EXCITING NEWS: I was selected to deliver a national training in San Francisco this November entitled: Personal Finance Solutions for Busy Mental Health Professionals. This 3 hour workshop includes material from my upcoming eBook. Stay tuned to get first crack at the NEW EBOOK. And it’s FREE to my readers.

“Life consists not in holding good cards but in playing those you hold well.” Josh Billings

Build skills in all areas. Set goals. Success will follow.

MAIN TOPIC: Pay attention to your Spending

Esmerelda  is a college student with lots of money trouble; ATM fees, overdrawn account fees, credit card late and interest fees, rescinded credit card, late fee on tuition account, and overspending in general. Hundreds of dollars in fees and interest ate up her meager savings and caused her LOTS OF STRESS!!

I want to save you from Esmerelda’s troubles.

At the beginning of the school year, you college students are on your own for the first time with worries about friends, school and MONEY. I’ll leave the friends and school worries to someone else. But I CAN TEACH YOU WHAT YOU NEED TO KNOW ABOUT MONEY MATTERS while you are in college.

IT IS YOUR RESPONSIBILITY TO HANDLE YOUR OWN MONEY whether you get cash from mom & dad, loans, jobs, or any combination. Follow these steps and you’ll have LESS MONEY STRESS NOW & LATER.

PRACTICAL APPLICATION: Get Control of your Cash

1. Open a checking account and savings account with NO FEES, for college students.

2. Arrange with employer to have check AUTOMATICALLY deposited in your savings account.

3. Use an on line account or bricks and mortar bank or credit union.

4. Ask these questions and only open if they say NO FEES in writing:

Do you have an account for college students with no fees at all?

Does this account offer free ATM withdrawals?

5. If you need a loan for school expenses, go straight to the Financial Aid office for HELP. Work with them as long as it takes to get the money you need. That’s what they’re there for!

6. TOTAL ALL YOUR INCOME- Estimate income from job, loans, parents, scholarship, and aid. WRITE DOWN YOUR INCOME IN A NOTEBOOK or chart like this one. Categorize by month or lump sum.

7. Complete a chart like the following and write down every expense you are responsible for; cell phone, tuition, rent, utilities, car payment etc.; include amount; date due; how paid. These are charges that are FIXED and don’t have much flexibility.

8. Add up your expenses write in the last line of the chart.

9. Next, add any expenses that you control; beer, restaurants, entertainment, etc. These are your DISCRETIONARY EXPENSES. These are the easiest places to cut spending.

10. TOTAL ALL YOUR EXPENSES.

11. If you have a credit card, use only for emergencies. If you don’t have the cash, don’t spend it!

12.  If you have a credit card, PAY THE BALANCE DUE IN FULL AT THE END OF EVERY MONTH.

13.  The money that is not due monthly, like your tuition or insurance, should be in your savings account. Make sure that the amount you will need for these infrequent payments stays in the savings account until you need it.

14.  Pay every bill early. At least a week before the bill is due, pay it.

15.  Bunch up bill paying into 2 times per month.

16.  Look at your income and expenses-Are you spending on things or experiences that are worthwhile to you? REALLY THINK ABOUT THIS ONE. If not, curb your spending.

17.  Read The Secret to Saving without Sacrifice here.

18.  Studies come first, but if you have extra time, consider partying less and get a part time job.

19.  Every month, put your discretionary money from each category in an ENVELOPE and label it. For example, $80.00 cash goes in an envelope at the beginning of the month. After you spend that $80.00 you are done with entertainment for the month!!!

20.  At the end of the month, analyze your income and spending. Complete another Income and expense tracking sheet. Make changes according to the info from the prior month.

ACTION STEPS:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

1. Read the entire article again.
2. Choose one or two steps to begin immediately.
3. Write in your planner the steps to take.
4. After completing the first steps, repeat until all are completed.

Write in with your questions and experiences.

YAKEZIE PERSONAL FINANCE BLOGS

After every article for the next several weeks, you will be introduced to several Personal Finance web sites in the Yakezie network. Each one has their own unique voice and style. The consistency in all is their desire to help others. Consider visiting a few each day!

