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Posts Tagged ‘Debt’

Why spending today costs more than you think…

Friday, February 19th, 2010

Once again we look to Dan Miller and his 48 days blog (visit the links section of our website for more info on Dan Miller) for an interesting article.  Today’s article, Look rich-die broke was inspired by a sign in front of a car accessories shop in Florida that read: “Rent your wheels and tires here”.

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.

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Posted in Friday's Financial News! | 1 Comment »

Obsession with Hollywood not good for the pocketbook…

Wednesday, February 17th, 2010

Personal confession: I love reading fashion magazines.  I like to see what trends are out there, to know what the best beauty tricks and products are etc.  Unfortunately, part of that world is the celebrity.  Magazines put them on their covers, they include their opinions on everything from decorating to politics (yes, because acting in action movies with big budgets qualifies you more than the average person to decide what’s wrong with this country) and they make them larger than life.  Now, as much as I love looking at the pictures and reading the articles, I can’t stand the obsession with Hollywood and being famous.

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.

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Oh, the insanity!

Friday, January 22nd, 2010

Just when you think you’ve seen all the silly things you can on the Internet, you run across something that makes you CRACK UP LAUGHING!  Such it today’s article, 9 reasons to love credit cards, by Liz  Pulliam Weston.  As the title might indicate to you, our readers, I’m not a fan…and that’s putting it lightly! 

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!

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Don’t be afraid to say NO!!

Monday, January 11th, 2010

This Mucho Moolah Money tip is probably more for our younger readers, but hopefully all of the readers will find some value in it!  I wanted to talk about saying no, canceling services and returning items.  I don’t know why, but for some reason, we have a negative stigma in this country about it!  This is completely ridiculous!

When we buy something or request a service, it is perfectly within our right to return it or cancel it, for whatever reason we deem worthy, with the exception of damage that we caused.  Why then, do some people fear returning things or canceling services?  My guess would be that it has to do with the marketing of retail companies, the “strength” of the sales people, and the idea that people (friends, family, the cashier) will think poorly of us for returning it. 

Well, as far as the retail companies go, they spend millions (maybe even billions) on marketing every year, so why wouldn’t they be able to give us the idea that we shouldn’t cancel their service, or return their product.  You have to stay strong and recognize this tactic for what it is…marketing, period. 

As for the sales people?  It’s their job to be pushy, get you to buy something, and, if you come back to return the product or cancel the service, convince you that you shouldn’t.  They aren’t looking out for your needs (in general…there are exceptions, but very few) and they don’t really want to be your friend…they just want their boss to see that they are doing their jobs, and that is it.  So what do you do/say when you want to return something or cancel a service and the sales team won’t “let” you?  Before you go back to the store in question, decide on what you’re going to say.  Let’s say that you are going to say “the device doesn’t work as promised, and I’d like a refund…here is my receipt.”.  Now, if/when they try to talk you out of it, you simply, but firmly repeat your first statement.  Repeat it again, and again, if you have to.  If you still haven’t made them listen, ask for a manager, and state the same sentence for them.  Eventually, they will decide you aren’t worth their time, and will do as you ask. 

When it comes to our friends and family, we all want them to think we are financially stable and secure.  When we return an item or cancel a service, some of us fear that our friends will think we don’t have the money to pay for it, and we feel embarrassed.  Whether or not this is true, it doesn’t matter.  Your business is your business, and keeping your budget balanced is more important than what someone thinks of you and how much money you have.  Don’t worry about what they think.  It’s NONE of THEIR business!

No matter what you’re trying to return or cancel, never forget that it’s your money in question.  You paid for the item or service, because at the time, it was worth more than the money in your hand, but when you decide it is no longer worth that money, don’t feel that you don’t have the right to get it back (or stop paying for the service)!

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Gen Y-ers grow up!

Friday, December 18th, 2009

Today’s article is from Foxbusiness.com, and is titled Growing Up Financially Is Hard to Do by: Gail Buckner.  It’s some interesting commentary on how the Gen Y-ers are responding to the recent economic turmoil!

Generation Y is a term applied to those people currently 22 to 33 years old, of which, I am a member.  These people are typically the offspring of Baby Boomers, and according to many in the work force, are nothing like their parents, especially in how they view their jobs.  In the past, this (my) generation has been characterized as a bunch of job-hoppers.   But now that they and their friends are experiencing layoffs and financial problems, the number of those surveyed that had changed jobs in the last 2 years dropped from 40% to almost half of that, and almost a quarter of them plan to stay with their employer until they retire…now there’s some surprising information!

Another interesting thing of note, however, is that the economy and higher rates of unemployment have changed the optimism and confidence typically displayed by this group of people, and they are becoming more financially conservative…all I have to say is that it’s about time! 

Apparently, a new survey shows that 41% of Gen Y-ers have become more fiscally conservative in the last year, and nearly 2/3 say they’re “trying to save more now than a year ago”.  I think that is incredible!  To know that a lot of people from my generation are waking up and saving is great.  And as far as retirement, in the last year the number of Gen Y-ers that are saving for retirement rose from 18% to 53%, but the majority of them are only focused on an emergency fund (which is a good start!).  Considering that more than 30% of Gen Y-ers owe more than $5,000 in credit card debt, saving for an emergency and/or retirement is a nice change of pace. 

