlook for the professions it studies. The job outlook shows the percent by which a field will grow (or shrink) between 2016 and 2026. The job outlook for pharmacists is 6%, which is just shy of the 7% average across all fields. Between 2016 and 2026, the BLS projects the field will add 17,400 jobs.

Where Pharmacists Make the Most

The Average Salary of a Pharmacist

The BLS also looks at state and metro-area data on the jobs the Bureau studies. So where does it pay the most to be a pharmacist? The top-paying state for pharmacists is Alaska, with a mean annual wage for pharmacists of $139,880. Other high-paying states are California ($139,690), Vermont ($135,420), Maine ($133,050) and Wisconsin ($132,400).

The top-paying metro area for pharmacists is Tyler, TX, with an annual mean wage of $174,870. Other high-paying metro areas are Santa Cruz-Watsonville, CA ($155,330); Vallejo-Fairfield, CA ($153,820); Santa Maria-Santa Barbara, CA ($151,590) and San Jose-Sunnyvale-Santa Clara, CA ($149,790).

Becoming a Pharmacist

In order to get a job as a pharmacist, you first have to get a Doctor of Pharmacy degree, also known as a Pharm.D. A Pharm.D. is a postgraduate degree, but most programs only require applicants to have two years of undergraduate education under their belts. Many future pharmacists will spend two years taking prerequisite courses like chemistry, biology and physics. Then, they’ll matriculate and spend the next four years in pharmacy school.

Once you have your degree, you’ll need to pass two exams to receive your license. The first is The North American Pharmacist Licensure Exam (NAPLEX), which assesses your knowledge and skills. The second is either a state specific test or the Multistate Pharmacy Jurisprudence Exam (MPJE). This tests your knowledge of pharmacy law specific to the state you’ll be practicing in.

The Cost of Becoming a Pharmacist

The Average Salary of a Pharmacist

Becoming a pharmacist requires years of study and, for most people, taking on student debt. According to the American Association of Colleges of Pharmacy
Graduating Student Survey, 84.8% of pharmacists-in-training borrowed money to complete their Pharm.D. degree program. Of the survey respondents who borrowed money, the median amount borrowed (across public and private institutions) was $160,000.

Bottom Line

While pharmacists have an advanced degree and a high salary, they are often working in a retail setting. And retail, with its heavy emphasis on customer service, isn’t for everyone. Still, the high pay and job security, along with the intellectual and public-service aspects of working as a pharmacist, might make it worth it. If you’re thinking of becoming a pharmacist, it’s a good idea to talk to some professionals in the field before you commit to an expensive course of study.

Tips for Forging a Career Path

  • Your salary dictates a lot of your financial life, such as how much you can afford to pay in rent and the slice of your paycheck that goes to taxes. However, there are some principles that apply no matter your income bracket, like having an emergency fund and saving for retirement.
  • Need help managing your money and growing your nest egg? You should probably be working with a financial advisor. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.

Photo credit: Â©iStock.com/skynesher, ©iStock.com/gradyreese, ©iStock.com/IPGGutenbergUKLtd   

The post The Average Salary of a Pharmacist appeared first on SmartAsset Blog.

Source: smartasset.com

Should I Cash Out My 401k to Pay Off Debt?

Paying off debt may feel like a never-ending process. With so many potential solutions, you may not know where to start. One of your options may be withdrawing money from your retirement fund. This may make you wonder, “should I cash out my 401k to pay off debt?” Cashing out your 401k early may cost you in penalties, taxes, and your financial future so it’s usually wise to avoid doing this if possible. When in doubt, consult your financial advisor to help determine what’s best for you.

Before cashing out your 401k, we suggest weighing the pros and cons, plus the financial habits you could change to reduce debt. The right move may be adjusting your budget to ensure each dollar is being put to good use. Keep reading to determine if and when it makes sense to cash out your 401k.

How to Determine If You Want to Cash Out Your Retirement

How to Determine If You Want to Cash Out Your Retirement

Deciding to cash out your 401k depends on your financial position. If debt is causing daily stress, you may consider serious debt payoff plans. Early withdrawal from your 401k could cost you in

Deciding to cash out your 401k depends on your financial position. If debt is causing daily stress, you may consider serious debt payoff plans. Early withdrawal from your 401k could cost you in taxes and fees as your 401k has yet to be taxed. Meaning, the gross amount you withdraw from your 401k will be taxed in full, so assess your financial situation before making a decision.

Check Your Eligibility

Depending on your 401k account, you may not be able to withdraw money without a valid reason. Hefty medical bills and outstanding debts may be valuable reasons, but going on a shopping spree isn’t. Below are a few requirements to consider for an early withdrawal:

  • Financial hardships may include medical expenses, educational fees, bills to prevent foreclosure or eviction, funeral expenses, or home repairs.
  • Your withdrawal is lower or exactly the amount of financial assistance you need.

To see what you may be eligible for, look up your 401k documentation or reach out to a trusted professional.

Assess Your Current Financial Situation

Sit down and create a list of your savings, assets, and debts. How much debt do you have? Are you able to allocate different funds towards debts? If you have $2,500 in credit card debt and a steady source of income, you may be able to pay off debt by adjusting your existing habits. Cutting the cord with your TV, cable, or streaming services could be a great money saver.

