A Few New Years Resolutions To Help You Out
Well, it’s that time of the year again. The end of 2009 approaches, and a new year will soon begin. If you’re anything like me, then you’ve probably made some pretty generic New Years wishes in the past like “I’ll try to be healthier” or “I won’t procrastinate anymore”. There’s nothing wrong with making those kinds of wishes- it’s just that we often let them slide when life throws us a curveball.
When you make a New Years resolution this year, try to change things up a bit. Instead of making a big and amazing resolution such as “I won’t procrastinate anymore”, say something like “I’ll finally take that special someone out”. Focus on something specific and positive instead of vague or negative qualities about yourself. Pay the bills as soon as you get them, take five minutes out of your day to sit down with your spouse or kids and connect with what’s going on in their lives. It’s like Robert Williams once said “Carpe Diem – seize the day!”
If you’re having trouble managing debt, medical issues, or some other crisis, then the ability to sieze the day is all the more important. Go out and see a free credit help agency like the people at debthelper.com about your debt! Find out whether or not you will qualify for some form of aid from the government through forms such as the FAFSA form for students and just try to do something productive; something along the lines of helping your roomates or spouse out around the house to share the burden or taking your child somewhere special for a day. Small things can make a giant difference.
It’s easy to make a sweeping resolution to try and deal with everything in your life, but don’t do it. Keep it simple and specific. Your New Years resolution could be just what you’ve needed to get you out of trouble. You can be the change in your own life. So go out and seize the day!
Have a Happy New Year!
Bank Of America Credit Card Changes: Things To Watch Out For
If you own a Bank of America credit card, then you are likely aware of the fact that the bank has changed (and is continuing to change) its credit card policies due to the passage of Congress’s Accountability, Responsibility, and Disclosure (CARD) Act of 2009, which takes effect in February 2010.
It would be in your best interests as a customer/cardholder (or a potential customer) to know what exactly they things are being changed, because it may have an effect upon your financial situation. The purpose of this blog post is to try and bring some of these changes to your attention, and to provide you with access to the documents being used to do so.
Highlights/Major Changes:
1) Your rate for existing balances will no longer be raised for being a few days late with your payment -but you will still be charged a late payment fee. This change affects the “Default Pricing” section of your credit card agreement.
2) Beginning on February 13, 2010, your APR’s on existing balances can only be raised if you do not make your minimum monthly payment within 60 days of the payment due date. However, the APR on future accounts and transactions can (and probably will) be raised if you fail to make the payment within 60 days. The bank also reserves the right to amend your agreement in such a situation. However, in order to do so, Bank of America has to provide you with at least 45 days of prior notice.
3) Bank of America will not give you a charged fee for going over your credit limit (although such transactions would still be declined). Doing so can negatively affect your account balance if your account is currently at a penalty rate, leading to a decrease in your credit score.
4) This one is perhaps the most important one – Any amounts that you pay over the minimum payment required will now be used to pay down balances with the highest APR. In other words, if you have a credit card account with two balances and you overpay on one, then the amount that you go over will be used to pay off the account with the higher APR. This is a tricky one that you need to keep your eye on.
5) Payment dates will always fall on the same date each month, and will be at least 25 days from the closing date printed on your account.
Helpful Documents:
Reading the following documents will give you a firsthand look at the changes being made, what exactly is being changed, and why. You can also use them to help reach your own conclusions concerning your personal financial situation.
For a copy of what the February legislation should look like, you can find an online copy if you click on the following link: Credit Card Program
For a copy of Bank of America’s letter explaining these changes, you can look at a sample provided by them. You can find it by clicking on the following link: Sample Customer
For a copy of the Accountability, Responsibility, and Disclosure (CARD) Act of 2009, click on this link: Congressional Act. And if you want to know more about what the Act will affect, you can find out by clicking on the next link: Congressional Act Explained.
Two Helpful Tools to Deal With Student Loans
Tuition. It is the financial nightmare of many parents, and nearly every student must face the problem of how to afford it at one point or another. Scholarships are by far the best choice out there to deal with the problem – regardless of the students age, as there are scholarships for returning students as well as those who are fresh out of high school – but what about those who do not get any, or if the scholarships do not cover the whole bill?
