Christmas Credit

"The fact is, nearly 75 percent of Americans who use credit cards make only the minimum payment each month. At that rate (minimum payments) you could spend the next thirty years paying back a $3,000 credit card debt and give the financial institution $8,000 worth of interest. It's the principle of compound interest in reverse." - Raymond McHenry

I hope I'm not too late with this post!

To all of those millions of people that use and live by credit cards, it is abundantly clear that we are prey to our own human nature. Credit card companies understand and exploit the mere fact that we are human.

Once you are approved for a credit card, which is quite easy to accomplish these days, they are betting on the fact that you will use that card. These companies are even more sure that you will not pay off your credit card each month.

This is where they make their money...interest charges.

It is those interest charges which begin to create a circle of debt that can make it nearly impossible to ever pay off a credit card. It is this constant debt upon which the companies make their money.

Now comes the rub, late fees.

Most late fees average around $34, instant profit to the credit card company and an addition to your balance collecting interest charges if you don't include that amount in your next payment. The pile of rocks (your debt) grows even higher.

How do you overcome the pitfalls of credit card usage?

Kristyn Kusek Lewis suggests these following tips.

* Remember a due date on your card statement is just that. A postmark date is not the same thing. Many card issuers impose ultra-specific cutoff times (American Express, in example, won't process some payments received after 12 noon in a customer's time zone until the following day), try to make your payment, by mail or online well in advance.

* One way to avoid going over your limit (and facing extra fees as a result): Go to the card company's website. Most will alert you via e-mail when you creep close to your cap.

* If you've historically been a good customer, it can't hurt to ask the customer service department to waive over-limit or other fees.

* Also, if your interest rate goes up, it's worth asking to have it lowered. A study by the Massachusetts Public Interest Research Group found when cardholders requested a reduction, about 6 in 10 had their rate reduced at least a third with just one five-minute call.

What I caution everyone is to use credit cards with care.

Do not overuse them and keep them to a minimum balance. Cash is always better but use of credit can be useful. One good way to limit the need for credit card purchases is to pay yourself at each paycheck (10%) and build up your savings. This will cut down the need to use a credit card.

Lastly, read as much as you can about using credit and creating a savings account. Knowledge is power in many instances and the more you know, the better prepared you will be to handle your finances.

Again, I hope I'm not too late with this post!

Stay inspired my friends!

Black Friday Caution

"When you have money, think of the time when you had none. -Japanese Proverb

Here it is, the day after the Thanksgiving Holiday in the United States, otherwise known as Black Friday. It signal the true rush to purchase Christmas Holiday presents and a rush towards large personal debt for many people. It is this debt which will bring New Years Holiday hangovers when the credit card bills begin to arrive.

So many of us overspend during this part of the year. Not only are we spending more money than we have, but many in the northern hemisphere (winter time) have higher heating bills, more car repair bills from the cold and other winter related expense. It can be a "double-whammy" on your bank account that adds to even higher credit card debt.

But why do we seem to overspend?

There is a great article that examines some of the reasons we overspend. Called Eight Ways to Stop Overspending Now written by Jocelyn Black Hodes for the DailyWorth, I have included a shortened version of her article here. I encourage you to read the entire article as well.

(Start of reprint)
The Reason: You’re Using Plastic.
The Fix: Try using cash for a week (or even a month). Hit the ATM on Sunday and take out the amount of money you feel comfortable spending that week on everyday purchases. Put it in an envelope, and use that as your ATM for the week. That’s a guaranteed way to avoid busting your budget. If you overspend one day, you’ll have to compensate for it the next. One week of using cash, and we guarantee you’ll have a much better sense of what you’re spending every day and what’s really worth the money.

The Reason: Your Lifestyle’s Bigger Than Your Budget.
The Fix: Make a point of consistently living below your means during good and bad times, and make sure you have at least six months of savings set aside, you’ll have a cushion if your expenses jump (with a new baby, say, or a long-term illness) or your income drops. One easy way to learn to live on less and build up your savings: Set up an automatic transfer into a savings account that you don’t touch until, or unless, you need it. After a few paychecks, you won’t even notice it’s gone and won’t look at it as money to spend.

The Reason: Your Childhood.
The Fix: If you lacked good financial role models or advice as a kid, seek them out as an adult. You don’t need to look any further than your local library or bookstore to find inspiring and instructive stories. Some of our favorite picks: “Rich Dad, Poor Dad,” “Your Money or Your Life,” “The Millionaire Next Door,” and “Secrets of the Millionaire Mind.”

The Reason: You’re Trying to Keep Up Appearances.
The Fix: Focus on your goals, rather than your neighbors. Take some time alone to think about what’s most important to you--what you want to have in your life, independent of what your peers may have. Once you’ve identified your goals and what you’ll need to get there, keep them front of mind. When you’re saving money for something that’s important to you, what your neighbors are doing with theirs will seem less important.

The Reason: You’re Feeling Peer Pressure.
The Fix: Make plans that won’t require a big payout. Meet friends for coffee or a drink, instead of a meal. Go hiking or running in the park. Invite friends over for dinner. And surround yourself with the friends who will support you as you work toward your financial goals. Seems obvious, we know. But many of us don’t think about it.

The Reason: You’re Filling an Emotional Void.
The Fix: Shopping can be an effective if temporary distraction, but it also keeps you from dealing with your feelings. Instead, look for a solution that will provide lasting relief, whether it’s putting that ‘retail therapy’ money into real therapy, dealing directly with the situation that precipitated the bad feelings, or just taking a walk with a friend. That won’t cost a thing.

The Reason: You Just Can't Say No.
The Fix: Give your kids an allowance. Next time they ask for a toy or a treat, you can give them to option to use their own allowance money or save their allowance up to pay for it. Using their own money will also give them a better understanding, and appreciation, of how much things really cost. And take time to establish your financial priorities with your partner, so that you’re both aware of where the money is going. It can also help to budget a little extra each month for indulgences to allow for some spontaneous purchases.

The Reason: You Don’t Have Clearly Defined Goals.
The Fix: Get clear on your goals and what it will take to reach them. Creating a financial plan can seem overwhelming, but it doesn’t have to be. Whether you go the do-it-yourself route or work with a financial professional, the process starts with simply prioritizing and visualizing your goals, writing them down, and thinking about how you’ll feel when you reach them.
(End of reprint)

Each of us are responsible for our spending habits and the needs or wants of all purchases. Just be careful not place yourself in new year financial bind. Know that being "PRESENT" around loved ones during the holidays is just as good as giving "PRESENTS" to them.

Stay inspired my friends!