Like furniture rental places, you can apparently also rent the rims you’ve been dying to have for your car as well, that way, you can look cool, and rich, even if you’re broke.  Dan Miller has a knack for talking about topics that are important to me, and there are few things that get my blood boiling more than people who spend themselves into debt chasing status.  He highlights the new book from Thomas Stanley, author of The Millionaire Next Door and The Millionaire Mind, both of which are excellent books (I will be buying and reading this newest addition to his works).  This new book highlights some of the habits of the truly rich (as opposed to those who only appear rich), which, in general, does not include renting your rims. 

Read the post, and go buy (or check out from your local library) Thomas Stanley’s newest book, Stop Acting Rich.  Let’s all begin to be open minded to the idea that having fancy things (for status) and spending obscene amounts of money on weddings and “McMansions” are not the real way for the average person to become wealthy.  Once you stop believing you are going to simply luck into a fortune, or become famous and rich out of the blue, you can focus on becoming rich the way most people do…through saving, working hard, and striving to be the best at their passion so they can advance themselves in that particular field over the years.

What do I do with my fashion knowledge??  I use it to shop for bargains at retail stores that aren’t going to break the bank.  Some people, however, think that they have to have what’s in the magazine, and what the stars are wearing, and they blow through their credit card limits barely noticing as they chase the current trends.  These poor people would rather be in debt than off trend or insignificant.  They chase celebrity status and think they are entitled to the best things in life.  I feel very bad for these people, because they don’t understand the damage that they’re doing to their lives, all in the pursuit of fame and appearances.  Do a google search for how to become famous, get 80 million results…search for how many people become famous, and get no relevant or accurate results.  For many people, this is an obsession, and it will cause them a lot of heartache throughout the years if they don’t change.

So, what are a couple of ways to turn the negatives of obsessing over fame and status into a positive?  Well, deciding to become the best at what you do, even if it means you’re not famous or on TV, is a good start.  That way, you’re pouring your energy and ambition into something that is likely to help you secure a decent lifestyle and a comfortable retirement in the future, and you’re not distracted by what is not likely to happen.  Also, challenge yourself to either save everything you were spending on those expensive lifestyle goods, or challenge yourself to find the absolute best price on them.  You’d be surprised at how much money you can save, if you just stop paying attention to the designer label!  

Remember, being an adult isn’t about age…it’s about character, attitude and actions…don’t let your actions reveal you to be a child, only out to get attention and the latest, coolest toys.

The article is a little lengthy, but it’s worth the read, if only so you can laugh at it as you read.  Here are some highlights:

• Arbitration – The author says that credit card arbitration is a fabulous feature.  Well, when I used credit cards, I never had to use this feature, even when I had problems with stores.  Also, opinions are split as to whether arbitration is good or bad.  This article says the consumer doesn’t usually come out on the winning end. 
• Automatic bill payment – Obviously, you can set up your bills to be paid from your account.  So?  You can do that with a debit card as well, which comes from YOUR money, not borrowed money. 
• Bulwark against identity theft – The author points out that credit card companies have laws in place to make sure they don’t charge you for fraudulent charges, after a $50 fee, within 60 days.  This is true.  However, debit cards have systems in place as well.  Within 2 days, it’s a $50 fee and a $500 fee up to 60 days.  Most banks voluntarily choose to extend the $50 fee to 60 days, and not charge $500.  So again, it’s a wash.
• Credit Improvement – I wish people would quit focusing on “improving your credit score through credit cards!  Having cash to pay for things makes credit cards pointless, doesn’t it?  Which makes your credit score less important.  Yes, you might need it to buy a house, but if you put at least 10% to 20% down when you buy the house, and have a good income, I doubt they will pay close attention to your credit score.
• Extended Warranties – These things are a waste of money most of the time anyway, so tauting them as an advantage doesn’t really make sense.  Period.
• Interest Free Loans – Well, interest free loans don’t matter if you pay for what you want with cash!  If you don’t have the money for it, don’t buy it.  Want money for “emergencies”??  That’s why you have an emergency fund!
• Purchase Protection - Some cards pay to fix or replace items broken that you paid for with a credit card.  They don’t do it out of the kindness of their hearts.  You, and others, are probably paying for it, you just might not know you are.
• Rental Car Coverage – Your auto insurance covers this.  So, why do you need more?  A silly advantage, considering auto insurance is mandatory, and credit cards are not!
• Rewards, Rewards, Rewards- Yes, some cards offer rewards, but that only encourages you to use them more!  Also, unless you stay in hotels a lot, fly a lot or whatever else they offer “points” for, the points are not useful.  Other rewards are usually not worth it, or are something that you could have bought outright, and saved on interest if you carried a balance.  I do know 1 person who got use out of their points, but it was her business credit card.  In general, not worth it!

