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August 27, 2006
How Your Interest Charge Is Calculated
You almost need to be a mathematics major to understand how the credit card companies arrive at the figure that shows up on your monthly statement under the heading Interest Charge. Come to think about it, forget the "almost." You do need to hold a mathematics degree.
Not only is the formula complex, but it is not standardized. Different cards use different techniques, and if you are concerned about the amount of inter¬est you pay, you need to understand how they work. Of course, it's all in the small print in your cardholder agreement, but who takes the time to read through all that? So here's a quick summary of the different calculation tech¬niques that are used. Ask your credit card customer service desk to tell you which one they apply. Remember, if you pay off your full balance owing each month, none of this need concern you.
Average daily balance
Here the company simply calculates the average daily amount of your out¬standing balance over the current billing cycle and applies to that figure the annual rate divided by 12. If your average daily balance is $1,000 and your annual interest rate is 12 percent, your interest charge for that month is $10 (1 percent of $1,000). The advantage of this method is that you are credited for any payments made during the latest period.
Prior month's balance
With your previous month balance you will pay interest for the entire billing period on the balance that you owed at the end of the previous month. You get no credit for any payments made since then, even if you paid off the entire debt in full!
Adjusted prior month's balance
This is a variation on the prior month's balance calculation, but it works in your favor. Here you are credited with any payments made during the present billing cycle before your interest owing is calculated.
Watch for the term “Two-Cycle”
That's our name for it, but the tip-off that you're facing it is the term "two-cycle" in the cardholder literature. Avoid this at all costs. It's a combination of the prior month's balance and the average daily balance that works in such a way as to maximize your interest expense.
August 26, 2006
When NOT to Use Your Credit Card
There are legitimate reasons to use your credit card such as:
I could go into every possible purchase but there is no need to go into that depth for what I want to say to you here.
Using your credit card to earn rewards points is a wonderful thing but make sure you don't over-extend yourself. Earn your points, pay your balance in full. That is a good use of a credit card.
When NOT to use the plastic
Never use your credit card for cash advances!
If you need to make a purchase you are much better off making the purchase of an item on your credit card as purchases in most instances have a grace period before interest begins to accrue.
A cash advance will immediately begin to accrue interest. Check your rates, as you will find the cost of borrowing on your credit card is incredibly high! Avoid pulling money from an ATM on your card, it's going to hurt! Same goes for those Visa and MasterCard checks that are exactly the same thing as a cash advance on your credit card. Credit card checks are simply a sneaky way that the banks have come up with to encourage you to take out a high interest cash advance.
If you truly do need to borrow money in the form of hard cash you should apply for a personal loan at a much lower rate than a charge card. Yes, it will take a little longer to receive the cash but this simple piece of advice will save you a lot of hardship down the road.
Cash advances on credit cards are a fools game - Don't play a game that is going to leave you facing the potential of bankruptcy!
Posted by Colin at 03:19 PM | Permalink | Comments (0) | TrackBacks (0)August 22, 2006
Student Loans, College Enrollment - Is it worth the risk?
With summer winding down and the school year upon us, college students are heading back to school. By now the student loans are in hand and tuitions are likely paid. The daunting cost of text books is just around the corner. The cost of education has come to outrageous levels and many students are looking at an uncertain future.
Is the cost of college really worth it?
Many students leave college with debts in excess of fifty thousand dollars and for what, a shot at a decent job, notice I said decent not great.
For the most part students are facing a very competitive job market and the nature of today’s business is to hire the young guns right out of college. Alright, so it seems you have a good chance of landing a job, but is that job going to provide you with the ability to support yourself considering the student loan repayments?
Businesses hire the fresh college grads for two reasons:
1. For their enthusiasm and give it all attitude
2. New grads will work for less.
Now think about it. Is it worth it to graduate with $50,000+ in debt load for a low paying job?
The enthusiastic new grad may think so. The thinking being that they will climb the corporate ladder and settle in with a nice salary over the years.
Guess what!
After a few years the enthusiasm for the job dwindles and the salary expectations increase.
Now you (the new grad) are no longer the new kid on the block. Companies will be looking for ways to push you out the door and hire a fresh batch of youthful go-getters to run the show and the cycle will continue.
It makes sense economically for companies to do this.
One more thing, don’t forget about the fact that we are living in a global market place and what Americans perceive as low pay, other workers in other countries view it as a small fortune.