However, if you’re on the verge of foreclosure or bankruptcy, living with a strict budget may not be enough. When looking into more serious debt payoff options, your 401k may be the best route.

Calculate How Much of Your Retirement Is at Risk

Having a 401k is crucial for your financial future, and the government tries to reinforce that for your best interest. To encourage people to save, anyone who withdraws their 401k early pays a 10 percent penalty fee. When, or if, you go to withdraw your earnings early, you may have to pay taxes on the amount you withdraw. Your tax rates will depend on federal income and state taxes where you reside.

Say you’re in your early twenties and you have 40 years until you’d like to retire. You decide to take out $10,000 to put towards your student loans. Your federal tax rate is 10 percent and your state tax is four percent. With the 10 percent penalty fee, federal tax, and state tax, you would receive $7,600 of your $10,000 withdrawal. The extra $2,400 expense would be paid in taxes and penalties.

The bottom line: No matter how much you withdraw early from your 401k, you will face significant fees. These fees include federal taxes, state taxes, and penalty fees.

What Are the Pros and Cons?

What Are the Pros and Cons?

Before withdrawing from your 401k, there are some pros and cons to consider before cashing out early.

Pros:

  • Pay off debt sooner: In some cases, you may pay off debt earlier than expected. By putting your 401k withdrawal toward debt, you may be able to pay off your account in full. Doing so could help you save on monthly interest payments.
  • Put more towards savings: If you’re able to pay off your debt with your early withdrawal, you may free up your budget. If you have extra money each month, you could contribute more to your savings. Adding to your savings could earn you interest when placed in a proper account.
  • Less financial stress: Debt may cause you daily stress. By increasing your debt payments with a 401k withdrawal, you may save yourself energy. After paying off debt, you may consider building your emergency funds.
  • Higher disposable income: If you’re able to pay off your debts, you may have more financial freedom. With this freedom, you could save for a house or invest in side hustles.

Cons:

  • Higher tax bill: You may have to pay a hefty tax payment for your withdrawal. Your 401k is considered gross income that’s taxed when paid out. Your federal and state taxes are determined by where you reside and your yearly income.
  • Pay a penalty fee: To discourage people from cashing out their 401k, there’s a 10 percent penalty. You may be charged this penalty in full.
  • Cut your investment earnings: You gain interest on money you have stored in your 401k. When you withdraw money, you may earn a lower amount of interest.
  • Push your retirement date: You may be robbing your future self. With less money in your retirement fund, you’ll lower your retirement income. Doing so could push back your desired retirement date.

6 Ways to Pay Off Debt Without Cashing Out Your 401k

6 Ways to Pay Off Debt Without Cashing Out Your 401k

There are a few ways to become debt-free without cutting into your 401k. Paying off debt may not be easy, but it could benefit your future self and your current state of mind. Work towards financial freedom with these six tips.

1. Negotiate Your Credit Card Interest Rates

Call your credit card customer service center and ask to lower your rates on high-interest accounts. Look at your current interest rate, account history, and competitor rates. After researching, call your credit card company and share your customer loyalty. Follow up by asking for lower interest rates to match their competitors. Earning lower interest rates may save you interest payments.

2. Halt Your Credit Card Spending

Consider restricting your credit card spending. If credit card debt is your biggest stressor, cut up or hide your cards to avoid shopping temptations. Check in on your financial goals by downloading our app for quick updates on the fly. We send out weekly updates to see where you are with your financial goals.

3. Put Bonuses Towards Your Debt

Any time you get a monetary bonus, consider putting it towards debts. This could be a raise, yearly bonus, tax refund, or monetary gifts from your loved ones. You may have a set budget without this supplemental income, so act as if you never received it. Without budgeting for the extra income, you may feel less tempted to spend it.

4. Evaluate All Your Options for Paying Down Debt

If you’re in dire need to pay off your debts, look into other accounts like your savings or emergency fund. While money saved can help in times of need, your financial situation may be an emergency. To save on early withdrawal taxes and fees, you can borrow from savings accounts. To cover future emergency expenses, avoid draining your savings accounts entirely.

5. Transfer Balances to a Low-Interest Credit Card

If high-interest payments are diminishing your budget, transfer them to a low-interest account. Compare your current debt interest rates to other competitors. Sift through their fine print to spot any red flags. Credit card companies may hide variable interest rates or fees that drive up the cost. Find a transfer card that works for you, contact the company to apply, and transfer over your balances.

6. Consider Taking Out a 401k Loan Rather than Withdrawing

To avoid early withdrawal fees, consider taking out a 401k loan. A 401k loan is money borrowed from your retirement fund. This loan charges interest payments that are essentially paid back to your future self. While some interest payments are put back in your account, your opportunity for compounding interest may slightly decrease. Compounding interest is interest earned on your principal balance and accumulated interest from past periods. While you may pay a small amount in interest fees, this option may help you avoid the 10 percent penalty fee.

As your retirement account grows, so does your interest earned — that’s why time is so valuable. While taking out a 401k loan may be a better option than withdrawing from your 401k, you may lose out on a small portion of compounding interest. When, or if, you choose to take out a 401k loan, you may start making monthly payments right away. This allows your payments to grow interest and work for you sooner than withdrawing from your 401k.

