Category Archives: Credit Cards

Children Need To Learn Early

It’s Never Too Early To Teach Children

Upon high school graduation most teens know nothing about finances, not even the basics.  Yet, most have signed a college loan agreement, and because during the application process, banks have passed out credit cards, most teens are now in possession of one.  But…..

Do they know that a financial mess is about to happen to them?….unless….someone has spent some time teaching them the rules of how all areas of finances should be handled in order to avoid this from happening.

Early in their life, they should have learned that you don’t slide a card into a little machine at the store and in return you get things.  Or that when you go to a bank, fill out a little piece of paper and go to the teller, you get money. What they see with these scenarios is instant gratification…. not a good thing for a child to learn….or believe.

The earlier the better is the right time to teach them.  Start with the basics….. You can’t always get what you want… they should do chores to earn money, and then, save some of it, and not until the full amount is there for the item wanted does the item get purchased. This will teach them how a credit card works.  So that when they do get that first card, they won’t purchase an item unless they have money set aside to pay the bill in full when it comes in.

Open a savings (custodial if age is under 18) account, take them to the bank to add to their account each time they earn money, letting them fill out the deposit slip. This teaches them how to interact with the business world. It will as time moves on teach them about interest earned (albeit small) every cent matters, and that a part of what they earn goes to savings. And seeing it grow in their account shows them the value of saving.

Give them a paper check register…. teach them how to use it.  Set it up as their ‘company’. Each time they receive money (earned, or as gifts), put that figure in the proper column, when they go to the bank to put some in their savings account, put savings in the memo line and subtract that amount, (it’s ‘gone’ from their money left),  the remaining figure is their balance, and if they’re buying a gift for a sibling, show that in the memo and subtract.  They did a chore, add that income with the chore in the memo line and so forth.

This will teach them not only how to use a check register or a spreadsheet later on, but it will let them know, at a glance, that they have to earn money, save some, and spend some…. where it came from and how, and how it can disappear quickly and where it goes.  It also teaches them discipline habits of saving and spending, and the balance of doing so.  It teaches them how to budget…not spending what they don’t have.  Each, in itself a very good lesson to learn early.

Knowing even these few things, having learned them when small children, they will, at their high school graduation, be a little more prepared than their peers who know nothing of finances when heading out in the world on their own.

Knowledge really is power…..  and with the basics learned, they will be more apt to want to learn and ask questions, moving forward only if answers are understood, when life changes occur, like buying a car or a home.

Knowing what you’re getting into before you get into it, is key.

 

 

A Few Ways to Accelerate Your Savings

Stay on budget while adding to savings……

Sometimes it’s hard to save.  We all go through times when life gets in the way with unexpected expenses.  But there are a few things that are easy, common sense ways, to continue to add to your savings.

If you have a loan you’re paying, say a car loan, when the maturity date arrives and the payments are all paid up, continue ‘paying the loan’, but put that amount into your savings account(s).  You got along without it these past years, so you still can.

Make lunches to bring to work and school.  Cook meals at home rather than eating out at restaurants…. homemade meals are far cheaper than eating out.

Make your coffee/tea/cocoa at home and put in a travel mug to take along.  Even one cup of your favorite beverage every day bought at your favorite stop, times seven days a week gets pretty pricey.  Get a pen and paper and figure out what it costs for a year…. until the figure is seen in black and white, quite often we don’t give it a second thought, and have no idea it is costing us that much.

Cut back at the grocery store by using store brands, coupons, watching for sale items and buying what you need while the sale is on (there is usually a 6 week cycle for items on sale). The snack aisle can be a costly aisle to walk down.  It’s another area where you add things to your cart without thinking of the cost.  Add the cost of the snacks in your pantry…. leave the snacks out of one grocery shopping trip….then every other. Put that money you would have spent into your savings.

Talk to all those you exchange gifts with, and instead of gift giving, maybe instead of individual gifts, you all could have a get together with each bringing a ‘grab gift’. Have a ‘potluck’ dinner with each bringing something to eat.  The money saved on gift giving can then go to your savings. And the get-together will be a lot of fun and make great memories.

If you get a pay raise at work, put the difference of what you had received before and the amount you now receive into your savings. Again, you got along without it before.

And of course, if you’ve been paying down your credit cards and now have zero balance(s), kudos to you!  But continue ‘paying’ the amount by adding it to your savings now.

All easy, but common sense ways to see more going to your savings.

 

 

Credit Cards

Credit Cards aren’t for everyone

Credit cards are a means of purchasing something without handing over cash.  They are a convenience when used properly….and they can be a curse if not.  They can be a financial nightmare.