Well, unless you can pay for it out of pocket, the option that many middle-low income families take is to pursue student loans. These can take a variety of forms, ranging from a standard bank loan to Pell grants, Stafford loans, Perkins loans and more. This can be a frightening decision to make, especially for low-income families and those with low credit ratings.
Two Helpful Tools
If you or someone that you know is thinking about taking a student loan, two tools that you should be aware of are the Free Application for Federal Student Aid, or FAFSA, form and the website http://humancapitalscore.com/.
1) http://humancapitalscore.com/ was recently mentioned in a Wall Street Journal article (a link to the article in question can be found at the bottom of this post) about college degrees and post-grad jobs. The website contains a free online calculator for figuring out how much that a student may make after they graduate.
This can be useful in determining how much money you should take out on a student loan. “Many experts say total student loans shouldn’t exceed a grad’s first-year income after graduation”. The entire point of humancapitalscore.com is to provide you with those numbers, and it is simple and easy to use. All you have to do is input the students test scores, high schools and colleges attended (or are considering attending), grades and major/vocational training.
2) If you, your kid, or someone else that you know does decide to take out a student loan, then make sure to check out the FAFSA form. It is designed to “…ensure that all eligible individuals can benefit from federally funded or federally guaranteed financial assistance for education beyond high school” (taken from the fafsa website). Broken down, what this means is that the goal of FAFSA is to make it financially possible for high school graduates or people with a GED to gain a college or vocational degree.
In the past, however, it has often fallen short of its goal. Like many federal programs, it has been called needlessly complicated and notoriously difficult to fill out – let alone receive aid from. Asking applicants as many as 157 questions in order to determine the students eligibility, many students and their families have given up without even turning it in. But this may soon change.
According to a New York Times online article, the Obama administration is trying to fix this problem. Specifically, the article states that:
“In January, when next year’s form goes online, about 20 percent of the questions will be eliminated, mostly by avoiding redundancies. For example, students who are at least 24, or married, will automatically be able to skip the 11 questions about their parents’ financial information, and low-income students will be able to skip the questions about assets, which are not used to determine their aid eligibility.”
Further changes are also pending that can affect low-income families and “less than 3% of applicants” (people with disabilities, medical problems, and other rare occurrences), but they may or may not happen. In order to be sure about whether or not the new FAFSA form can help you out, take a look at the new form which is being released sometime next month, January.
Remember, tuition doesn’t have to be a crushing nightmare. There are ways to send yourself or your kid to college without taking on a massive amount of debt besides, or in addition to, finding scholarships – you just have to be aware of your options.
A Few Things I do to Organize my Finances
This is a guest post by Mr Credit Card from Ask Mr. Credit Card. Today, Mr Credit Card is going to write about ways to keep your finances organized. If you are looking for a credit card, then be sure to check out his best credit cards list section.
Telling folks to be organized in their finances is easy to say, much harder to do. I’m going to share some ideas that I myself have implemented and hope you find them helpful for yourselves and your situation.
Set Monthly Bills on Autopay – I find it such a hassle to constantly go through my utility bills, cell phone bills, internet connection bills, credit card bills, mortgage etc. For me, I find that putting all my bills on automatic bill pay works for me. There are a couple of ways to do it. You can set it up from your online bank account, or with the entity which you are paying the bill. What I also do is to put some of my utility bill on my credit card to earn extra reward points!
Some folks prefer to manually check the bills and write the checks themselves. For me, I find that this will not work because I just cannot be bothered with things like that. I also do check my bills even though they are on autopay to make sure there are no errors. The only thing you have to be aware of is to have enough cushion in your checking account. You do not want to be short of money and go into overdraft!
Have a separate box for warranties – Ever bought a new blender and forgetting where you put the warranty after you send them in (normally within 30 days though most folks actually forget about it!)? I used to lose warranties and instruction manuals because I had no set place to put them. Well, I now put all product instruction manuals and warranties in one place (more like a big box). That way, even though I am unlikely to ever need to refer to it, I always know where it is.