This type of loan may vary on principle balance, interest rate, term length, and other conditions. In most cases, you’re allowed to borrow up to $50,000 or half of your account balance. Some accounts may also have a minimum loan balance. This means you’ll have to take out a certain amount to qualify. Interest rates on these loans generally charge market value rates, similar to commercial banks.

Pulling funds from your retirement account may look appealing when debt is looming over you. While withdrawing money from your 401k to pay off debt may help you now, it could hurt you in taxes and fees. Before withdrawing your retirement savings, see the effect it could have on your future budget. As part of your strategy, determine where you’re able to cut out unnecessary expenses with our app. Still on the fence about whether withdrawing funds is the right move for you? Consult your financial advisor to determine a debt payoff plan that works best for your budgeting goals.

The post Should I Cash Out My 401k to Pay Off Debt? appeared first on MintLife Blog.

Source: mint.intuit.com

Fed reports credit card balances continued to dip in November

Credit card balances slightly dipped in November, as the COVID pandemic fallouts continued, and with the government continuing to wrangle about a second round of fiscal stimulus measures.

Consumer revolving debt – which is mostly based on credit card balances – was down $700 million on a seasonally adjusted basis in November to $978.8 billion, according to the Fed’s G. 19 consumer credit report released Jan. 8.

In November, credit card balances were off 1% on an annualized basis, after October’s 6.7% drop, which came on the heels of September’s 3.2% annualized gain.

Total consumer debt outstanding – which includes student loans and auto loans, as well as revolving debt – continued to grow and rose $15.3 billion to $4.176 trillion in November, a 4.4% annualized gain.

Card balances had touched an all-time high in February 2020 before the coronavirus pandemic started impacting consumer spending and bank lending. They dipped below the $1 trillion mark in May, for the first time since September 2017.

The Fed also reports that interest rates on credit cards were at 14.65% in November, with the rates on cards that are assessed interest (since they carry a balance) at 16.28%.

See related: Paying with credit is getting more expensive in the pandemic

Consumers expect household spending to rise

Consumers expect their household spending at the median to grow 3.7% in the year ahead, the highest in more than four years – even though they don’t anticipate much growth in their income (2.1%) or earnings (2%) – according to the New York Fed’s survey of consumer expectations for November.

Moreover, they are less optimistic about their household financial situation in the year ahead, with more of them expecting it to decline, and fewer consumers expecting an improvement.

Even then, more respondents are optimistic about their ability to access credit in the coming year, expecting it will be easier. However, the mean probability of missing a minimum debt payment in the next three months rose by 1.6 percentage points to 10.9%. Even then, this is still below its 11.5% average for 2019.

Less cheer on labor market front

On the labor market front, more consumers expect that the U.S. unemployment rate will be higher in the year ahead, with the average probability of this outcome rising to 40.1% in November, from October’s 35.4%.

However, they were less pessimistic about the prospects of losing their jobs, with this probability down to 14.6% on average, from October’s 15.5% (but still above the 2019 average of 14.3%).  Those above the age of 60 and those without a college degree were more optimistic about holding on to their jobs.

The respondents were less likely to voluntarily leave their jobs, with the mean probability of this down 1.3 percentage points to 16.6% (a low for the survey). Those 60 and older were at the forefront of this decline. However, respondents on average were more optimistic about the prospects for landing a new job if they lost their current ones.

In the meantime, the government reported that the economy shed 140,000 jobs in December, and the unemployment rate remained at 6.7%. The jobs lost were mostly in the sectors hard hit from the pandemic, with closures impacting the leisure and hospitality sector, as well as private education jobs.

The retail sector added jobs to aid holiday shopping, mostly in warehouses (which benefit from e-commerce) and superstores.

Although average hourly earnings for private sector employees rose $0.23, this is mostly because of the loss of lower-paying jobs in the leisure and hospitality sector, which tilted the average wage for the employed workers to the upside.

In online commentary, Diane Swonk, chief economist at GrantThornton, noted, “The silver lining to a bad overall jobs report is that the losses were concentrated in sectors that are most sensitive to COVID. Many of those jobs will come back once we get to herd immunity. The challenge is getting there, given the slow rollout of vaccines and poor uptake in some areas.”

Given that it will take a while to more fully open the economy, she is in favor of “aid today and another tranche once the new administration takes office.”

See related: Second stimulus deal provides $600 per individual

Application rates for credit cards plunged on pandemic impact

The New York Fed also reported in its credit access survey, which is conducted every four months as part of its survey of consumer expectations, that most credit applications and acceptance rates fell sharply after last February. Mortgage credit was the exception to this.

For credit cards, the application rate was off a steep 10.6 percentage points since February to touch a survey low of 15.7%. This decline impacted all age groups and credit score categories. Applications for credit card limit increases dropped 6.6 percentage points to 7.1% between February and October, another series low since the survey began in October 2013. The decline was spread across all ages and credit score categories.

Consumers applying for credit cards were also subject to steep rejection rates, with this rate rising 11.6 percentage points from February to touch 21.3% in October. Those looking for higher credit limits also were rejected about 37% of the time, from about 25% of the time in February.