 The Debt Hawk
The Millionaire Nurse Blog
The Saved Quarter
The Wealth Artisan
Ultimate Money Blog
Watson Inc

EXCITING NEWS: I was selected to deliver a national training in San Francisco this November entitled: Personal Finance Solutions for Busy Mental Health Professionals. This 3 hour workshop includes material from my upcoming eBook about Investing. Stay tuned to get first crack at the NEW EBOOK; and it’s FREE to my readers.

“If I splurge on anything, it’s cologne. I love smelling good.” Zac Efron

This quote suggests that Zac Efron, the wealthy movie star sensation from High School Musical and many more projects, is so financially savvy that his one indulgence is cologne. If that’s his lone indulgence, then this guy is on a path of financial strength.

Personal disclosure: I have never met nor spoken to Zac Efron. (Although I wouldn’t turn down an invitation to meet him!)

MAIN TOPIC: I am ALL FOR SPLURGING

I carefully plan my our family splurges:

• El carino (my hubby) indulges in his hobby of collecting sports memorabilia.
• I go out to work at a coffee shop once or twice a week and buy a coffee.
• Special occasions find me at the COACH outlet for a nice bag.
• Travel is planned and a big priority for our family. This week-end it’s a quick family get away to Atlantic City! (No gambling for us!)

I do not covet expensive jewelry, cars, fine dining (my birthday dinner was at Applebee’s this year). In fact, when el carino wants to tease me, he goads me with the offer to buy me jewelry (because he KNOWS I don’t value spending our money on expensive jewelry). In fact, I totally don’t get the women who want a huge diamond (bought on credit). Give me the cash any day to stick in the investment account.

Please don’t think this is a condemnation of cars, jewelry, or fine dining; it’s not. It is a recommendation to spend on those activities that YOU value, not what your neighbors, TV, or society tells you to value.

PRACTICAL APPLICATION: When not to Splurge

Do not splurge if these are your reasons:

• I really really want it
• I deserve it
• I owe it to myself
• I feel like getting it
• Why not, you only live once
• It will make me happy or important

These reasons to splurge are usually justifications to overspend; just thinly veiled self deceptions.

Look, if you can afford it, pay for it this month, and it’s in your budget, then why not.

But, if you just “WANT IT” but don’t have the cash to pay for it, even if you work hard….. you will regret the IMPULSE PURCHASE.

The August 2010 issue of Money magazine includes 7 Secrets of Super Savers. And although some of the strategies were a bit over the top, many included quite a few luxuries. Delay purchases over a certain amount was a sensible option. After all, the Elovitz family didn’t say “NO” to any purchase, but just to think about it and delay. Another family did not buy anything until they could pay for it in cash. No credit for them. Live below your means is a “no brainer;” but what about living on one spouse’s salary and banking the other?

On the flip side….it is IMPORTANT TO SPLURGE ONCE IN A WHILE. After all, if all you do in life is restrict yourself, you will feel deprived and be more likely to go on a spending binge.

How to make the decision to SPLURGE? Plan a splurge and consider your own personal splurging guidelines.

These are the FRIEDBERG SPLURGE GUIDELINES:

1. Plan , the purchase, not an impulse buy.
2. It is something we will enjoy for a while; either thinking about, watching, remembering, or using. Vacations and Broadway shows fit this category. For our splurge, el carino and I budget in trips to NYC to see Broadway Shows (frequently purchasing half price tickets).
3. Never buy on credit.
4. Consider whether it is worth the cost, TO US. On a recent trip to visit my parents, my mom offered to take us to a really fancy restaurant to celebrate my birthday. Even though my parents were treating, the cost of an extravagant restaurant is not worth the expense. I value eating out, in fact, I love to eat out…. But really upscale restaurants are not of value for me. I chose a nice seafood restaurant; healthy and tasty!!!
5. Pays lasting dividends: Education!