There was a point in my life that I was going to pursue a Masters degree but realized the risk was not worth it. I chose to pursue launching my own business, which has been a very wise choice for me. No student loans to pay off and huge cash rolling in. Nobody to answer to and a life of increased freedom.
Just some food for thought before signing for that student loan.
August 19, 2006
High Earnings Can Lead to Serious Trouble
I am here to speak to you from the voice of experience - Earning a fortune can lead to some big time financial troubles.
The problem begins with, say starting a business. Your business takes off, you buy stuff, expensive stuff. You might have bought into the idea that it is better to finance and have some cash in the bank than to purchase your expensive acquisitions outright.
I can tell you I chose the path of financing everything - My new cars, throwing big screen TV's and home theater equipment on credit lines.
My latest purchase was $24000 on a new travel trailer - This time I chose the pay cash option.
You see, sometimes these huge earnings from a highly successful business can drop rapidly leaving a serious cash flow problem at hand. This time, I have my expensive toy but should my business take a hit I don't have any cash flow problems as I have not taken on new debt.
In fact my research has shown me that my travel trailer will hold it's value for many years. Should I ever need the cash I can sell the trailer for close to my purchase price providing I maintain it well. Which I am doing.
I hope this can help a fellow high earning business owner in a financial decision - Even if your income is not at an incredible level the same idea should be applied to your purchases.
Posted by Colin at 10:59 PM | Permalink | Comments (0) | TrackBacks (0)Release Others From Your Financial Problems, Serenity is Key
We have big plans and goals. We feel ready to move forward, but we're dependent on others.
"If so-and-so would do such and such at this time, I'd be able to take on some extra work."
We expect others to operate in our framework, on our timelines. We expect them to understand our needs.
We may even expect them to read our minds!
The level of our expectations is directly related to our level of serenity.
The more we expect of others, the more disappointed we can get.
This is not to say that we forget our dreams. We still think as big as we'd like,
and we still seek support from others. We just learn that we can't connect our expectations or our
thinking with someone else's behavior without running the risk of being disappointed.
We accept that we cannot change another. We accept reality with grace and move forward from there.
Today release others from your expectations.
In doing so, you gain serenity.
Get Intimate With Tax Laws - Save Your Money
Many of us fear that we don't know enough about tax laws.
Our spouse is good with numbers so we let him/her handle it.
Our spouse makes it clear to us that he/she knows what he's/she's doing.
Everything will be fine.
If we suspect that our spouse or recently divorced spouse may be filing erroneous taxes, we may want to file separately so we are not responsible for back taxes, even if filing separately will cost us more money up front.
Tax laws change every year. If we've never done taxes and don't feel confident filling out tax forms, we spend the money to have a professional do the work.
Today your financial future.
August 18, 2006
The Truck Lease Saga - Got me a Trailer
A few months ago I was trying to dump my GMAC lease on a Chevy Avalanche.
For those of you following that story, I am pleased to say that I now have something to tow behind my super expensive lease of $830/month on that stinkin' truck.
Yes...I went out and bought a new 27 foot travel trailer to tow behind my overly expensive lease payment.
This time rather than finance or lease I had the cash so I purchased the trailer with cash. No payments - No future cash flow headaches. The trailer is mine!
I have about 15 months or so left on that lease and upon expiration I will be buying another Avanlanche (or whatever truck strikes my interest at that point) with cash - And I will be buying outright a truck that is a couple years old.
It really ticked me off when I looked at the prices of 3 year old Chevy Duramax Diesel, Dodge Cummins Ram Diesel and Ford F-350 Diesels (which have a much higher towing capacity) - All of the forementioned trucks at 3 years old with low mileage were going for about a third the price I paid for my Avalanche!
The towing capacity of my Avalanche is more than enough to tow my trailer - I do love that truck but the payments sometimes make me reconsider my feelings towards the vehicle :)
Oh well, in about a year I will be able to shed that debt - Maybe I will return the Avalanche and then buy it at a much more reasonable price - Or who knows what will be my new tow vehicle.
Readers and truck owners, please submit your comments for "best travel trailer tow vehicle with a touch of coolness" on a truck with a reasonable price tag.
August 15, 2006
Get Out of Debt - Where's Your Attitude At?
We go through stages when we get distracted.