No wonder consumers said they were less likely to apply for a credit card or credit limit increase in the next 12 months, with these figures falling 36% and 34% on average since February 2020. Those with credit scores above 680 led this decline.

Source: creditcards.com

How to Choose the Best Healthcare Plan for Your Budget

Healthcare expenses can take a huge chunk out of any family’s budget so I want to break down how a family can weigh the pros and cons of a traditional health plan vs a high deductible one.

Health Insurance Getting Too Expensive

If I asked you what’s are your biggest expenses each month, what would you say? If you’re like most families, you’d probably mention rent (or mortgage), food, or transportation. And yes, those are huge expenses for the typical family.

However, one of the largest can be healthcare. The crazy thing is how much it can drain from your budget even if you’re a relatively healthy family.

We found out firsthand a few years ago when my husband’s employer had open enrollment. Each year we review the health insurance options and it seemed to us that the costs kept rising. After having kids, we went with the ‘basic’ family plan and the monthly premiums still rose pretty fast. Finally, we hit our limit.

With the latest update, our monthly premiums would pretty much be the same as our mortgage. Considering we only visit the doctors for the girls’ annual well visits, we knew we needed to change things up. We know we’re not the only family dealing with this.

Right now for a family of four, the average monthly premium paid is $833 or  $9,996 annually. Add in the costs of the average deductible and you can see what a huge chunk of money health insurance can be.

However, this year when you get ready to review your options during open-enrollment, you may want to look into whether a high deductible health plan is a practical and affordable solution for your family.

How High Deductible Health Plans Work

As the name suggests, a High Deductible Health Plan (HDHP) comes with a larger deductible than a typical health insurance plan. The appeal for employers and insurance companies to offer this is that you’re taking on more financial responsibility for your health care costs.

The upside for you is that you should see a drop in the monthly premiums. For us, we saw a difference of a few hundred dollars for each month for premiums. Using a $300/month in savings, that’s like an extra $3,600/year that can be used for other financial goals that you may have.

Huge Tax Wins with a Health Savings Accounts

Another reason why a high deductible plan may be appealing for families is the ability to have a Health Savings Account (HSA).  It’s an extremely tax-advantaged account that you can use to pay for medical expenses.

If this sounds familiar, it may be because you’ve heard of or used a Flexible Spending Account (FSA). That’s what’s typically offered with the ‘more standard’ health plans. Basically you put money in there before taxes.

We used an FSA for years and it helped us to pay for regular expenses like my glasses and contacts. The problem was making sure we calculated enough to go into the account because if we didn’t use it by the end of the year, we’d lose it.

With a Health Savings Account, however, whatever you don’t use you keep. It can then grow in the account over the years. After saving enough to cover things like the deductible, you may decide to invest a portion to improve growth over the long term.

Making it even better is the fact that your HSA contributions are tax-deductible. Depending on your employer, they may also offer contributions to your HSA. That’s a fantastic bonus!

What really sweetens the deal is that families can contribute up to $6,900 each year, that money grows tax-free, and if we use the money for qualified medical expenses, what we pull out is tax-free.

Sounds amazing, right?

It’s enough to make you want to jump in and switch right now, but a high deductible and HSA may not be the best solution for your family.

The Pros and Cons of High Deductible Health Plans

A high deductible plan sounds great, but there are some costs to consider. With the higher deductible, you need to be aware of what your typical annual expenses would be to make sure you’re coming out ahead.

For example, if you have chronic health issues that require regular visits and perhaps medication, then you’d be paying a lot of money upfront before you hit your deductible and have your insurance cover their portion.

One way you can review your expenses is by using Mint to pull the numbers quickly. You can then easily see how much you’ve paid out of pocket.

When we looked at a few years of expenses, it confirmed that our visits were pretty much limited to annual well-visits (which are covered by HDHP plans), meaning we can save a significant amount of money.

When I spoke to a certified financial planner about what families need to consider, he pointed out families should also be aware of their out of pocket maximums with the plan they are looking into.

You want to have enough stashed away (either with your general savings or with your HSA) to cover those expenses.

A relative of mine recently had a procedure done. Even with insurance, her portion came out to be $3,000!

Thankfully she has some savings she can tap into, but still, that’s quite a bit of money.

So please run the numbers to make sure you could absorb a medical problem, especially during that first year of switching plans.

Choose the Best Plan for Your Family

So after weighing the costs and benefits, took the leap and switched over to a high deductible health plan and opened an HSA. Years later, we feel it was the best decision for our situation.

I hope you now have a better understanding of your options when it comes to health insurance. Having that knowledge can assist you in making the best decision for your family and finances.

I’d love to hear from you – what plan are using now? Do you have any plans on switching?

 

The post How to Choose the Best Healthcare Plan for Your Budget appeared first on MintLife Blog.

Source: mint.intuit.com

10 Ways to Master a Virtual Career Fair (+ Questions to Ask)

Preparing for a career fair used to mean packing a bag, suiting up, and budgeting more time for travel. Now, preparational tasks include updating video backgrounds and Wi-Fi connections. Swapping in-person events for virtual events may sound like an outlandish idea, but it’s become the star of the show in 2020, as virtual networking events have become the safest meeting alternative amidst the COVID-19 pandemic.