Splurging is important! Who wants to live a life of total deprivation? Wealth in life is actually more important than wealth in money. Of course, the irony is that you need a certain amount of financial wealth in order to splurge without debt.  Although, a bubble bath is a great (cheap) splurge,  it isn’t the same as a trip to Puerto Rico! Choose your splurges to fit into your own budget!

ACTION STEP:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.  

Write out a list of your personal SPLURGE GUIDELINES.

What do you splurge on? How do you plan for it?

 Check out what other personal finance bloggers are saying about Splurges.

Cool to be Frugal asks: Is it ok to Splurge when you are in Debt?

Well Heeled Blog wonders if Abnormal Penny Pinching Justifies Splurges?

Money Reasons discusses Losing Control to Lifestyle Inflation

Mea Culpa, I just Spent $1,450 at Apple said the Financial Samurai

Money Funk bemoans her Emotional Spending

Ramit Sethi at I Will Teach you to be Rich shares The Money Diaries of a 25 year old Single Mom who Writes Bad Checks

Image credit: Swamibu

Summer’s a time when you can kick back, relax and read a bit more. In that vein, I’d like to recommend some enjoyable and informative articles I’ve come across recently. Get a taste here, and stop by the authors’ sites for the full versions.

Could the Free Market have Ended Racism?

Let me state, I am not a fan of racism (As a matter of fact, some might call me a “liberal.”)! I don’t think the free market is enough to end racism but read on to hear a fascinating discussion at The Amateur Financier:

“ ‘The free market, as usual, will address the problem.  It punishes racists.  A business that doesn’t hire blacks will lose customers and good employees.  It will atrophy while its more inclusive competitors thrive.’ (John) Stossel raises an interesting point: could the free market have ended discrimination without government intervention?  Or were the government actions like the Civil Rights Act and its prohibitions on employment discrimination a needed remedy to the segregation era?”

2010 Tax Brackets; Which Income Tax Bracket am I in?

No one is enthusiastic about paying taxes, that being said…. the more you understand about the system, the more likely it is that you will KEEP MORE OF YOUR CASH! Read on about this important issue at The Oblivious Investor:

“The Federal income tax is referred to as a “progressive tax.” Of course, it’s not progressive in the same way that a social movement could be said to be progressive. What the term means in this case is that, as your taxable income increases, so does the rate at which you are taxed. People will often make statements such as “I’m in the 25% tax bracket.” For example, as you can see in the table below, a single person with a taxable income of $40,000 would be in the 25% tax bracket. People frequently misunderstand this to mean that all of the person’s income is taxed at a rate of 25%. In reality, the person’s overall tax rate will be much lower.”

The TAO of the Intellect

Loved the title, and the content gets you thinking… just not too much! Read more at Early Retirement Extreme:

“Another very human trait is to weigh recent information more than historical information or worse, weigh it higher than  “what is not seen”. The latter causes an enormous amount of confusion. One might almost say that the entire field of economics is dedicated to solve this problem (the broken window fallacy), at least after a couple of beers.”

Six Tips from Yorkshire’s Top Thriftiest Grannies

Who wouldn’t want to read this post? The grannies have the best tips; here’s a sneak peek, read more at Miss Thrifty:

“TOP TIP 4 – Pack junk mail into the empty cardboard toilet roll tubes and use them as firelighters.”

Good Debt vs. Bad Debt 

I agree with MOST of the content here… but read on and see what YOU think. Young and Thrifty has a great writing style, enjoy….. 

“Yes.. I mentioned the “D” word. Debt. Just letting that word roll off your tongue makes you feel like you have halitosis. Well, get that tongue scraper and Listerine out, because as surprising(and somewhat crazy) as this may sound, there is such thing good debt AND bad debt.”

Crank up your Savings Goals at Smarty Pig

Right now, get a (relatively) high yield at this unique goal-oriented savings site as discussed at Free From Broke.

“Whether you want to save up $500 for back to school shopping, or $5,000 for a family vacation, it is possible to use SmartyPig to reach that goal.  The concept is fairly straightforward, and works simply.”

Could you Give it all Away?