Have a separate file or box for your insurance policies and wills – We all buy insurance policies and once the payment starts, we forget why we buy them! Some folks don’t even remember buying them! I find that it is a good practice to keep these documents in a separate area. I frequently forget about the nitty gritty details of my health insurance and when I want to check them, I know where to get the documents.
Have lots of files – I file all my statements in bright colored files that I get from statements. For me, I refuse to receive “email or online statements” from my credit cards or utilities. I receive my statements in the mail and file them promptly.
Use Quicken – I use Quicken to track my accounts (both personal and business). My CPA told me to set up my business accounts in Quicken so that she has less work to do come tax time (and would presumably charge me less!). Since I moved over to Quicken, I found life so much easier. I could track my expenses and see patterns in my spending (obviously, you could use use services like mint.com. But for me Quicken does the job.
One trick that I’ve been taught was to set up my expense categories in my business accounts according to the expenses listed under the Schedule C (Form 1040 – where you file your business P&L). This makes it easy for your CPA if you just give him or her your Quicken file.
Use Separate Business Credit Card for your business – I used to use one personal credit card just for my business expense. But I found that I occasionally used it for personal use as well (most of the time by accident! or to make use of reward points!). But it gets messy because it gets in the way of keeping your business and personal finance separate. I finally bit the bullet and got myself a small business credit card. The card I got was the American Express Plum Card, which earns me cash back if I pay in full within a 10 day cycle. I also get no preset spending limits, which allows me to charge a higher than normal expense if the need arises.
Keep track of all your autopay accounts you charge to your credit card – Once I got my new business credit card, I had to call the vendors (or change them online) to change my credit card account. My web host for example has my old credit card information. Google has my old credit card information. My Verizon FIOS had my old credit card number. I had to either call them to tell them to charge to my new credit card or do it online.
Track your portfolio performance – Whether you have a single or multiple accounts with various online brokers, you should always consolidate your accounts into a platform for performance tracking. Quicken for example, does a good job of that. If you only use one brokerage firm, then the task is relatively more simple as most will have some form of annual performance tracking tool. But part of keeping your finances organized is to be able to say precisely what was your return last year net of fees.
Get a safe – I would recommend getting a safe to keep important documents like birth certificates, marriage certificates, your college degree. You could obviously keep your jewelery in it as well.
Have a list of important phone numbers – Make a list of your banks’ numbers, your brokerage number, your attorney’s number, your health insurance agents number, your doctor’s number. You never know when an emergency might come up and you want to have those numbers on hand.
I’ll stop here – These are some of the things that I have done to try to keep my finances organized. I hope you will find some of these tips helpful. The one thing that I have not really figured out is how to organize my pile of receipts! I hate filing them and I am very tempted to get something like Neat Receipts where I can just scan in my receipts and it can be transferred to my Quicken account and the images can be used for IRS audits. But I’m not sure if scanning receipts is an improvement at all. If anyone has any ideas for these, I’m all ears.
When Good Debt is Bad
We know the old adage: never go into debt for depreciating assets. For a long time, the conventional wisdom has been that bad debt are things like credit cards, appliances, and things that lose their value quickly. At the same time, many people regard two types of debt as “good debt”. These are mortgage debt and education debt (or student loans). But, are these really good debt? What happens when making payments on a mortgage or student loan debt instead of paying down an investment in the future become more like a ball and chain holding you back from things? How can appropriate boundaries on this debt be set? Consider the following:
–What is a realistic estimate of your future income? — the main problem that I find with servicing mortgage and student loan debt is the unrealistic forecast many people have of their future stream of earnings. Sure, when starting out, an entry level wage typically goes up. However, a realistic worker today needs to consider that regular annual pay raises have not been part of the median worker’s experience in America. In addition, most people will experience some income uncertainty from layoffs, furloughs, lower bonuses, and stints between jobs (intentional and unintentional). This income irregularity needs to be part of planning of paying off large debts.