My favorite quote from the article:  “I get all these goodies largely because so many other folks play the credit card game so badly.  The profits they generate for the credit card issuers essentially pay for my freebies.”  So, she plays the “game” well, and you pay for her rewards and benefits.  Why not just get out of the game?  Use debit cards or cash.  You’ll save more money in the long run!

Your first option, of course, is to save up throughout the year (or what time you have remaining before the holidays).  It’s not that hard to amass a nice little sum to spend on your loved ones if you plan and budget.  Saving only $10 a week amounts up to $520 in a year…now, while that isn’t enough to buy everyone a new car, you can certainly do something nice with that amount.  Want to spend more?  Save more!  The trick is in deciding on what you usually spend and saving that amount throughout the year!  If you didn’t save up for it, and don’t have the disposable income, then you should look into other forms of gifts, because no one needs the stress of credit card debt, and the certainly don’t need to go into debt to buy presents for other people.  And, I’ll tell you a secret…your friends and family don’t want you to go into debt to buy them a present!

If the first option won’t work for you, you’re not out of luck, because you can always give the gift of your time or experience!  Granted, it’s not as glamorous as a new T.V., but giving the gift of your time is still special, ans still shows that you care enough (maybe more) to do something nice for your friends and relatives during the holidays.  Some good options?  Well, you could offer up babysitting services, cook dinner etc. for busy working parents.  That kind of stuff not your thing?  Well, figure out what you’re good at, or what your hobby is, and offer that service to your friends and family!  Let’s say you’re a masseuse…you could offer some of your friends and family a complimentary 30 minute massage as a gift!  No one would turn that down! You just need to be creative.

I’m sure I will revisit this topic as the holiday season draws near, because honestly, it irks my nerves that so many people cannot plan for the holiday season!  Whatever your financial situation is, it boils down to this: If you have the cash saved up or on hand, by all means, spend it on loved ones as you wish, but if you don’t have the cash, give the gift of your time or don’t buy gifts at all, since the last thing anyone needs is more credit card debt!

Today’s article is What credit card legislation means for you By: Ismat Sarah Mangla

Brief summary: Legislation that restricts “questionable” lending practices by credit card companies. The article shares the highlights of the 2 Bills, in plain language.

The original bill in question, H.R. 627, was renamed by the Senate, The Credit Card Accountability, Responsibility and Disclosure Act,or S.414, which passed by an overwhelming margin of 90-5, with 5 people not present or not voting. This bill had some changes in it from what the House sent to the Senate, so now a committee of the 2 groups will have to get together and work out the differences, so that they are in agreement. Then, it goes to the President to be signed into law, or vetoed. So, here is what this legislation means to you:

1. Due dates – In the past, credit card companies didn’t have to send you the bill until 14 days prior to the payment due date. This will now be 21 days prior to due date, and when the due dates fall on holidays or weekends, the payment will be accepted the next business day. I think this is great, because everyone needs time to plan out their budget. The holiday/weekend schedule part is interesting though, because while I agree you shouldn’t be penalized for a holiday (who knows when they are except bank employees), with regard to the weekend, you should have mailed that payment earlier, since those weekends, they do come at the same time every week!