The uber-wealthy Bill Gates and Warren Buffett are doing just that? Join the discussion at Beating Broke:

“At the real bottom of this is a more important question.  Why do we build wealth?  What purpose do we give our lives that we strive to attain wealth.  In Warren Buffetts case, I think you could argue that he has always seen it as a challenge.”

Buying Blogs, Selling Blogs: How I Built my Blogging Business

Sam at the Financial Samurai is somewhat of a “rock star” in the personal finance blogging world as founder of the Yakezie Network. This guest post on his site is a real peak inside the “business of blogging.”

“This is a guest post written by Mike, a young financial planner / web entrepreneur who is pursuing his dream of running his online business. You can follow his progress at The Financial Blogger and read his other financial blogs at Green Panda Treehouse and Intelligent Speculator. 3 years ago, I was told by many bloggers: “You will never make money blogging. And if you do, $200/month will be your highest peak ever”. Three year ago, The Financial Blogger was averaging 500 visits per month and I was ecstatic when I made my first deal of $10 for a link. Three years later, I now run three financial websites, bought 2 of them and flipped a blog within a year.”

My Teen-age Son, the Cell Phone, & a Bill for $1,055.20

Len Penzo dot com is one of the most hilarious personal finance writers around. He DOES NOT DISAPPOINT with this uproarious post about his son’s adventures with texting & a new cell phone:

 ”I can’t remember the exact day he first requested his own cell phone, but I am quite certain the first letters he learned in school weren’t A-B-C.  They were A-T-(T). When Matthew turned 12 last year, we decided it was finally time to grant his wish.   The only condition was that he had to pay us $25 per month to maintain his account.  Knowing that he could easily earn $40 per month by simply mowing the lawn and doing chores around the house, Matthew readily agreed – and so we got him his phone.”

CARNIVAL of Money Stories 2 featured my article this week; Reduce Stress Get Rid of Dysfunctional Money Behaviors-Part 2. Read my article as well as other money stories at this informative round up.

“Overcome a Passion for Procrastination (in dealing with financial matters). ‘Procrastination is like a credit card: it’s a lot of fun until you get the bill.’ Christopher Parker

This young actor hit the nail on the head! Avoiding and procrastinating seem fine, for a while. Later- the price you pay for procrastination is quite HIGH. Charge away with the credit card; if you don’t have the cash to pay it off every month, you are walking on a treadmill of pain.”

ACTION STEP:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

Today, and every day, LEARN SOMETHING NEW!

What do you think about this summer reading? Agree, disagree, join the discussion……leave a comment.

Categories: credit, debt, goal setting, life

“Say NO out of love, and yes out of weakness.” Suze Orman

This means, NO to yourself for frivolous spending, NO to your kids. And NO to extravagances (you cannot afford) or wasteful spending. You will increase love of yourself and those around you when you practice the discipline to say NO.

MAIN TOPIC: The True Cost of Debt

Keep positive-debt sucks, you got yourself in trouble, accept it, and move on. Until you face up to reality and make a decision to get rid of the pain. You will continue to perpetuate it.

Here is the cost of making the minimum payment:

Let’s say you have $5,000 credit card debt.

 With an interest rate of 20%

If you pay the minimum payment of $133.33/month (declining slightly in later months) it will take ALMOST 23 YEARS to pay off the debt, and you will have paid $7,732.00 interest. That’s right; you will have paid a total of $12,732.00 for the privilege of buying $5,000 worth of goods.

With an interest rate of 9%

If you pay the minimum payment of $87.50/month (declining slightly in later months) it will take ALMOST 21 YEARS to pay off the debt, and you will have paid $3,373.00 interest. That’s right; you will have paid a total of $8,373.00 for the privilege of buying $5,000 worth of goods.

Now triple the $87.50 and pay $261.00 each month.

With an interest rate of 9% and a monthly payment of $261.00 it takes only 21 months to pay off $5,000.00 and you will only pay $418.00 in interest.