–What flexibility is given up through these debts? — one of the saddest conversations that I’ve had with friends and co-workers recently has been around those that feel chained to a job they hate because of large debts hanging over their heads. For graduate school debt, sometimes over $100,000, I know many people that have opted for corporate law or banking in order to pay their debts down. This is a huge barrier for many people wanting to go into public and community service roles. Mortgage debt, or the inability to quickly sell a house, also seems to be a barrier in quitting a job, moving to a new location and other problematic features of having a huge inflexible, and illiquid liability. With the shine on housing finally dulled, perhaps more people won’t continue with the false mantra of “housing only goes up”.
–What is the payoff period of the loan? — at the age of 18, when most people take out their first student loan, it’s hard to comprehend what a decade really means. With some of the large student loan balances, many people are committing themselves to a payment over $1000 a month, each month, for over 10 years. With most mortgages, people tend to sign up for a 30-year loan. Are you really prepared to service these loans for 10 or 30 years, respectively?
–What is the opportunity cost? — in addition to flexibility, servicing large loans often means having to give up future purchases and activities, or threaten future retirement schemes. While it may be worth it to many people, it pays off to take a long, hard look at the trade-offs before engaging.
–What are the alternatives? — I’m certainly not advocating for people to forgo their education, but I do think that people should consider lower cost alternatives more than in the past. For a mortgage, downsizing expectations, or deferring a house purchase for a year or two to accumulate a larger down payment, is straightforward. For education, I recommend that people consider lower cost options like state schools and community colleges, especially if they are planning to get a second degree. Also, looking at programs that help to pay down debt in exchange for public service. Unfortunately, it looks like Harvard Law School just suspended this program as it looks like too many people had the same thought.
STRESSED?!
Dr. Mark Rogovin doesn’t need to check in with CNN to know the tanking economy is taking a toll on the public.
The waiting room of his Boynton Beach family practice is evidence of it.
“They’re tired despite a full night of sleep, they have rashes with no clear cause,” Dr. Rogovin reports, “they’re not sleeping, they’re not eating or they’re eating too much of the wrong stuff.
“Some of them, frankly are tearful and acknowledge it’s stress-related, and others come in thinking they have a terrible disease.”
They don’t, it’s just stress.
But that’s no small matter if, like thousands of Americans, that stress is chronic or constant.
What is stress?
Well, back in the day it was a response your body generated to meet outside demands — like that big animal bearing down on you as you gathered berries.
Think of that fight-or-flight rush of adrenaline, or a boost in blood pressure, blood sugar or body heat.
The idea is to make you more alert or stronger.
But it’s supposed to be a short-term solution.
An economy that threatens your job, how you put food on the table or a roof over your head can send you into a chronic state of stress. And bundles of research tells us that’s no good for your body.
Then what happens?
More people end up in Dr. Rogovin’s, or some other doctor’s office complaining of a litany of ailments.
Stress can create a new illness or exacerbate ones you already have.
An 2008 AARP study found that 20 percent of people 45 and older reported health problems due to financial stress. (To compound matters, about a fifth delayed seeing a doctor because of the cost.)
That study also found that while older folks have less stress in their lives than younger ones, Baby Boomers (ages 45 to 63) appear to be the most susceptible to stress that comes with concern about money and the economy.
And we’re not talking about mere headaches or tight shoulders — though they are among the more common stress-induced pains.
In West Palm Beach, Dr. Mujahed Ahmed says he’s seeing more patients who complain of lack of sleep, heart palpitations and dizziness.
To the south, Dr. Charles Metzger at MDVIP in Boca Raton ticks off even more issues: upset stomachs, back pains and higher blood pressure.
Also, research indicates stress can hamper the immune system. While there’s no evidence yet that suggests stress can cause cancer, there is some question whether it may play a role in cancer by “tampering” with the immune system, according to a special report on stress released last fall by the Harvard Medical School.
So what do you do?
First, figure out the source.
Metzger has his patients complete a stress inventory.
“It’s a great way to broach a topic that sometimes doesn’t get broached. It asks questions about your sleep, do you still enjoy things you used to, it asks about your libido,” Metzger said.
He also asks them to keep a journal.
“Just understanding what’s going on as they write it down gives them more distance from the feeling, helps them think more clinically. As people start to understand things better they get a feeling of more control,” Metzger said.
