Archive for the ‘credit cards’ Category

We took the big plunge and cut up all but two of our credit cards.  I won’t cancel the accounts, as doing such could seriously hurt our credit score.  But since the cards are cut up I won’t be able to use them- at least not on the spur of the moment.  The two we saved not only had the lowest interest rates, but both offered rewards (one based on redeemable points, and the other based on cash back).

From here we will pay down one of the cards we saved (as it has the lowest balance) and use it ONLY for gas so we can easily track how much we spend on gas each month.  The gas card will be paid in full at the end of each month, within the cards grace period for interest charges.  The other will be for emergencies (like car repairs that savings won’t cover).

So why don’t you take this step today too!  Cut up all but one or two cards.  If you can’t bear cutting them up, drop them into some Tupperware filled with water and put the Tupperware into the freezer.  At least that will keep them out of site, out of mind, and most importantly- out of your wallet.

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Why don’t you make your savings automatic- that is after you finish paying off those high interest credit cards? Let me address the latter before tackling the former.

It makes no sense to put your savings in a bank account with less than 2% interest while your credit cards accumulate debt at 16-20% interest. Plus, if a true emergency occurs (i.e. your car breaks down) you can access that money on your credit card just as easily, if not more so, as if it were in your savings account.

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Our present financial condition is similar to my physical condition back in February. My wallet is horribly out of shape; my credit cards are stretched like me waist used to be; and cash flow is almost non-existent (much like my previously well concealed six pack). I think that is enough analogies for now, you get the point.

Where are we right now? Well, sad to say, we are burdened by about $15,000+ dollars in credit card debt. That debt costs us about $525/month just to stay on top on minimum payments. Crazy, isn’t it? It wasn’t always like this, when we got married we had three credit cards. It got this way because we (and most often me/I) got suckered into those credit card giveaways. We bought a new mattress and took advantage of the no interest, no payments for a year if you signed up for store credit card “special.” Of course we didn’t pay it off within the year, so we got charged the back interest. Same thing with a digital camera. We also had medical bills we couldn’t pay, so that ended up in a medical credit card. So right now we have about 9 credit cards. I could just smack myself for getting into this mess.

To make matters worse all those cards are maxed out. Why? Well, since my wife is a school teacher and I am a grad student we had two months each year with NO paycheck. We didn’t save/budget well so we ended up living off our credit cards.

So what now? I can’t go back and change this, but I can create an action plan to pay-off this debt. Chances are you could use an action plan too.

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If you’ve been reading this blog for a while you know I am big on promoting transformation and growth in ALL aspects of life. You should be concerned with transforming your body, but don’t forget about you mind, soul, and finances.

In some ways reigning in your spending can be harder than controlling your diet. As tasty as cookies and cupcakes can be, what about the thought of a new home entertainment system? But it isn’t only the big ticket items, what about that Starbucks coffee you buy each morning?

Try the “latte factor” calculator available at this link. I ran through the calculator the $3 dollars I spent almost daily while in college for the two slices and a drink special at the local pizza place. If I had put that money in an IRA account at 7.5% interest here is what could have happened:

2 years = $2,092

5 years = $5,855

10 years = $14,260

15 years = $26,327

20 years = $43,651

Wow. That pizza was good, but it wasn’t that good. Do you see how simple it is to save for retirement (or about anything else).

So now that you see how easy it can be to save, maybe it is time you take some control over your finances. My wife and I are starting this process August 1 (the day we become a two income family).

Below I have provided LOTS of links on getting your finances in order as well as tips on saving money. But for now (before the page break) I want to offer what has been the BIGGEST savings for our family thus far.

PAY ATTENTION! We used to use our debit/credit card to buy groceries at Kroger and Wal-mart. We had no food budget to speak of. So when I went into our on-line bank account and tallied all our trips to Wal-mart and Kroger together I found out that some months we spent as much as $750 bucks at those two stores (the average was about $600). That was insane!

So what did we do? We decided on a reasonable food budget ($250 bucks) and put $250 bucks cash in an envelope that we bring whenever we visit the grocery store. When that money runs out we stop buying groceries. As a result. We cut out about$350 to $450 dollars wasted each month on impulse items and other non-essentials.

Wanna go the extra mile? Make a list before you go and STICK TO IT! Between your list and the knowledge that you only have so much money to spend you will do wonders to cut back on that food budget.

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This blog is about total transformation- not just transforming my flabby body. Part of any such transformation is cleaning up one’s financial situation. I don’t know where you are with finances, but I know where I am- all too well. Credit card debt has a grip on our budget- taking up about 15% of our monthly pay in payments to about 8 different cards. Right now we are just beginning to get it under control- emphasis on the word beginning.

So for all those in the same situation, check out these excellent resources.

How Much do you Owe?

Debt Roll Down Calculator

And if you want to start planning ahead

Savings Calculator

How Long Until you Reach Your Savings Goal?

I hope these links are as helpful to you as they were to me.

UPDATE: WC suggested a great link.  Check this out.  And since WC gave me the suggestion here is a link to his blog.