FACE REALITY; you need to pay down debt, for these reasons:

• Reduce stress
• Secure your financial future
• Reach you goals
• Add your own reasons:
• ______________________
• ______________________

 PRACTICAL APPLICATION; Here is the Plan

There are all sorts of calculators, systems, and plans for debt reduction. I’m not suggesting they are bad, and if they work for you, great. But, my premise is consistent; MAKE IT SIMPLE. Debt reduction does not need to be complicated. Let me repeat this; DEBT REDUCTION DOES NOT NEED TO BE COMPLICATED!!

Here is a strategy to get rid of debt, NOW. I don’t know how long it will take, and if you want to find out, feel free to check out one of the debt calculators above. But the BarbaraFriedbergPersonalFinance premise of debt reduction is like the “NIKE” school of thought: Just do it! Don’t obsess on how bad it’s going to be or how long it’s going to take, just follow these simple steps and begin!

1. Stop using all credit cards. NO EXCEPTIONS!

2. Renegotiate your interest rates – Lower your interest rate(s) now and decrease the total amount of interest you end up paying.

Call the number on the back of the credit card and ask to speak with customer service.

Here’s how Luiza did it.

Luiza: Hi, my name is Luiza and I currently have a $5,000.00 balance on my “CREDITSTINKS” credit card. The interest rate is currently 20% and I would like to lower the rate to 9%.

Customer Service: I’m sorry, I don’t have the authority to do that.

Luiza: Please connect me with a supervisor.

Supervisor: What can I do for you?

Luiza: Hello supervisor, I would like to lower my interest rate to 9%.

Supervisor: I’m not sure I can do that.

Luiza: Well, I would like to keep my business with your company, but if you cannot lower my interest rate, I will need to transfer my balance to a card with a lower interest rate.

Supervisor: We want to keep you as a customer. We can only lower your interest rate to 14%.

Luiza: Then I guess I will need to follow up with one of the other companies who offer me a 1.5% rate for a balance transfer.

Supervisor: Well, I guess I can lower your rate to 9%.

Time spent: 10 minutes

3. Repeat process on every credit card. Don’t worry about calculating how long it will take to pay off your debt.

4.  Pay at least TRIPLE the minimum on THE SAME CARD EVERY MONTH.

5. Pay double the minimum on the remaining cards.

THAT’S IT. You are done. Look, if you can pay more, wonderful. DO IT! If you can only pay triple on one card (and not double on the others), do that and just pay the minimum on the others.

When the first card is paid off, move on to triple the minimum payment on the next one. As you see the balance on your debt declining, your motivation to pay it off goes up.

No purchase is worth the pain of being in debt!

ACTION STEPS:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

1. Make the call to lower the rate on ONE CARD TODAY. Don’t delay.
2. Read about  RichMomSingleMom’s  heartfelt pain of debt, and let it motivate YOU like it motivated her! (She’s now well on her way to wealth!)

RELATED POSTS:

Help I Can’t Save, I’m too Far into Debt-Part 1

Help I Can’t Save, I’m too Far into Debt-Part 2

“It is imperative that we make consumers more aware of the long-term effects of their financial decisions, particularly in managing their credit card debt, so that they can avoid financial pitfalls that may lead to bankruptcy.” Daniel Akaka 

Not really much to add to this quote except—-PAY ATTENTION TO YOUR SPENDING!

MAIN TOPIC: What Happened After Esmerelda got her Credit Card?

In Understanding Credit Part 1 you learned of Esmerelda’s foray into the world of credit. Let’s revisit Esmerelda and find out how she faired with her first credit card.

Esmerelda gets a credit card and uses it a few times. Flash forward a few months; Esmerelda got a letter from a credit agency reminding her to pay her past due credit card bill. It turns out that she never paid ONE bill on her new credit card. How did this happen?

This is how Esmerelda explained it to me…..

“I was so proud of myself when I got the card, and I went directly to the web site to input my bank information for direct payment. I patted myself on the back for how responsible I was,” she said to me. After that introduction, I was somewhat perplexed at the bill collection letter she received on behalf of the credit card company.

So I responded, “So, what happened?”