2. Teaser rates – Both the Senate and House bill call for these “teaser rates” to be offered for at least 6 months. Well, I can’t see how this is a big deal, but more importantly, should credit card holders be falling for “teaser rates”?? Don’t fall for anything like that. Face it…if it looks like a good deal, and it came from the credit card company, it’s not. Don’t buy into the hype!

3. Cards for young adults – This is probably my favorite part of this legislation, since I saw the credit card companies hard at work (and the college students falling for it) when I was in college. The House bill doesn’t allow people under 18 to get a credit card unless the parent is the account holder, and limits college students to one credit card, with limits on their credit to a percentage of their income. But here’s the best part…The Senate bill went even further. Under the Bill from the Senate, no one under the age of 21 would be allowed to have a credit card (thank goodness), unless an adult co-signs or the person can show proof of income. Now, why do I like this so much? Well, I am very much of the opinion that people need personal responsibility, especially with money, but let’s face it…when we’re young, we don’t always know what is best for us, and we do stupid stuff. I think it is the parents responsibility to teach their children how to handle money, but if the parents don’t know how, then where does that leave the children? Most likely, in debt.

4. Retroactive rate hikes – This one can be confusing, but the gist is that if you carry a balance on your credit card (which you shouldn’t do), and then the CC company raises your rate, the new rate only applies to the purchases you make after they raise it. However, if you’re more than 30 days (House bill) or 60 days (Senate bill) late, then the credit card company can raise the rates on all of your debt. I like that it keeps them from charging higher rates on balances you carry (but again, you shouldn’t be carrying a balance), and totally agree that the CC companies should be allowed to raise the rates if you”re late. You were late. There SHOULD be penalties.

5. Penalty periods – Speaking of penalties, if you make a late payment and your rate goes up, the Senate bill says that you can reclaim your lower rate if you pay on time for 6 months in a row. I agree with this, because in 6 months you should learn your lesson. Besides, the CC companies won’t be losing any money, since the people who are consistently late will never be able to reclaim their lower rate.

6. Over-the-limit fees – This is a nice little part of the bill. Used to be, credit cards had “limits”. These would keep you from spending more then you should. The problem? People didn’t like being “declined” in public, so CC companies would just let you go over your limit, and then charge you a hefty fee. However, with the new legislation, consumers have to opt in to get over-the-limit approval, and the fees that come with it. I didn’t disagree with the fee…you shouldn’t have overcharged your card. You should have paid attention to your finances. But this is great, because you actually have to make a conscious decision, by opting in, to go over the limit. You actually have to say “yes, I want those fees”…and people will do it!

7. Gift cards – I was surprised these made it into either bill. Legislation calls for expiration limits to be no shorter than 5 years, and if there is a “dormancy fee”, it must be printed on the card. I don’t know anybody that waits more than 5 years to use a gift card, but I don’t think I’d want my money to be swiped by the gift card issuer because I’m slow.

8. Advance notification – The standard practice has been to give card holders 15 days notice of a rate change in your card. The bill changes that to 45 days. Again, I like the planning aspect of this, but if you just don’t carry a balance, then it won’t matter.

9. Payment allocation – Here’s another confusing one. Say you have a balance transfer on your card at some low rate, and purchases at a higher rate. The CC companies have been applying any payments to the lower interest rate first, so they could still rack up interest charges on you on the higher rate (i.e. more money for them). But now, any payments you make that are “in excess of the minimum amount” are applied to the higher rate first, and then the remainder of your balance in descending order. Notice the key phrase…in excess of the minimum amount, or payment. I like this because it will hopefully encourage people to pay more than the minimum amount, which is the ONLY way to get them paid off! So, you pay more toward the card, you’re rewarded, you pay the minimum, you’re not. This is good, though I think people shouldn’t need a reward for doing the right thing and being responsible.

10. Universal default – Universal default is when CC companies raise your rates on their card because they discovered that you were late on another card. Both bills eliminate this, which is good, because it’s wrong to assume that one mistake will carry over to all of your finances.

11. Account closings – Although not covered in the Senate bill, the House bill requires that the CC companies give you 30 days notice before it closes your account. I don’t know why this matters, but I don’t see it as a hassle for anybody, so I guess it’s ok.

