by
Carl Hampton
08/04/2006
Behavioral economist Meir Statman, recently
said “getting out of debt is the financial
equivalent of trying to quit smoking."
Just like any bad habit, good intentions
alone will not be enough. To ensure success,
we need to break our underlying patterns of
behavior. How is it we live in the richest
most powerful country in the world, but the
average American is more than $11,000 in
debt. Our European friends who live by a
mainly debit card system have an average
savings of $13,000. On a recent visit to
Germany, I was shocked to find that less
than 35% of all the shops and restaurants
accepted credit cards. What would we need to
do to reverse this trend and get into a
(plus) situation.
Plastic Surgery
If we are serious about paying off our
balances. We don't have to literally cut up
our credit cards, just stop using them
routinely. We should go green for our
everyday spending. Try carrying around a set
amount of cash to use each week. We make
better purchasing decisions when we actually
have to hand over the green stuff plus
there's a preset spending limit. When we run
out of money, we stop spending it's that
simple. When the only way to purchase is
plastic, buying online for instance, then
use your debit card. Your debit card can
also be used as an emergency substitute for
cash should you run out.
Leave Those Cards At Home
The best way to ensure that you enforce the
cooling off period on new credit purchases
is by taking the cards out of your wallet.
You should store them in a place that's not
easily accessible and safe. Do not let
others know where you have hidden them.
Close The Accounts No Longer Needed
Having unused credit available from lenders
with whom you've had a long relationship
will help boost your credit score. Having
too many will harm your credit score. As a
rule, 3 credit cards is what works best and
try to never spend more than 50% of the
available credit on any of the cards. This
will keep your score at it's highest. You
should also consider closing all your store
cards, if you need to make a purchase then
use your credit card and pay it off at the
end of the month.
Lowering Your Interest Rates
Start by reducing what you pay in interest.
We can start by calling our current credit
card companies and explaining that we intend
to transfer our balance to another issuer
unless our interest rate is lowered. Almost
all credit card companies run promotional
programs with low or 0% interest. They will
be willing to put you on one of those rather
than risk losing your business. All you need
to do is ASK.
Tackling Those Credit Card Balances
Finally we need to develop a strategy for
paying off our existing credit card
balances.
Gather all your credit card statements
together and make a simple table listing the
entire amount you owe, and the minimum
payment and interest rate for each card.
This will help us determine the order in
which we should pay off our cards. We need
to focus on the highest interest rate cards
first and pay off as much as you can each
month while making only the minimum payments
on our other cards. When the first card is
paid off, use the same strategy on the
next-highest interest rate card and so on
until you're debt-free.
Late Payments
Are the number one cardinal sin of debt
management. You get hit with hefty late fees
and very high penalty rates that can go to
30%, plus of course your credit score will
take a big hit.
We all have a responsibility to improve our
financial literacy and develop the required
skills and practices for effective financial
management. There is a real need to get away
from the “Someday things will get better
in my life” or the “Someday I will be
able to earn enough money to stop worrying
about the bills. There is a lot more to life
than that, but it has to be said and
understood that the only person that can
change your life is YOU. There is NO
substitute for Action! With Action, you will
overcome your fears and hesitations and
accomplish everything you set out to do and
more.
Have an opinion or a question you would like
me to answer, then write me!
http://www.CarlHampton.com