Here’s where the story goes downhill. “I went back to check that my payment had been received,” reported Esmerelda. The credit card site said the payment had not been received. So Esmerelda did what I suspect some of you have also done. She ignored the message and assumed there was just a problem with the site.

Esmerelda went on about her life, and forgot about the message stating the credit card bill was unpaid. Esmerelda didn’t worry too much when her credit card was denied for payment. After all, she still had her debit card. She was a master at “compartmentalizing” and so just forgot about the issue.

As a close confidant and financial resource, she came to me for help. After some prodding, it turns out she input her debit card number instead of her bank account and ABA bank routing numbers into the credit card web site. Had she put in the correct numbers, everything would have been ok.

In the end it worked out ok. Fortunately, her credit was cut off before she had the chance to do much financial damage. She returned to the site, input the correct numbers, and paid the bill. It remains to be seen whether this will impact her brief credit history or not!

Practical Application: The BIG LESSONS!

What are the take-aways from Esmerelda’s unfortunate credit card adventure?

• When you get a credit card, you must pay the bill on time or else………….. bad things happen. There is no way to avoid paying the bill. It will not go away.
• If you do not pay the bill within the allotted time, the credit card company adds on MORE CHARGES, called “finance charges” and “interest charges.” That means you are borrowing money from the credit card company. For that privilege, you pay a fee (finance charge) as well as interest (a percent of the outstanding bill).
• If you continue to avoid paying the bill, then the fees and interest charges (18%) continue.

• Still haven’t paid after 2 months? You owe $173.46 and your bill now goes to a collection agency. That is a company that is hired by the credit card company to collect their debt.
• The bad thing about going to a collection agency is….. you still have to pay the bill, the interest and fees continue to accrue AND the CREDIT AGENCIES are notified of your delinquent account.
•  Once you have a non-payment or late payment reported to the credit agencies, more bad stuff happens.

 In life and credit, you must pay your bills. Don’t buy something you cannot afford to pay for AT THE TIME OF PURCHASE. Going into adulthood is difficult.

 Learn to pay your bills early and make life easier for yourself.

ACTION STEP:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

 For a month, pay for everything you buy with cash.

Write and share how it works out.

YAKEZIE SHORT CARNIVAL:  Pay Off Highest Interest Or Highest Balance Credit Card – Analysis Paralysis @ Free From Broke -   What Scrooge McDuck Taught Me About Finances @ Saving Money Today -  Are you a Monthly Payment Buyer or Budgeter? @ Car Negotiation Coach

Categories: credit, debt

“I can’t speak for them, of course, but I believe that most economists would accept the view that, while you sometimes can make a score by sheer luck, you can’t do it constantly, unless you’re willing to put the resources in. “ Merton Miller

There is minimal luck in achieving a high credit score! As in most life endeavors, even maintaining strong credit takes effort.

MAIN TOPIC: I’ve Got a Secret

When I first started buying real estate, I had no idea what a credit score was. People didn’t talk about credit scores and I just assumed there was ONE interest rate, depending on the term of the loan. In other words, if you took out a loan for 30 years, then you got the banks prevailing interest rate. Now, I did understand that each bank or lender banks might charge a slightly different rate, but I had no idea that the rate varied based on the CREDIT SCORE of the borrower! As ignorant as I sound today, back in the last century, most borrowers didn’t know much about the ins and outs of the CREDIT SCORE.

 Did you know?

You might earn $500,000/year and have lousy credit.

Even those of us who pay off our cards every month might not have the top credit scores!

According to the Consumer Federation of America, only 31% of consumers know what a credit score means. So don’t feel bad if you are one of the 69% who are clueless about them.

PRACTICAL APPLICATION: Here are the Key Facts about your Credit Score!

 What is a credit score?

• It is a number used by lenders to determine how trustworthy you are to pay back a loan. The more trustworthy you are, the lower the interest rate on your loan.

 Where can I find my credit score?

• My fico.com. You’ll probably have to pay for it.

 Why should I care about my score?