Whether you’re seeking a new career or an internship, you’ll likely come across virtual career fairs as a way to talk to potential employers. This is a new experience for many, so we’ve compiled 10 tips to make the most out of a virtual career fair. From preparing your stage to showcasing your skills, here’s how to build your resume and salary potential. Landing a new job is the perfect time to enhance your budgeting skills as you allocate your new income.

What Is a Virtual Career Fair?

A virtual career fair is an event over video that pairs job seekers with employers. For people who want to advance their skills and income, finding a paid internship or new career path may be on this year’s agenda. These events bring together established companies looking to hire people just like you.

Virtual events may feel out of the ordinary compared to traditional in-person career fairs, but there are a few perks — like saving you travel time and expenses. Before signing up for a virtual networking experience, you probably have a few questions. Should you dress like you would for an in-person event? How will you stand out? Below, we share 10 tips to prepare for a virtual career fair and be seen by employers.

How to Prepare for a Virtual Career Fair

First things first, register! If you’re unaware of when or where these events may take place, contact your school’s career center or hosting company. Email, or call, to ask about future career events and opportunities. Keep reading to get the ball rolling with your new career by networking and interviewing from home.

1. Check Your Wi-Fi Connection

Wi-Fi has become more of a lifeline and it’s especially valuable for a virtual career fair. The last thing you want is to freeze or get kicked out due to an unstable connection. If your home has spotty Wi-Fi zones, make sure you set up in a reliable zone. Test your connection by calling a family member or friend with the video software you’ll be using. If your Wi-Fi passes the test, set up your meeting station. If not, reboot your Wi-Fi router and try again in a different area.

2. Set Up Your Meeting Environment

Set your computer up in a professional and distraction-free zone. Setting your computer on your kitchen table with your back up against a white wall may do the trick. Ensure you silence your phone, sit in a well-lit area, and rid your area of sounds or visuals that may steal your attention. Test your video background by turning on your computer camera before starting the event.

3. Research Companies You Would Like to Speak With

Before starting the meeting, make a strategic plan. Ask your career center for a list of employers that may be attending this event. Research each employer on Google, LinkedIn, or job sites like Glassdoor. Scope out which positions you’d be interested in and may excel at. Once you’ve created a list of top employers and positions, ensure you secure a meeting spot to chat with them. During the virtual career fair, emphasize your skills and how they may fit each company’s needs.

4. Dress Up as You Would for an In-Person Career Fair

To get in a professional mindset, dress as you would for an in-person career fair or interview. Thirty-seven percent of employers ranked appearance as one of their key differentiators when seeing if someone is fit for the job. While employers may only see you from the waist up, dress up from head to toe. Dressing the part may help you act the part as a professional goal-getter. A classic button-up shirt, slacks, polished hair, and simple accessories will make the perfect outfit.

5. Test Your Equipment and Log In Early

After doing your research and picking your outfit, test your equipment. Double-check your computer’s battery, microphone, camera, and Wi-Fi connection. Then, log into any accounts or video conferencing software you’ll be using for this event. If possible, ask a friend or family member to video chat beforehand to work through any technical difficulties. Have your notes, research, and a pen close by for the meeting ahead.

The Anatomy of a Successful Virtual Meeting

6. Practice Strong Communication and Body Language

When you’re on the call, present yourself with confidence and attention to detail. Look into the camera, sit up straight, and nod throughout conversations to show you’re engaged. When speaking up, avoid fidgeting or touching your face. When using hand gestures, consider sitting far away from the screen for attendees to see. Practice these skills by role-playing video conversations 30 minutes before the video call.

7. Be Patient and Listen

Technical difficulties and long conversations may happen. And that’s okay! Practice your patience and professionalism by patiently waiting for an employer to sift through candidates or technical issues. If you’re cut short on time, ask the employer for their contact information. After the event, if you want to learn more, ask to set up an additional meeting to continue the conversation.

8. Ask for Email Addresses to Stay in Touch

You may consider asking each employer you speak with for their contact information. In most cases, you’ll get an email address. After the event ends, compile your thoughts. Write a list of your top three employers and reach out directly. Send each an email thanking them for their time and kindly ask about next steps.

9. Practice Your Interview Skills

Sending in applications and speaking with employers may lead to an interview. And if so, congrats! To prepare for any short notice interviews, brush up on your skills early. Print out a list of commonly asked interview questions and topics specific to the industry. Consider curating responses to five interview questions each morning. Before you know it, you’ll be ready for any impromptu interviews that come your way.

10. Maintain Your Network

You may choose to work for one employer over the other, and employers may go with another candidate. To keep a pulse on future career opportunities, stay in touch. Down the line, these employers may want to hire you. Send each person in your network an email check-in every six months. To ensure you keep tabs on your network, create a spreadsheet with contact information and check-in notes.

Questions to Ask at a Virtual Career Fair

The key to standing out is to ask engaging questions. While 56 percent of recruiters may hire candidates that don’t ask questions during an interview, 44 percent wouldn’t. If you want to be seen by employers in video meetings, ask questions! Here are 10 questions to ask employers you’re interested in working with:

  • What surprised you the most about [company/role]?
  • On a typical day, what does someone in [role] do?
  • Can you tell me about the different stages of the hiring process?
  • What are the highlights and lowlights of this position/your role/company?
  • I read an article about [event, role, candidate, campaign]. What was it like being a part of the team during that time?
  • What opportunities for growth are there at [company name]?
  • What’s the biggest challenge you and your team face?
  • I see you don’t have any openings in [position]. Do you have a forecast on upcoming roles in this industry opening up?
  • Who will this potential candidate report to in this role?
  • How does your team measure performance?

