Posted by Charity on January 25th, 2008

I have been thinking for a while about doing more personal finance posts, but I wasn’t sure if I was really qualified to give out financial advice.

Well, I decided that since I’m not qualified to teach elementary school, but I do that anyway, I might as well go for it.

It’s not like I am going to give stocks tips or investment advice. I am just going to share some helpful pointers that we have discovered along our journey to financial health.

This first week, my advice is simple.

Get out your January credit card bill(s).

You should be able to find the total finance charges for last year. Take a good, long look at that number.

Think about all of the things you could do with that money, if you had it right now.

Now, realize that you paid your credit card company that money in interest. You basically gave that money away for the ability to buy something that you could not afford.

Okay, don’t beat yourself up about it.

Resolve now to stop trowing your money away. Resolve now to put away those cards and never use them again.

Bob and I did this two or three years ago when we realized how much we spent on credit card interest. We have not used our card since.

At first it was hard, since we were only using it for car repairs. We had to save money in order to not need the card, but we were still paying on that card. We did not feel like we had the extra money to save for repairs.

It was very difficult to get into good habits and wean ourselves off of our credit dependency, but we stuck to our guns and are better for it.

You will be too.

6 Responses to “Friday’s Finance Tip”

  1. I don’t use my cards at all any more. I’m just paying off when I used to. For the last two years, I’ve managed to go back and forth two cards whenever they get 0% balance transfer offers. there’s a fee, but it’s always less than the interest I’d be paying. You’re right though, it’s best not to uese em.

    That’s what’s so screwed up about our economy and the upcoming stimulus package… if people don’t relentlessly spend money, it comes crashing down. If I get the rebate check, it’s going to pay down debt and to go into savings, the two things the gov’t is hoping I won’t do with it.

  2. Well, if you put it into savings, the bank will just loan it out to somebody. Maybe that will help someone else out too.

  3. if you can get 0% for a year offers you can use the card for all your purchases and keep your money earning 5-7% in a high-interest savings acct. Pay the balance at the end of the year, keep the interest that you earned (not a ton, but it sure feels good to get free $$$) and start over… Another neat cc trick: get a credit card that gives you frequent flier miles. Don’t use it until you are making a huge purchase that you would otherwise make with cash. (car, etc…) Use the credit card, pay the balance a couple hours later, get a free plane ticket… My wife does this with her tuition payments… Gets the loan company to give her the money rather than giving it directly to the college (you have to ask, but they’ll do it), pays her 10k+ tuition bill with a credit card, pays off the credit card the same day with the loan $$, gets a free plane ticket every semester.

    Note: I don’t do any of this as I am content to just pay cash for EVERYTHING. I don’t even have a checking account. But my wife is into taking advantage of cc companies and makes some pretty neat $$$ off it… I think this last year she said that we made $600 off interest by using a 0% card and keeping our spending $$$ in an interest yielding account + two airline tickets…

  4. JD, you and I totally agree about the stimulus plan. I hope to get a chance to post about that.

    Rediculous, those are good tips, but only for people who are already in control of their spending. Otherwise, that would be a huge potential disaster.

  5. Not a potential disaster, just figure out what your income is, have it direct deposited into an account that you don’t even have quick access to (all the highest-yield savings accts work like mini CDs, take a week or so to get $$$ out of) and tell the cc company to set your limit at whatever you’ve figured your income is… At the end of the year, as the 0% interest is about to expire, you take the $$$ from the savings acct and pay off the card and you’ve collected 5-6% on it… (Of course that was before the fed started slashing rates)… It’s no more of a potential disaster than just using cash… You just don’t spend $$$ that aint in the bank… It’s just like not spending $$$ that isn’t in your pocket, except that you make 5-6% more… If you commit to using the card for all your purchases and you bank every penny of your income, it’s like getting a 6% raise… Which is more of a raise than I’ve got from my employers in a few years…

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