• You can save money when you borrow 
• Be more competitive when vying for a job
• Maybe save money on insurance
• Qualify to rent an apartment

 How much could I save on a mortgage with good credit?

• FICO score 760-850; Interest Rate 5.82%: Monthly payment $1,764
• FICO score 500-579; Interest Rate 10.31%; Monthly payment $2,702  (30 year fixed mortgage rate for $300,000 loan)
• Difference between best and worst score; almost $1,000/month

What goes into a FICO score?

• 10%  Type of credit used
• 10%  New credit
• 15%  Length of credit history
• 30%  Amounts owed
• 35%  Payment history

How to get and keep a good credit score?

• Get your credit report from annualcreditreport.com. It’s free. Fix any mistakes by following the credit bureaus’ directions.
• Pay your bills on time.
• Only use 10% of your available credit.
• Pay off your excessive debt. See why here.  

Where did you get this information?

 Most of this information came from 1-2-3 Money Plan by financial columnist, Greg Karp.  

ACTION STEPS:

 Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

1. Get your free credit report
2. Pay off your credit card every month.
3. If you can’t pay the bill in full, pay more than the minimum and don’t charge any  more until it is paid off.

Categories: debt, credit

“Banks introduced the installment plan. The disappearance of cash and the coming of the credit card changed the shape of life in the United States.” Jerzy Kosinski

It’s amazing to consider that 50 years ago, credit cards where rare. Most people paid cash for their purchases. And what happened if they lacked the cash? You guessed it, they didn’t buy!

MAIN TOPIC: A Story of Esmerelda’s First Credit Card

Without mentioning any names, let me just say, someone very close to me got her first credit card. Well, on second thought, let’s give her a fictitious name, Esmerelda.

Upon receipt of her card, Esmerelda asked, “What do I need to know about the card?”

 I said, “First of all, you have a spending limit on this card; do not spend any more than your limit. Second of all,” I continued, “Pay off the total balance due on your card every month.”

She then asked, “Is there anything else?”

I replied, “If you do those 2 things, you’ll be fine!”

As far as I knew, that was the end of the conversation. … until Esmerelda asked if I could “help” her with the card.

I said, “What’s wrong?”

And she responded, “It’s not working right.”

Now, I’m not sure what happened because we never finished the conversation. She mentioned subsequently that the card was not accepted when she tried to buy a train ticket with it. But, that’s all I know. Esmerelda did not bring up the topic again.

PRACTICAL APPLICATION: How to Stay Out of Trouble with a Credit Card

There is an incredible amount written about the evils of credit cards and some thoughts on the other side about the benefits and rewards.

In today’s society, credit cards can be helpful when used responsibly and occasionally.

You can’t rent a car without one. You need one to make airline and hotel reservations too. When you get ready to buy a home, lenders like to see that you have used a credit card responsibly.

 They can also cause a mountain of trouble if you charge more than you are able to pay off completely at the end of the month.

Credit cards are kind of like guns. People are responsible for the deaths associated with gun violence. And people are responsible for the debt accrued with improper use of credit cards. Learn to use credit wisely and no one will get hurt.

These tips, if followed RELIGIOUSLY will keep you out of credit card trouble and get you started using credit responsibly.

Get a credit card with NO ANNUAL FEE

Get a MasterCard or Visa, because they are accepted everywhere.

Sign up to have the FULL BALANCE of the card deducted from your bank account every month. Double check and make sure it happens EVERY MONTH!

When you make a purchase on your card, save the receipt and keep a running total of EVERY purchase made with your card.

NEVER go over your spending limit.

Hold no more than 2 cards. You do not need any more credit cards.

That’s it, you’re done. No exceptions, no more.

 If you want something and don’t have the money to pay for it this month, DO NOT BUY IT.

I promise, you’ll live without buying things you can’t afford and your life will be lots happier without credit card debt.

ACTION STEPS:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

1. Cut up any cards you have over 2; if you owe on these extra cards, make sure you pay off the balance.
2. If you cannot afford to pay for something, do not buy it! Get in this habit and your life will be much happier!

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