Keep reading for quick tips to mastering the art of a virtual career fair.
your budget. You may have the opportunity to grow your career while getting paid. To track these financial changes, regularly check in on your budget. You may be able to put more towards your savings, credit card debt, or investments. While building your career portfolio, you could build your financial portfolio along the way.

The post 10 Ways to Master a Virtual Career Fair (+ Questions to Ask) appeared first on MintLife Blog.

Source: mint.intuit.com

Ways to Earn Extra Money for Paying Off Debt

Debt traps you in a seemingly endless cycle. More debt means more interest and less disposable income, which means you’re constantly fighting against the tide and are always one issue away from complete financial disaster. 

Once you start making repayments on this debt, there will be less interest to compound, which means the grip will loosen, you’ll have more breathing space, and you can look forward to a debt-free future.

In this guide, we’ll look at some of the ways you can earn extra cash to start clearing your debt, from acquiring additional work and responsibilities to making money-saving sacrifices.

Stop Wasting Money

The average American household wastes over $10,000 a year on unnecessary purchases. These purchases all fuel the economy and keep you and your family happy. But if you’re losing sleep because you have so much debt, it’s worth making these sacrifices to give you some peace of mind and build towards a better future.

Save on Grocery Bills

The average family spends between $300 and $500 a month on groceries and as much as 40% of this food goes to waste. The majority is fresh food past its expiration date but we also have a tendency to cook monster-sized meals that end up being thrown away.

To save money on your grocery bill, try the following:

  • Plan your shop carefully. Only buy fresh when you’re confident that the food will be eaten in the next day or two.
  • Reduce your portion sizes when cooking. It’s okay to err on the side of caution and make more than needed, but to cook double or triple what will be eaten is just wasteful.
  • Don’t worry too much about best-before dates. It doesn’t mean the food should be thrown away, just that it’s not at its best. The same applies to lots of fresh fruit and vegetables. In this case, you can rely more on the squeeze and sniff test.
  • Cook food that is about to expire and would otherwise be thrown out. You can freeze the meals for later. You can also try picking, preserving or juicing to reduce waste.

Eating Out

On average, American families spend close to $3,000 a year eating out. It’s a great way to spend time with the family or have a date night with your partner. However, if you have a lot of debt then $3,000 worth of restaurant visits is a little excessive. 

Stop spending so much money eating out and focus on some cheaper alternatives. A picnic is a great alternative. You can use some of that uneaten food and spend time with the family without paying a small fortune for the pleasure.

Stop the Vacations

Big families take one vacation a year on average and this costs them between $4,000 and $5,000. The more children you have, the more expensive it becomes. What’s more, around a third of these families will take as many as three additional, smaller vacations every year, potentially spending over $7,000.

Don’t sacrifice spending some time with your family but look for cheaper options instead. Choose a small cabin instead of a plush hotel. You can go for walks, play games, swim, hike—all free activities that could bring you even closer and cost even less.

Hold the Vices

Thousands are spent on cigarettes and gambling, and much more is spent on shopping sprees. If you have any of these habits, it’s time to put a stop to them. We don’t need to tell you about the benefits of stopping smoking or giving up those shopping sprees, but if you’re still not convinced about the gambling, then spend a few months recording every single dollar that you bet.

Most gamblers think they are breaking even or only losing a little, but when they monitor their activity, they discover they are actually losing a lot.

Check Your Subscriptions

According to a recent survey, most Americans underestimate how much money they spend on subscriptions. We’ve turned into a nation of subscribers, spending hundreds of dollars a month on dozens of services we barely use.

We pay for cable, streaming services, gyms—we convince ourselves that it won’t matter as it’s only a few dollars, but those costs can add up to a lot of wasted cash at the end of the year.

Sell Your Stuff

Many sites can help you offload your unwanted items. There’s a home for all the things you no longer need, from electronics and video games sold on eBay or Amazon, to clothes and furniture sold through sites like Craigslist, Facebook Marketplace, and Swappa. 

It’s time to let go, stop hoarding, and earn some cash from the things you don’t need. Be honest with yourself and get rid before the value of those items depreciates more and you end up with worthless, dust-covered junk that just takes up space.

As an example, let’s imagine that you have a dozen old video games worth just $5 each on average, 10 old school textbooks worth just $2 each, a couple of furniture pieces worth $10, an unwanted guitar worth $50, and a couple of handbags worth $25 each.

Individually, those items aren’t worth much and you might think they’re not even worth your time trying to sell them, But combined, you’ll get $200 and if you put that towards a high-interest credit card debt, it could save you twice that in interest over the term. You will also free up some space in the process.

Get Another Job

You know you can make more money by asking for a pay rise. It goes without saying. The problem is, life isn’t quite that easy and, in most cases, asking for a pay rise will elicit little more than a short, sharp laugh from your employer. 