Instead of focusing on our projects at hand, we find something or someone to complain about and make it our mission to let everyone know our thoughts.
Our gripes are big and small.
The banker is a jerk.
The driver who cut us off on the street has a lot of nerve. Our doctor doesn't listen.
What comes around goes around. We remove ourselves from situations where we feel tempted to waste our energy secretly hurting others.
We imagine what it feels like to be the recipient.
We ask our Higher Power for forgiveness and secretly ask those we've harmed for forgiveness.
We make it a habit to act with honor.
Think good thoughts and say good things, your positive enery will go a long way in all aspects of your life.
August 12, 2006
Getting out of debt - How does your lifemate see things?
When we choose to commit to a relationship, we commit emotionally, physically, spiritually, and mentally.
Many of us, however, give very little serious thought or discussion to our financial commitment.
Either we've decided in our heads how the money is going to be managed, or we just figure everything will work out.
We may even feel guilty talking about the money end of the relationship.
That would, we believe, be focusing on what's least important.
We think again.
Each of us brings our own emotional baggage about money to a relationship.
Arguments, resentments, manipulation, and deceit can all stem from misunderstandings and fears about money and equality in a relationship and can undermine the happiness of even the best of soul mates.
We take considerable time learning what our partner's "emotional currency" is.
Today, do not assume that you understand the financial relationship you have with your partner
Posted by Colin at 10:15 PM | Permalink | Comments (0) | TrackBacks (0)Seek Your Sense of Freedom
Some of us made it a policy not to borrow money.
We didn't want to feel indebted to anyone.
To us, having money meant freedom.
When circumstances—perhaps job loss, divorce, death of a spouse, retirement, medical expenses, or addiction—led us into debt, we felt we lost our freedom to do what we wanted to do, to be where we wanted to be, or to go out and have a good time.
Money, instead of being our ticket to adventure, became our prison.
Many of us will eventually escape debtor's prison.
In the meantime, we know that freedom can be a state of mind.
When we free ourselves of worry, hate, blame, expectations, and look back, we are free to just be.
Today begin to look within for a sense of freedom.
August 09, 2006
Personality Traits Affecting Your Credit?
If we take the time, most of us could describe the major characteristics of our personality.
We all have good points and some not-so-good points. We may, for instance, be very generous and kindhearted.
On the flip side, we endanger family finances through reckless spending.
If our natural tendency is to focus on our defects, we haven't accepted them.
We write down our character defects.
We read the list over. We acknowledge that, for better or worse, for one reason or another, this is who we are.
Once we accept ourselves entirely, we are at the starting gate for making change.
We're able to exhale.
Today, identify and accept one of your negative traits.
Posted by Colin at 12:42 PM | Permalink | Comments (0) | TrackBacks (0)Tips for Managing Your Money
Just as fast as money multiplies for those who have it and manage it well, it dwindles for those of us in debt.
Whether we have bad credit, too much credit, or both, we're penalized. Interest rates are higher.
We juggle bills and pay late fees and overdraft fees.
We're denied loans and low-interest credit cards.
We're hounded by creditors.
We have good intentions but feel we only get deeper in debt and can't get out from under it.
We feel trapped.
We get angry.
We try to be creative but find only short-term solutions or rejection.
When we accept that penalties and setbacks are not personal attacks, that they are part of a system we can't control, we no longer waste our energy fighting a losing battle.
August 08, 2006
Getting Out of Debt, Stop Your Obsessions!
Most of us are likely to obsess about one thing or another for a period of time, sometimes for days, weeks, or maybe even for years.
When in debt, we may obsess about getting what we can't afford, our past spending behaviors, or what we could've had if we hadn't gone so deep into debt.
We question our values.
Obsessing about what we want or can't have means we value what money can buy—stuff—more than we value money itself.
We're really ignoring money altogether. Instead, we can concentrate on what our money can do.
We value its ability to grow, and we appreciate money more than a new computer.
We begin to see how money can work for us.
Today turn your attention from material goods toward money.
Posted by Colin at 03:22 PM | Permalink | Comments (0) | TrackBacks (0)August 06, 2006
How Many Credit Cards Are in Your Wallet?
We may have five or six credit cards, maybe more.
We juggle the payments, do balance transfers, try to remember what we owe on each balance, what the percentage rates are for each card, and when payments are due.