“I have people come in saying, ‘I feel bad. I have headaches.’ Turns out what’s bothering them most is, ‘My neighbor’s fence is on my property.’ “
Even when people recognize the stress in their lives, they don’t realize the toll it’s taking, Ahmed said.
“Sometimes they have stress but think they’re handling it. Or they rationalize something like a job loss, saying they can pursue something else, but subconsciously it comes out. Turns on them. It all goes inside,” Ahmed said.
All these doctors, and others throughout the country agree the next step is to try and tackle the stress with changes in our routine.
Then it may be time to change.
Time to change your bed time for one, said Rogovin.
He often suggests turning back that time even just a half-hour.
Add in some time for exercise, even if it’s just walking. Again, Rogovin favors at least a half-hour — walking in the pool if you’re overweight or older.
Then there are the standards: eat well, rest, ask for help.
“We also try to go through relaxation techniques, biofeedback, massage, yoga, meditation,” Metzger said.
Bottom line: You must find a way to curb that stress.
“The effects are not trivial,” said Sarah Burgard, an assistant professor of sociology at the University of Michigan, who has studied stress and its resulting health problems.
“I was actually really surprised to see the magnitude of problems. It is similar to the effects of being a smoker,” said Burgard, whose team looked at 3,000 employed people under age 60 who were already enrolled in two long-term studies.
Another interesting finding: People who constantly fear losing their jobs are worse off health-wise than people who actually do lose their jobs but eventually land another.
Everyone react differently to stress.
Here are some red flags to look for:
•Headaches, muscle tension, neck or back pain
•Upset stomach
•Dry mouth
•Chest pains, rapid heartbeat
•Difficulty falling or staying asleep
•Fatigue
•Loss of appetite or overeating ‘comfort foods’
•Increased frequency of colds
•Lack of concentration or focus
•Memory problems or forgetfulness
•Jitters
•Irritability
•Short temper
•Anxiety
Source: American Psychological Association
The American Psychological Association offers these tips to help deal with your stress about money and the economy:
•Pause but don’t panic.
Pay attention to what’s happening around you, but refrain from getting caught up in doom-and-gloom hype, which can lead to high levels of anxiety and bad decision making. Remain calm and stay focused.
•Identify your financial stressors and make a plan.
Take stock of your financial situation and what causes you stress. Write down specific ways you and your family can reduce expenses or manage money more efficiently. Then commit to a specific plan and review it regularly. Although this can be anxiety-provoking in the short term, putting things down on paper and committing to a plan can reduce stress. If you are having trouble paying bills or staying on top of debt, reach out for help by calling your bank, utilities or credit card company.
•Recognize how you deal with stress related to money.
In tough economic times some people turn to unhealthy activities like smoking, drinking, gambling or emotional eating. The strain can also lead to more conflict and arguments between partners. Be alert to these behaviors — if they are causing you trouble, consider seeking help from a psychologist or community mental health clinic.
•Turn these challenging times into opportunities for real growth and change.
Think of ways that these economic challenges can motivate you to find healthier ways to deal with stress. Try taking a walk — it’s free and a good way to exercise. Having dinner at home with your family may not only save you money, but help bring you closer together. Consider learning a new skill. Take a course through your employer or look into low-cost resources in your community that can lead to a better job. The key is to use this time to think outside the box and try new ways of managing your life.
•Ask for professional support.
Credit counseling services and financial planners are available to help you take control over your money situation. If you continue to be overwhelmed by the stress, you may want to talk with a psychologist who can help you address the emotions behind your financial worries, manage stress, and change unhealthy behaviors.
16% of people 45 and older had to use retirement savings or other savings to pay for medical care
21% have cut back on other expenses in order to afford their medical care
One in six, 16%, are not confident they will be able to afford health care in the coming year
Source: 2008 AARP study
TAKING STOCK OF STRESS …
A recent survey by The Associated Press and AOL found that people with high amounts of stress related to their debt were far more likely to report suffering several health problems — including ulcers or digestive-tract problems, migraines or other headaches, anxiety, severe depression, muscle tension and heart attacks.
