Don't Do Debt.com

Don't forget...Write it down!

Don't forget to take account of all money outstanding (credit/debit purchases, outstanding checks) to determine your balance when balancing your checking account. Take the current balance of your checking account and subtract outstanding debit and credit charges and any checks- that's how much money you have.

Sounds like an elementary reminder, but too often people forget to write down the checks they've written or the credit or debit charges made with a debit card. Even debit transcations can send you into overdraft status, even if your purchase is approved.

Make it a habit, if you haven't done so already, to write all of your purchases down. This is also helpful in the future when it's time to evaluate your spending habits. You can look at how you've spent your money for the past few months and assess ways to cutback and save money.

Incentive happens: A vision and money

The holidays are now officially behind us. Okay, well actually, tonight marks the end of the holiday season for me as I had one more party to attend this evening. I declined at the last minute as I felt compelled to write about some questions asked of me while travelling around during the past few weeks.

One thing I'm frequently asked after the madness of the holidays comes to a screeching halt, is how to have more money. One person recently expressed concern about her inability to save money, another asked about how to have more money to get out of debt. A mother asked me how to teach her sixteen year-old about money as she recently took on her first part-time job. Other questions have come up, too, but here are a few thoughts I had in response to these questions:

I don't have the perfect answser for anyone. But one thing I live by for myself is this: I have a vision for what I want to do with my life and my money. I have things I want to accomplish:

Quick tips and your money

When I tell people that I write about credit cards, debt and money, I am inevitably asked about any "quick tips" I might have. So, I thought I'd take a minute to share these with others who might have this same question. Below are a few of these "quick tips":

1). Have a vision for your money (see blog entry below).
2). Be aware of the cost of being in debt: It is in fact very expensive to be in debt. When you break the costs down, you can see the incentive to begin seriously eliminating, or at least, reducing the balances on your high interest credit cards (see entry/article- "Quicksand: Debt's impact on budgeting").
3). Get organized with your money: Late/missed payments can be very costly to the cost of your debt-load and can seriously erode your credit report. It’s important to be organized with your money in order to avoid these and other unnecessary and costly penalty fees.

Article: "Quicksand- Debt’s impact on budgeting"

(Highlights from an article slated to appear in an upcoming edition of Budgetstretcher Newsletter)

Ever find yourself quietly pondering where it is exactly
that your money goes? Or, do you find yourself constantly struggling
to save money and get ahead in spite of perfecting your budget
and cutting back on spending? If you’re struggling with money
and credit cards are a part of your spending strategy, it’s time
to look at how your debt-load could be crippling your efforts to
budget and save.

Think of these simple costs to use a credit card:

Balance	Interest	Cost
$2000	10%	$200/year
$5000	10%	$500/year
$10,000	10%	$1,000/year
$20,000	10%	$2,000/year

Other highlights:

Being in debt can cost thousands of dollars a year.
With the cost of being in debt so high, it’s important to understand how credit cards work.
Many people do not comprehend the impact of interest until they’re swimming in it.
When it comes to your money, don’t overlook how your credit cards could be hindering your efforts to budget and save.

Defining predatory

Driving along Selwyn last night, I felt compelled to pull off the road and write. Asking myself why I am working to change the face of predatory lending, thoughts of "predatory" bombarded my mind.

Predatory: My first thought? Engaging or luring someone into an activity when one party knows what the outcome will likely be while the other has neither the foresight or experience to even imagine the outcome.

Choosing a credit card

A friend of mine chooses credit cards like this: An offer comes in the mail. She entertains the offer, turns it over and then reassures herself she can get a lower interest rate. Seriously. She doesn't consider the costs of using the credit card or the impact her current cards have on her financial situation, only whether she can get a lower interest rate. Sadly, she and her husband are on the haphazard strategy of paying bills. They pay when they have money and a convenient time to sit down and "do bills". NOT GOOD. They pay late fees every month on almost every account they currently have - from credit cards to health insurance and other loans- they don't need more accounts.

When it comes to your money and paying bills, organization is a must and timeliness is godliness in terms of protecting your credit and saving money. Late payments erode your credit history and worse, are very expensive, especially when late on multiple accounts. Think of this: A meager $20 late payment on 7 accounts a month. That's $140/month. Pay late on all accounts for a year, they are looking at $1680 in late payments alone. They, however, see the late fee on each account and it seems insignificant. They don't necessarily do the math in the big picture- to their own detriment.

When choosing a credit card, don't simply consider the interest rate. Think about whether you can afford another credit card and the fees, penalties and interest you'll pay for the life of that account.

Q&A: Credit Card Use (III)

Q: I can't afford to pay my basic bills, I'm nervous about eventually repaying my student loans and it seems perfectly logical that a credit card will help me have more of my money. What should I do?

A: Think twice. Credit cards seem especially easy to manage in the short term but they can become expensive and messy in the long-term if mismanaged.

Q&A: Credit Card Use (II)

Q: Should I use a credit card to build my credit?

A: Credit cards are a big responsibility and mismanagement carries great consequence. Using credit cards to build your credit can backfire and you can quickly do more harm than good to your credit report. Building credit takes time, an abililty to demonstrate positive money management skills, and it's really wise to wait to use credit cards until you understand exactly how they work.

Q: How much debt is too much debt?

A: $2,000 in debt is a lot of debt, no matter how much money you make.

Q&A: Credit Card Use (I)

Q: How many credit cards should I have?

A: The technically correct answer would be one or two. If you have more than one credit card, your obligated to interest and penalty fees on all credit cards in your name. Think of this: You have to pay five credit card bills late one month. A late pay fee = $30. Total = $150 in late fee charges that one month alone. Additionally, your late pays reflect on your credit report (remember late payments erode your credit). The expense of multiple cards can send your money spiralling out of control in little time.

It depends on why you are considering a credit card. If you're hoping a credit card will help build your credit, this strategy can quickly backfire.

Credit report (II)

Q: How do I get bad credit?

A: First thing's first. Credit score: FICO scores range from 400-800. If you have no credit, you're somewhere in the middle. Your job is to take responsible measures to increase your credit score. Timeliness is godliness in the world of credit and paying every loan (traditional or a credit card, for example) is imperative. Late payments erode your credit. When it comes to credit reports, there are 3 factors to consider: Good credit, debt to income ratio, bad credit.