Our goal is to get down to one or, if we're compulsive spenders or gamblers, zero credit cards.
While we still have a balance due, however, we don't take chances.
We cut up all but one (or all) credit cards so we're not tempted to use them and create more debt.
We keep the card with the lowest interest rate (or a debit card) for emergencies only.
We call the credit card company and ask that our credit limit be lowered.
Today clean your wallet of excess credit cards. Be sure to keep your credit card spending to an absolute minimum.
Posted by Colin at 09:53 PM | Permalink | Comments (0) | TrackBacks (0)August 05, 2006
Do You Believe in Your Goal of Debt Freedom?
We develop goals, priorities, and action steps.
We feel energized and ready to move full speed ahead.
But midway, as our momentum picks up, new thoughts enter our mind.
Do I really want this?
What if it creates new problems for me?
If I reach this goal, I'll have nothing to look forward to.
Being wishy-washy gets us nowhere.
These thoughts are the ego's way of looking for obstacles.
We acknowledge the doubts and then quickly cast them aside and move forward with complete conviction, like a warrior.
If the goal still feels right, we keep moving ahead.
We know in our hearts that doing what we believe in keeps us on the right path.
Today, believe in your goals and begin your path to debt freedom.
Posted by Colin at 11:47 PM | Permalink | Comments (0) | TrackBacks (0)August 04, 2006
The Little Things Add Up - Debt Freedom can be Achieved
One of the first and most obvious ways to pay off debt faster is to look for ways to cut excessive, wasteful, and frivolous spending and to apply that money toward our debt.
It can be hard to save hundreds of dollars in one category, but, amazingly, it's easy to save five hundred dollars or more by cutting back on smaller expenses.
Could we, for instance, replace the two-dollar cup of gourmet coffee with the stuff we get at work?
Can we buy generic brands of medicine?
Use vinegar instead of expensive cleaning solutions?
Use cheaper shampoos and lotions?
Bring our lunch to work every now and then?
Cutting back doesn't have to mean doing without. We experiment.
Maybe we get gourmet coffee once a week or once a month instead of every day.
We may find that we don't miss it as much as we thought we would and that we feel more gratified saving ten dollars a week.
We allow ourselves to be flexible. We put the money we save in an envelope or box.
We apply the savings toward our debt.
Look for small ways to save five hundred or a thousand dollars a year.
Posted by Colin at 11:52 AM | Permalink | Comments (0) | TrackBacks (0)August 02, 2006
Money, Debt and Security
Some of us once found money to be a source of security.
We looked at it as a way to solve our problems and to make our future worry-free.
We took great care to save and to not spend foolishly. Now deep in debt, we feel insecure, afraid, and bitter.
We tried hard not to get in debt.
Regardless, here we are.
We learn to view money as a positive energy.
If we don't cling to the energy, and if we trust that all our needs will be met, money flows to us when we need it.
We realize that, no matter how rich or poor we are, anything can happen.
When we had money, we may have felt we didn't need to worry about the future.
Now that we're in debt, we no longer need to worry about losing money.
In debt, we gain a sense of freedom—freedom from the need to be secure.
Today I will ask my higher power to strengthen my faith.
I will know that the less I seek security, the more secure I will feel.
Posted by Colin at 02:21 AM | Permalink | Comments (0) | TrackBacks (0)August 01, 2006
Debt Burdens Are A Problem For High Earners Too
We have a job where we earn more money than we'd ever dreamed possible, or perhaps we inherited a large sum—or even won the lottery.
We always thought if we just made a given amount every year or won a chunk of cash, we'd be okay.
We'd be happy. But we find the more we make, the more we spend. And we're still not happy.
What happened?
When our appetite is always bigger than our bankroll, we remember to treat the true source of the problem.
When by reasonable standards we make plenty of money but our spending and income increase proportionately, we question our thoughts about money, our spending patterns, and our needs: emotional, physical, spiritual, and mental.
No matter how much you make it is possible to sink yourself in major debt.
When the money starts rolling in, stop and question each and every purchase decision.
Pay special attention to your emotional state when the temptation to take on loans kicks in.
Making more money can actually put you in a debt burden that is insurmountable, especially if that large income vanishes.
Trust me on this - I know from experience! Yes it is possible to make over $500,000/year and still be a financial wreck!
Posted by Colin at 04:15 PM | Permalink | Comments (0) | TrackBacks (0)