When that survey was conducted, an estimated 14 million Americans had high levels of ‘debt stress’ that were contributing to serious health problems, according to Paul J. Lavrakas, a research psychologist and consultant to The Associated Press.
Plastic Free
More holiday shoppers this year are using cash or debit cards to avoid overspending with credit cards.
But what about the rest of the year? Is it possible in a credit-dependent society to get by without plastic?
“Credit cards are not necessary,” says Ed Fredericks, a finance professor at Pepperdine University. “Originally, credit was seen as a privilege. Soon it kind of turned into something that everyone had to have. Multiple cards were mailed out to people, whether they were able to carry credit or not.”
Granted, credit cards are convenient, offer protections you don’t get with cash or debit cards, and make sense for many consumers.
But the buy-now, pay-later system has lulled millions of Americans into piling on debt. And many consumers are finding in this tough economy that card issuers, at least for now, have the upper hand. Issuers are doubling interest rates, raising fees and lowering credit limits at the first hint of risk. These tactics – plus new annual fees – are being used even against disciplined customers who don’t carry balances.
“Right now, everyone wishes they didn’t have a credit card. People have gotten into such a deep hole with credit cards in the last decade or so and are desperately trying … to climb out,” says Beth Kobliner, author of “Get A Financial Life: Personal Finance in Your Twenties and Thirties.” “Cash is becoming a bit more in vogue.”
The latest government figures show that the average credit card debt is $7,905 per household, down from $8,387 last year, Kobliner says.
Yet millions of consumers live without credit cards. Some never got into the habit; others have sworn off plastic after being burned.
Danielle Peterson, a Web developer for the University of Maryland, Baltimore, hasn’t used a credit card for two years.
“It makes me feel pretty good. I really don’t miss having the credit card bill come at the end of every month,” she says. “I feel bad for everyone who has a credit card and is facing these interest rates and everything else.”
The 32-year-old got her first card while a student at the University of Maryland, Baltimore County, where she opened accounts with vendors on campus to get free T-shirts or other gifts. Card debt wasn’t a big issue until her senior year in 2000, when she took an unpaid internship in New York and lived off credit cards. Add tuition, and her balance ballooned to $8,500.
Peterson signed up for a debt management plan, closed her accounts and paid off the balance over 2¿ years.
A few years ago, she got another credit card as a backup. But after slipping into carrying a balance again, Peterson closed the account and paid it off. She now sticks with cash and a debit card that pulls money immediately out of her checking account.
Making the switch
Going without credit cards is an adjustment. It requires building savings and tracking expenses.
“I do a mental tally every time I’m using my card and what my balance will be after that,” Peterson says. She frequently checks her account balance online.
“This time of year is probably the hardest time to not have a credit card because of all the weekly sales,” she concedes. “But not having a card allows me to stay true to budget and not be tempted by impulse shopping.”
She’s right.
“You are more likely to buy and spend more when you use credit cards [rather] than debit cards,” says James Roberts, a marketing professor at Baylor University. A study of fast-food restaurants, for example, found that customers using credit cards spent 50 percent to 100 percent more than those paying with cash, he says.
People spend more with credit cards because it’s painless, Roberts says. You get what you want immediately, but the bill won’t come for a month.
Paying with cash or a check is painful because you see the money disappear before your eyes, he adds. Debit cards are a little less painful than cash, but they hurt, too.
Proponents say that credit cards are more secure and are required by merchants such as car rental agencies and hotels. Others say you need a card to build a credit history and credit score.
That reasoning is outdated, Roberts says.
Lose cash and it’s gone, of course. Federal law, though, limits your liability to no more than $50 if your credit card is stolen. Legal protections for debit cards depend on when you report a missing card, and it’s possible to see your entire account wiped out if you wait more than 60 days. But in practice these days, card companies frequently give debit cards the same liability protections as credit cards.
As the use of debit cards has grown, so has their acceptance.
“I traveled all over Europe on my debit card two years ago,” Peterson says. “I used it to book cruises and plane tickets, and rent cars.”