However, there are many ways you can earn money from a side hustle, taking advantage of the gig economy and swapping a little talent, a little time, and a lot of hard work for some cash.

Get a Part-Time Job

There is a multitude of ways you can earn some extra cash these days. The pay isn’t always great, but if you’re working towards clearing your debts and have some free time, every dollar helps.

Uber and Lyft are always looking for new drivers; retailers need shelf-stackers and greeters, and there is no shortage of delivery jobs. Review your free time, calculate when you can work, and see what’s available. 

Teach a Skill

Can you play a musical instrument or speak a second language? Do you have some other teachable skill? It has never been easier to make money as a part-time teacher, as sites like Preply.com, Udemy.com, Tutor.com, Noodle.com, TakeLessons.com, and many more bring all of these opportunities to you. 

You can visit the student’s house, invite them to yours or simply conduct the lessons via Skype or the site’s built-in conferencing software.

Freelance

Upwork.com, Guru.com, Fiverr.com—these sites and more have created a world of possibilities for skilled writers, designers, coders, and other experts. But they offer so much more than that. 

You don’t need to be particularly skilled to work on these sites as the pay is scaled based on ability and experience. If you have a little free time and some competent language skills, you can hire yourself as a virtual assistant to do basic admin work.

There are countless entrepreneurs seeking individuals to complete basic tasks such as transferring data, reviewing images, and answering emails. The pay isn’t great if your skills are limited, but you get to work from home on your own time. 

Cover the Basics

Freelancing and teaching may be out of the question if you don’t have any skills and are not computer literate. But there are still a few other options, including dog walker, lawn mower, babysitter, and general handyman. 

Ask your neighbors, friends, and family if they need any work; check Craigslist and local classifieds. Everyone can do something and there are always odd jobs available if you’re willing to work.

Try Some Other Methods

When the ordinary fails, it’s time for the extraordinary. There are some weird and wonderful ways you can make extra cash when needed.

Sell Your Hair

If your hair is long and untreated, you could make a tidy sum by selling it. Good quality human hair is used to make premium wigs and some companies are willing to pay thousands for the right locks. However, there are some strict conditions, such as the fact that it must be untreated and very well looked after.

House Sit

Sites like Thumbtack can connect you to homeowners looking for skilled workers, as well as people willing to look after their homes and belongings. They will pay you to stay in their homes and perform some basic chores while they’re away, such as watering plants, feeding pets, and mowing the lawn.

Make Something

If your skills are practical and not creative, turn your hand to making things and sell them through sites like Etsy, Facebook or your own online store. The world has been obsessed with single-use plastics for many years and it’s now waking up to the damage that has been done. Many consumers are willing to pay extra for something that has been handmade and is unique, especially if the money supports an independent creator.

Grow Your Own

If you have a yard and some free time, start growing some produce. Crops like potatoes, carrots, greens, and even some fruits are easy to grow and can give you a bumper crop every year. You’ll pay a few cents for the seeds and simply need to devote some time to digging, watering, and harvesting.

Think about how much money you’ll save if you have your own supply of vegetables and fruits and can just pick fresh from the yard whenever you’re cooking. If your family eats a lot of cheese or drinks a lot of wine or beer, you can also start producing your own supply. 

Cheese can be made with a lot of milk, a little rennet, and a few simple steps. Beer can be made using some do-it-yourself kits. 

As for wine, it’s one of the easiest things you can make yourself. You don’t even need grape juice as wine can be made from a multitude of fruit juices, vegetable juices, and more. You can even make a strong, fragrant white wine with a handful of fruit teabags. The only expense is the sugar, which means you can make several dozen bottles worth of wine for less than $10.

Join a Clinical Trial

Although it’s not a method we would recommend, it’s one that’s worth including. If you join a clinical trial, you’ll be paid to act as a guinea pig. The good news is that the majority of these trials run without incident and most subjects are as healthy at the end as they were at the beginning. The bad news is that there is always a risk and there’s no telling what will happen.

You can search for available trials on the Clinical Trials website run by the US National Library of Medicine. 

Summary: Paying Off Your Debt with Extra Money

Your first priority is to meet your minimum payment obligations and avoid any missed payments. Once you meet this obligation every month, you can put any extra cash you have towards clearing those debts. Every little helps, even if it’s just $50 or $100 here and there.

As an example, if you have a credit card debt of $10,000 with an APR of 25% and a minimum payment of $300, you’ll repay $17,251 in total over 58 months. Add just $100 a month and you’ll reduce the term by a whole 12 months and the balance by a massive $3,000. Take a look at our guides to the Debt Snowball Method and the Debt Avalanche Method to find the right payoff strategy for you. Both methods rely on you earning some extra cash and now that you’ve made it to the end of this article, you’ll know just how to do that!

Ways to Earn Extra Money for Paying Off Debt is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

How to Explain a Gap in Your Résumé

My first job out of college was with a recruiting firm run by three women who had nearly a hundred combined years of experience in the workforce. They taught me everything I needed to know about how to read resumes, including the warning signs to look for. A gap in employment was, according to them, the kiss of death.

Today, a hot minute and three U.S. presidents later, I truly believe that wisdom is as outdated as my prom dress. It was fine in the moment, but the moment has passed.  