No matter what their motives, the Generation Y group has started to notice the benefits of saving money and job security.  I have feared that my fellow Gen Y-ers would never learn this lesson, but I am happily wrong.  Maybe it was the economy, maybe it was the fact that it became cool to be a “recessionista”…or maybe it was that we got tired of hearing the word “recessionista”, and started watching our money to get people to quit using that word…either way, it happened, and hopefully it’s here to stay!

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It’s officially autumn! Are you getting ready for the holidays?

Wednesday, September 23rd, 2009

So, this might come as a big shock to some of you, but December 25th is only 3 months away!  I know, it’s surprising, but Christmas (or Hanukkah or Kwanzaa) comes around the same time every year, and many of you are, as usual, caught off guard!  This, frankly, blows my mind.  Every year, as the Christmas season draws near, I hear so many people talking about how they are buying Christmas presents on credit cards, or buying lesser things than they wanted etc. because they didn”t plan and budget for the holidays.  These problems can be alleviated very easily.  Like everything else we talk about on here, it just takes a little planning!

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!

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Friday’s Financial News…The decline in America’s wealth.

Friday, June 12th, 2009

Today’s financial topic is a little bleak, but unfortunately, it is something that we feel our readers should know about. Today we will be talking about the decline in Americans’ wealth. This post will be a little different than the previous posts as it will only be a brief summary. I encourage our readers to click on the link and read the full article.

Today’s article is Americans’ wealth drops $1.3 trillion By: By Tami Luhby

Brief summary: The wealth of Americans has been dwindling over the last 7 quarters, to amount to a hefty overall decline. Only only good news from the decline in our wealth is that the average American’s debt has also declined for the first time EVER. During the first quarter of ‘09, $1.3 trillion of wealth disappeared from our wallets, and the stock market and home values are still declining according to a government report. Some things may be changing, but not quick enough. Luckily, at least some Americans have learned that debt is a bad thing. According to a source from Moody’s economy.com, “Consumers are cutting back on their borrowing to some extent, but the decline in value of assets is swamping that.” Household debt fell at an annual rate of 1.1% to $13.8 trillion for the first quarter of 2009, after falling off 2% in the fourth quarter of 2008. That was the first time household debt shrank…EVER. All I have to say is that it’s about time.

Alright, there is the brief summary. Now, it is up to you to click the link above and read the rest of the article. We’ve given you the tools, now go use them!

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Budgeting Series…You have to know where you’re going before you make a map…

Wednesday, April 8th, 2009

Sometimes, when a person decides to get their “financial house” in order, they are overwhelmed. They don’t know where to start, they panic, and they mess up. So, in order to help our readers with this sometimes monumental task, I have decided to do a series on making a good budget.

Making a “good budget” is different than simply making a “budget”. Anyone can write down their income and expenses, but a good budget is more than that. A good budget starts off by the person making a list of financial goals. Do you want to save more? Pay down debt (mortgage, credit cards, student loans…)? Save for retirement, vacations or Christmas/holidays? Give more to charity? Once you have decided which of these apply to you, write them down.

Next, you need to figure out where you are. Make a list of financial responsibilities over as long a term as possible, in as much detail as possible, including:

  • take home pay
  • weekly bills (groceries, gasoline/bus fare etc.)
  • monthly bills (electric, water, cable, phone etc.)
  • annual bills (tax prep, property taxes)
  • money spent going out (movies, dinner, drinks etc.)
  • money spent on gifts (birthdays etc.)
  • estimated medical expenses (including dental)
  • child care expenses (babysitter, day care etc.)
  • car payments (don’t forget car insurance!)
  • house payments (don’t forget mortgage insurance!)
  • minimum payments due on credit cards
  • alimony / child support
  • personal spending money
  • clothing expenses (for everyone in the household)

Don’t forget that the more precise you are, the better your budget will be when it is finished. This part of the process will be time consuming, and you should try not to guess at an amount unless you are left no other option. You should be able to locate this information by going through previous bills and receipts. As an example, you should take all of your electric bills for the previous year (if you don’t have these, use what you do have), add them up and divide by the number of bills…this will give you your average monthly electric bill. Now, do the same for any other weekly and monthly bills where you need to know the average spent in that particular time frame.

At this point, you should have a good idea of your monetary needs for a weekly/monthly basis.

Next Wednesday, we will discuss what to do with this information from this point. Good luck with your information gathering!

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Credit Cards Stink…Why Do You Want One?

Tuesday, March 24th, 2009

These days, people are a little more concerned with saving money than spending money via credit cards…this is a VERY good thing…but those credit cards are how some people got in trouble with money in the first place. Well, in spite of the good reasons people like to give and think they have for having credit cards, I cannot think of ANY good reasons to have a credit card, if your finances are set up to protect you and help you in the future. So, why do people WANT credit cards? Because they WANT things…

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.

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