The convenience is that a card is handier than cash.  Or you’re making a purchase of something ‘on sale’, and don’t have the cash with you. They are a curse when you don’t pay it before the due date or don’t have the full amount to pay it, adding a late fee as well as interest charges on the remaining balance, thus wiping out the ‘on sale’ amount.  Before you slide the chip in, ask yourself “Is the money there to pay for it”? – “Do I really need this?”  If the answer is no, put the item back, and walk away.

Keeping up with paying for purchases made in full and on time adds points to your Credit Score.  Something you need to do to stay in good  standing with creditors. Your score is a link to your credit history – how you pay off your debt.  A score in the excellent range can get you a lower interest rate on a loan, or a house/apartment over someone else with a lower score than yours. Your credit score follows you throughout your life, and if you’re ‘a couple’, the score of your ‘other half’ is factored in to yours.  It’s why it’s imperative that you talk finances and have all debt paid off, for both, before you say “I do”.  Their financial mess is yours, and vice versa.

Credit cards are not to be used carelessly.  Until, and only if you are disciplined enough to pay in full for purchases when the bill comes due, do not use them.  Do not open one.

Do your homework before you open a credit card.  Some have an annual fee, so watch out for that…..there are a wide variety that are free.  Each come with their own features – many with rewards.  Unless you can use their type of rewards, pass on that one, and look for another.  Read the material and ask questions before you open one.  If you don’t follow the guidelines —- it can cost you plenty. And if you don’t pay in full and on time each month, adding purchases on top of those already there, and still paying only the minimum, turns into a financial hole that can take years to climb out of.

Do not put another person on your credit card.  Don’t be tempted with ‘their’ extra points to get you travel benefits or whatever the rewards are.  They will all be wiped clean if the other person doesn’t pay for the purchases he/she has made, both in full and before the due date….and their credit score is linked to yours because of this card.

We often pull out the credit card, swipe it, and forget about the purchase, only to be shocked at the balance at month’s end.  We open the bill, stare at the balance, and think, “that can’t be right’.  So, during the month, call the Customer Service number on the back of the card, they’ll ask a question or two and then give the balance as of that day.  Get used to checking on this at least twice a month, so if you’re getting close to what you can pay when the bill comes due, you can stop using the card so you won’t overbuy.  This will prevent surprises when the bill comes in, as well as not being able to pay it in full resulting in interest charges on the unpaid balance next month.

Be credit card savvy.

 

 

 

 

The “Budget Filing System”

Keeping categories separate lets you see at a glance.

Save first. Once you’ve put your savings into their allotted accounts, separate your budgeted money into three categories… Rent/Mortgage, Regular Bills, and Occasional Bills.  Open a checking account for each one.  Doing so, keeps you ‘on target’ with money in each when the bill comes in.

Rent/Mortgage:  Meaning your ‘overhead expense’ – Rent, or if you have a mortgage (which includes PITI (Principal, Interest, R.E. Taxes, Insurance), and Condo Fees if you own a condo.

Regular Bills:  Meaning monthly bills, the ‘Have to’s’ … Heat, Light, Food, Health Insurance Premiums, Phone, Car or transit costs, internet.

Occasional Bills: Meaning annual, semi-annual insurances, RMV excise tax etc.  Clothing, entertainment, gift giving are in this category too, however, these can be trimmed to the bone, or omitted.  Get along with the clothing you have, Drastically cut entertainment and gift giving. Your goal here is to get out of debt, save every penny you can.  You can do this.

After having made your budget, figure how much of your income should go in each category, and deposit that amount in the appropriate account each payday.  When paying a particular bill, withdraw it from…only…that account category.

Doing so keeps things in order. It allows you to, at a glance, know exactly if, and where, you’re falling short and the need to re-evaluate your budget…immediately.

A suggestion for all, but especially the rent/mortgage account – begin with a ‘cushion’… some extra money. Costs rise – the cushion will help while you re-evaluate your budget accordingly.

Rent/Mortgage Account -start out with, or add to it – an extra month or two of your ‘overhead’ cost….this insures the roof over your head, meaning there is excess there should condo fees or real estate taxes rise….or if your rent rises, it also means, should you move, money is there for that ‘overlap’ of the moving month, and the deposit needed for the new place.

Continually check and recheck your budget. Recalculate so there is always enough in each account….seeing at a glance where your spending can be whittled down. When done regularly it takes about 15 minutes, keeping you financially savvy and aware of where your money goes.

 

 

 

 

Are You Paying Only The Minimum Each Month?

Results of paying only minimum

You have a credit card or more than one.  You’ve spent and spent, and there are balances on each.  Within those balances are interest charges – every month, and possibly late fee charges.  The interest, now being part of the balance owed, will, next month, and every month until the bill is paid off, will add interest on the interest already there (it’s part of the balance owed). The thing is, whatever the interest rate is,  it’s a waste of your hard earned money. On most cards it’s anywhere from about 14% -28% (maybe more).