Of course, card policies vary among businesses, so you should check before traveling. According to some car rental policies, for instance, the agency will put a larger hold on a debit card than a credit card. And some agencies conduct a credit check on customers using debit cards.
As far as credit scores go, a credit card is an easy way to establish a score, but not the only way.
“You can have a very good score without a credit card,” says Barry Paperno, consumer operations manager for FICO, creator of the widely used credit score.
To generate a FICO score, you must have an account that’s more than six months old posted on a credit report and activity in that account within the past six months, he says. Besides credit cards, FICO takes into account student loans, car loans, a mortgage, home equity and other consumer loans.
Peterson, for instance, says she was able to get a car loan and a 30-year-mortgage with favorable terms without a credit card. One benefit you don’t get with cash or debit cards: If you have a dispute a merchant over a purchase made with a credit card, the issuer is in your corner to negotiate.
So, can you adjust to life without a credit card?
“It’s not going to be an easy shift if you have been relying on credit,” warns Bruce McClary, a counselor with Clearpoint Credit Counseling Solutions.
Planning ahead
Living without a credit card takes discipline. You must keep enough money in the bank to cover everyday expenses and unforeseen emergencies, such as your furnace dying. You must budget and track expenses to avoid overdrawing your bank account. And you may have to wait to purchase something you want.
Living without a credit card will take more work, but the trade-off could be worth it.
Says Roberts, “You can live a better life and be more financially at peace without a credit card.”
False Economy: Think You’re Saving Money? Think Again
You assume you’re being a savvy consumer by doing things like using coupons, getting free shipping with online purchases, and shopping in stores with no-hassle return policies. But are you really being taken for a sucker?
There are plenty of programs and promotions out there that claim to save you money. However, retailers don’t come up with these promotions to save you money. They come up with them to make profits. The game comes down to who is playing who.
You can save money through many of the programs and retailers below, but the trick is to make sure you’re working them, and not the other way around.
Coupons
It’s great to get a discount on something you were going to buy anyway. But coupons are often used to entice folks into purchasing stuff that’s not normally on their shopping lists, and that they don’t really need—so if you buy, it’s a net loss, even if you’re buying at a discount. There’s an interesting discussion on whether coupons are a waste at FiveCentNickel.com. Most bargain hunters use them, but use them carefully, strategically. To use coupons wisely, you must be willing to jump from brand to brand and from store to store, and you must keep your eye on what you’re actually paying out of your pocket, rather than what you’re supposedly saving with some coupon. As one commenter said:
There is no point in saving $0.50 on a $4.00 bottle of salad dressing, when the one you normally purchase is $2.39.
Which brings up another point: Even if you have a coupon for a national brand product, a generic store brand equivalent might be cheaper, and tests have shown that store brands generally taste just as good or better.
0% Financing
Yes, you can get a deal with 0% financing—but only if you pay back the loan in its entirety before the 0% period runs out. As a Consumer Reports post said, retailers like Best Buy and Wal-Mart offer 0% financing for big purchases like flat-screen TVs, but once that no-interest period expires, you’re looking at interest rates of around 30%. Again, no harm done if you’re certain you can pay off the balance in the agreed-upon time frame. The problem is that many people are attracted to 0% financing because they don’t have the money to pay in full. They may think they’ll be able to cover the debt in the 6, 9, or 12 months detailed in the contract, but, especially because the economy’s been so dodgy, do they know for certain?
Stores That Are Always on Sale
At some stores, the discount hype never ends, and there’s always a readily available coupon to knock 20% off your purchase. Kohl’s and Bed, Bath & Beyond come to mind. The result of the non-stop sale-o-rama is that the retail price is pretty much meaningless. No one ever pays the list price (or at least no one ever should). The price after you’ve factored in the coupons and the never-ending discounts—that’s the true price. And often, it’s still not that great. The bottom line is, well, your bottom line. Don’t be bowled over by a flashy discount; look at what you’re paying, and see if you can get it cheaper at another store.