According to the article, most of these are addressed in the Fed’s credit card regulations which are supposed to take effect July 2010. So, is this legislation necessary then, or is it that the government (the Fed is not the government…Find out what the Fed is here), specifically congress, wants to take “credit” for the new regulations, since their approval ratings are at 35.7%?? I’ll let you think on that one for a while.

Now, while I think that, in general, the government legislates too much of our lives, I am obviously, not opposed to this legislation. This is not to say that I think the credit card companies are “the ones to blame” for all the delinquent balances out there…I mean, come on, you didn’t know when your payment was due? You had no idea what would happen if you spent over your limit? You didn’t know your credit card limit, and it’s the credit card companies fault?? No, it’s not their fault that you are in debt, but they are engaged in practices that I think are a little shady, and I am happy to see that change is coming.

Combine the list of financial goals and financial responsibilities and assign priorities to each of them. You have to decide if Christmas gifts are more important then paying down debt, and if that $6 coffee is more important then some monthly bill or credit card payment etc. Every item has to be arranged in a list of most important to least important (you can assign numbers next to each if you like). A few tips here: Your rent/mortgage payment, food, electricity and water should top the list as most important financial responsibilities, since you have to have a safe, warm place to live, with running water and food.

Now, add all of your expenses together. If your expenses total more than your income, then you have a problem. That means that every month, you (just like countless others) have been spending more money then you make, and are accruing debt. Now, don’t get discouraged if your expenses exceed your income. You simply need to focus on cleaning up the mess. If it looks overwhelming, remember, it doesn’t matter how bad the problem is, you just take it one step at a time. So, here is what you do: if your expenses total more than your income, remove expenses from the list, one by one, until the total expenses does NOT exceed your income. The first thing to go should be anything that resembles extravagance, and yes, that includes $6 coffee.

Another choice is to add income. If you want to keep all of your expenses on the list, then you might need to figure out a way to make extra money. A paper route? Pizza delivery? If you’re a teacher, you can pick up club activities at school, which pay extra. Be creative. If keeping all the “stuff” you’ve accumulated (and the debt that goes with it) is important to you, then you need to increase your income til it matches your list of expenses.

If your list of expenses did not exceed your income, congratulations! You are at a very good starting point! Now look at yout financial goals, and determine which of them are and are not being met. Are you covering all of your expenses but not saving anything and you want to? Then you have some work to do as well.

Next week, we will discuss “how to get there faster”!

Credit card companies let you use their credit, otherwise known as their money, in exchange for high Annual Percentage Rates and tricky terms and conditions. In reality, they want you to mess up and pay late. They want you to get the cash advance and hope you don’t notice that the cash advance APR is higher (in most cases) than your regular rate for purchases. Why? It’s their BUSINESS to make money off of you, and you don’t care, because they make it easy for you to get things! If you have $1000 in credit card debt at an interest rate of 12%, making payments of $25 (standard minimum payment on this much debt) a month, it will take you 51 months to pay that off!! That turns out to be $1275 total…and it just goes up from there. $10,000 in debt at 12% with a payment of $150 a month takes 110 months, or 9 1/2 YEARS to pay off. You will pay a total of $16,500 to the credit card company. I don’t think anyone should be happy with that arrangement. Wouldn’t it just be easier to save up for it?

Let’s face it…a lot of people in this country are materialistic. The “keeping up with the Joneses” mentality that all of us have succumb to at some point in time keeps us begging for more credit from the credit card gods. We want things…handbags, tools, shoes, HOUSES (hello people who bought more house than they could afford) and who knows what else. So I ask again…why do you want a credit card? Well, if you can’t say that you pay off your credit card EVERY month, and if you can’t say that you have an emergency fund and don’t NEED the credit card, then you shouldn’t have one. Using credit cards because you can’t afford to pay cash for what you want is a bad idea. You should save up to buy items that are not in your budget. Credit cards are NOT a supplemental income. They are not a way for you to expand your lifestyle, and when a person uses credit cards as supplemental income it almost always comes back to haunt them.