This means when you purchased an item(s) for $100.00, and when the bill came in, you paid the minimum – about $25.00, when the bill comes in next month, you still have $75.00 remaining on the item(s) purchased, but the balance due has interest added  to that amount at the rate in the credit card agreement.  Again, you pay the minimum, $25.00, but you missed the due date.  When the bill comes in the following month, you have the balance of the item(s) bought, $50.00, interest added on that remaining balance, plus the interest charges to date, plus a late fee of about $35.00.  That $100.00 item(s) are now costing you far more than that.

Adding purchases to the bill each month adds to the problem too.  By paying only the minimum each month, you will eventually be paying more in interest and any late fees than you do in your purchases.

This is how so many people get caught up in the vicious circle of financial debt.

The only way….. the only way to get out of it is to stop using credit cards, and pay off your balance(s) as quickly as you can.

If you insist upon using credit cards, and if you want to stay out of credit card debt, do not make a purchase that you don’t have the money for.  And when the bill comes due, pay the entire balance in full and before the due date.

It’s the only way to use a credit card.  It’s common sense. It can be done.

Digging Out Of The Debt Hole

Getting Rid of Outstanding Debt is a Priority

There are millions of people who have debt, but some have staggering debt.  Sad but true. Paying down your debt, continuing to do so until you pay it off and vowing to never allowing yourself to get buried in that hole again, is your goal.  Make it your priority…. It’s imperative.

You will have to cut your expenses to the bare bones.  So start chopping…there’s no other way.  Gather your debt statements.  Call the creditors and tell them you are serious about paying it off, letting them know that you are putting serious effort into getting down to a zero balance.

If the debt is your home, (if you’ve missed some payments) – that will have to be paid first, or you’ll find yourself on the street. Call the landlord or the mortgage lender and let them know you want to catch up with back payments owed, and then continue paying current payments.  Unpaid mortgages means foreclosure.  The bank repossesses the property, and you lose all you’ve put into it.  And renters can come home to find that the locks have been changed.

If the debt is your car, it may be your transportation to work. So, if it’s repossessed, whatever you’ve paid into is is now gone along with the car.  The only way to get it back is to pay all the back payments owed as well as the repossession costs (towing, storing etc). You may no longer be able to get to work if you don’t have your car, so losing your income is added to the mix.

If it’s credit card debt, stop using the credit card(s) immediately.  it means you’ve been overspending.,,,buying what you can’t afford, and not paying for what you do buy when the bill comes due, thus allowing the balance to accumulate along with added fees.  In checking your credit card statement(s), you will notice that a good deal of the balance is a high interest balance that has been included – which is money you now have to pay, but have nothing in your hand to show for it.  Also, if you’ve paid late, that tacks on an additional fee for each occurrence, …completely wasted money.  Stop using, but don’t cancel your cards.  Cancelling will decrease your already plummeting Credit Score.  Hide the card(s).  Or better yet, shred them.

Whatever the cause of the debt, paying it off, repairing your Credit Score, and living within your means is key.  You can turn your Financial Health around.  Learn from your mistakes, and don’t fall into the debt hole ever again.  Once out of debt, you can begin to add to your various savings accounts, by using the money you’re now not wasting on fees and old debt.  A gift you give yourself.

Why Am I Living Paycheck To Paycheck?

You Work Hard For Your Money – Know Where It Goes

Everyone, at some time or other, has said, “I don’t know why I have no money”….or some such phrase.  You work hard, get paid, pay the bills, and there’s nothing left.  Where…did the money go?  Good question…..do you ‘know’ what you spend your money on?  Really, ‘know’????

A good guess is you are wasting a lot of money…..without even realizing it.  So, grab paper and pen.  Make a list of ‘incidentals’…. stopping for coffee, lunches, vending snacks, entertainment, gift giving…..  You get the picture….they are anything other than necessary living expenses (‘have to’s).  Think through a few days last week. Where did you stop to get an item, and come out with a few?   Add up what you spend each week on incidentals. Surprised? Those quick stops can be costly.

Some of these items, although necessary sometimes, can be easily scaled back.  Quite often, these are the things that eat up a good chunk of your budget each month — far more than you thought.

Paying bills on time and in full, will eliminate interest charges and late fees which are a complete waste of money.

There are hidden, and easy, ways you can lower costs on other items in your monthly expenses too, which leaves more of your money going into your savings, whether it be your Retirement, Emergency Reserve 6-12 month ‘Cushion’, or Liquid Emergency Account.

Once you get the hang of it, you’ll be able to continually scrutinize your entire budget, and find some savvy ways of shaving your expenses.