Each of us is complex and unique, and our personal stories should reflect that.

The rules of employment history have changed, and the story you craft about your timeline is yours. Whether your employment gap happened because of a layoff, becoming a caregiver, taking a sabbatical, exploring entrepreneurship, or even just a mental health break, let's talk about how you can own that gap in a way that will want a prospective employer wanting more of you!

1. Lead with transparency

As poet Walt Whitman said, “I am large. I contain multitudes.” Each of us is complex and unique, and our personal stories should reflect that. There are no right or wrong plot points as long as each point is truthful.

When capturing your history (employment and otherwise) on your resume, be honest and transparent. There's no need to flag a gap in employment in bold print, but neither should you try to hide it.

Our journeys are complex and diverse. The trend toward inclusion will only grow in 2021. And beyond diversity in terms of race and gender, I believe companies are ready to lean into a diversity of experiences in the workforce. Companies must look beyond the traditional one-directional career path, and search for talent whose life experience reflects that of their customers.

Beyond diversity in terms of race and gender, I believe companies are ready to lean into a diversity of experiences in the workforce.

So don’t be ashamed of revealing your lived experiences, from caregiving to travel to taking time to pursue a passion. Transparency upfront will help you begin the conversation with a prospective employer on the right foot.

2. Reflect on your gains

Maybe you opted out of the workforce for a year to care for a child or parent or to travel the world. Or perhaps you were laid off in an economic downturn. Whatever your reason and whatever the cause, you were still a person living in the world during this time. Your experience may not have been “work experience,” but this is where life experience gets its time in the sun.

When I spent 2007 at home with my newborn daughter, there were days—many days—that left me feeling like my brain had turned to mush. Baby Beluga had become my theme song and I was spending days calculating ounces of milk digested and … processed. (Yes, I mean poops).

This is where life experience gets its time in the sun.

But as I started gearing up for a job search in 2008, I pushed myself to reflect on the gift of that year. Certainly, it was a privilege just to be with my infant daughter. But it had also given me some new skills and perspective. 

Time management and prioritization become finely tuned when your baby’s naps are suddenly your only windows of productivity. I had become part of a new demographic—parents—which broadened my perspective not only on the world but on any company’s potential customer base.

Oh, and my ability to experience failure but keep on keeping on? That expanded immensely. I screwed up daily with sleep training and sign language and all the mothering things. But I also persisted because I had a new responsibility to manage.

These were some of my reflections. I challenge you to define your own.

Think expansively about how this time has added in any way to the multitudes you contain. It is now a part of your story to shape and own.

Maybe you were laid off during the pandemic. You’re not alone. And remember, you’re leading with transparency. You don’t have to pretend the layoff was some grand gift. You’re allowed to experience disappointment. But shift quickly into considering what you gained during the weeks or months of not being employed.

What have you spent time doing? Being with family? Caring for a loved one? Supporting a working partner? Have you taken any classes? Picked up a new certification? Learned to cook? Think expansively about how this time has added in any way to the multitudes you contain. It is now a part of your story to shape and own.

3. Craft the narrative

So now, armed with insight and reflection, it’s time to craft the story you will proudly tell any prospective employer. This is your chance to package yourself as the most irresistible product on the job market.

I’ve always loved the commencement address Steve Jobs delivered at Stanford back in 2005, during which he said:

You can’t connect the dots looking forward; you can only connect them looking backward.

Steve Jobs

So, as you look back at the totality of your experience—work and life—what is the story you want to tell that makes you the most compelling candidate? How will you choose to connect the dots and help your potential employer see the complete picture?

In 2008, I showed up in interviews not as a new mom hoping desperately for anyone to give me a chance, but as a person with a broad perspective to offer. I still had my pre-baby skills and experiences, but now I could apply a keen ability to prioritize, to think critically about what should command my focus, to learn from failure, and to be successful without having control over a situation.

My conversations with hiring leaders painted this picture of me. I made sure to bring in examples of both work and parenting experience. It made me real and whole. And it ultimately won me a great job.

So, what’s the story you’ll tell? Maybe being laid off taught you that things can change on a dime, which has challenged and enhanced your agility. Maybe you used your time to take classes, brush up on skills, and add a certification. 

Prepare examples of how these insights and added skills will deliver value for your next employer. How lucky they will be to have you!

4. Fake it till you make it

I stand by the logic of everything I’ve said thus far. But there is so much more than logic at play here. There's ego and emotion and anxiety and lots of other messy human things. I’ve lived through, and overcome, all of that. Some days I’m still overcoming it.

Confidence is something that will grow over time. But don’t wait for it; cultivate it.

Are you wondering how I managed to show up with so much confidence after spending a year away from the corporate world? Then let me tell you my secret: It wasn’t confidence at all! It was all my fear and anxiety hidden behind a smile and a firm handshake. (Remember those?)

Confidence is something that will grow over time. But don’t wait for it; cultivate it. For now, if you’re struggling to access confidence, then just play the part. You’ll be amazed at how quickly the real thing will follow.

And there you have it. Yes, whole, complex, messy you. So practice your most confident smile, prepare your firm handshake, brush up your résumé, and get ready to pound the pavement.

Source: quickanddirtytips.com