Stores With Good Return Policies
Of course, a good return policy is good for consumers. But the fact is that, per a WSJ story written to inform the business side of the equation:
… customers who know they can return anything they buy, no questions asked, for a full refund are likely to buy more than shoppers who are afraid they might get stuck with something they don’t want or lose money on the return. They’re also more likely to refer the retailer to other shoppers, broadening the company’s customer base.
Retail researchers study this stuff inside and out. They know, for instance, that there’s a lower likelihood of an item being returned if it was purchased at a discount, or that a customer who usually shops in the store will be less likely to return items purchased online.
I’m not saying to avoid shopping in stores with easy return policies. I’m saying that you should be mindful of the puppeteers who come up with these strategic return policies, and that you should only purchase the items you really want. And if you decide after the fact that you don’t want the item, by all means return it. A no-hassle return was one of the reasons you were shopping in the store in the first place.
Free Shipping
The issue here is similar to stores with no-hassle return policies: It’s commonplace to get duped into buying more than you normally would have. Many retailers have carefully-considered dollar minimums that a shopper must meet to get free shipping. So, even if you only wanted to buy one $12 item, you wind up spending $50—but with free shipping!
Studies have shown that consumers are far more likely to buy a $5 item that comes with free shipping than to buy the same item for $2.50 and pay $2.50 for shipping. Makes perfect sense, right? Don’t trick yourself into thinking you’re getting a deal, when what is really happening is that you’re spending more than you planned.
Extended Warranties
You pay more upfront with the idea that it’ll save you money down the line when the car or laptop or whatever breaks and needs to be fixed. The two big problems with extended warranties are that they are expensive (sometimes 30% or 40% of the cost of the item itself) and that consumers rarely ever use them (and stores make as much as 80% profit on extended service plans because of it). Net result: Very few consumers get their money’s worth out of extended warranty, even though they may think that buying them is the prudent thing to do.
Four Important Steps on Good Debt Management
Before you declare bankruptcy because you are stuck deep with several debts, think hard about such decision. There are good debt management techniques that you can opt to do to help you ease your way through your debts.
The process is not easy. Financial problems are never easy. This is especially true if you owe various companies and various people lots of money. The situation will be worse once you are dealing with the situation and find out that you don’t have any idea where to get the money to settle your dilemma.
The reason why declaring bankruptcy must be thought hard about is the fact that such occurrence will be recorded on your credit report for 7-10 years. This will gravely affect your credit status in a negative manner. What you can do is find the right solutions to your problems. You can plan for how you will settle your debts. And you must abide by the rules that you set for yourself to follow.
Here are only some suggestions on how you must prepare in managing your debts.
1. Do not add to your problems by acquiring more debts.
This is the last thing that you need right now. You may still be tempted to swipe your credit cards every now and then. But resort to that only on emergency situations. If you have to change your lifestyle to be able to buy what you can only afford, then do that. It is better to live by your means than to live in fear of a credit collector coming at your house, ringing your phone and knocking on your door.
2. Your goal must be to reduce the amount of payments that you allot for your debts as time goes by.
To achieve this, you must religiously settle your debts little by little. Whatever extra money that you get as bonuses from your work or tokens from other people, you must immediately think about your debts first. Allocate enough money to this endeavor. You want to get out of this rut as soon as possible. But what are your reasons why you want to do that?
The wrong answer to this question is that you are settling your debts now so you can start using your credit cards to buy more gadgets or whatever luxury that you want to acquire. The right answer is that you want to start living according to what you can afford.
3. You can call your creditors and ask for help with your situation.
You can tell them your situation and your longing to get out of that. You can ask them for the right repayment schemes that they can offer you. This way, the interests of your debts will stop from increasing. But if they have agreed on such terms, you must prove yourself worthy of it all. You must pay for whatever amount you’ve bargained for at every period that it must be done.
4. You can also hire a pro to handle this task for you.
You can settle for this if you feel like you can no longer handle the situation. You can ask for the help of credit counselors to manage your debts and teach you how to never again get yourself into this kind of situation.
Part of a good debt management is self control and sacrifice. You just have to bear in mind that all these will be for your own benefit. Try to never commit the same mistakes with regards to money once you have finally gotten out of your dilemma.
Source: Debt Managment Help
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