My CFO on the Go!

This is the second post in a series that will explore how you can become debt free, and stay debt free forever. Future posts will talk about when you should and should not use credit cards for purchases. Why you should care about your credit score, how to save money on every day expenses, will credit repair companies help you or hurt you and much more. Make sure to subscribe to our feed so you don’t miss a single installment of this series.

I hope you have read the first post and have made your commitment to become debt free forever. Last time we talked about the problem of debt, and of the fact that most people do not get an adequate financial education. With this post we are going to start into the real work of becoming debt free forever. And the best place to start is with credit card debt.

Credit cards are easy to obtain and easy to use. In fact, most stores will give you a discount on your purchase if you will sign up and/or use the store credit card. Why is that? Because they know that you will probably not pay off your purchases every month, and that they will earn more from you in interest charges and fees than the discount that you get.

It is interesting to see just how much a purchase made on a credit card can end up costing you. Let’s look at an extreme example.

Let’s pretend you have just took a wonderful vacation and charged the whole trip to your credit card. After all, you work hard and you deserve a good vacation! For this example we’ll assume you are paying 24% interest on your credit card and paying the minimum payment, which is the interest charge + 1% of the balance. If you always make your payments on time, and you never charge anything else on that card, how long do you think it will take to pay off your credit card? It will take almost 20 years and you will pay over $3,500 in interest on your vacation! Wow!

What if you did it a little different. What if you planned ahead and saved for your vacation. Making the same payments as your initial minimum payment of $59.60 a month into a savings account it would take you less than 3 years to save $2,000 and pay for your vacation in cash. And that is not taking into consideration any interest you might earn on your savings. So, would you rather pay for your vacation for 20 years, or for 3?

Assignment:2 Find Out How Deep the Hole Is, Add Up Your Credit Card Debt

Go find all your credit card statements, we’re going to find out just how much credit card debt you have. No guessing allowed, you probably have more than you think. If just thinking about doing this assignment gives you a sick feeling in your stomach, do it anyway. Once you know how big the problem is, you can start fixing it.

For this assignment you can use pencil and paper, you can make yourself a spreadsheet, or you can use this debt tracker spreadsheet from mdmproofing.com.

Across the top of a large piece of paper, make the following columns. Name of credit card, interest rate, initial balance, current balance, minimum payment, current payment. Then, fill in the blanks.

It should look something like this:

Now total the following columns. Current Balance, minimum payment, and current payment.
Now take a deep breath and look at the current balance number. Don’ let it stress you out, it is just a number. Good job! In my next post we are going to work out a plan for paying off your credit card debt. It may be just a little different than you think!

If you are serious about becoming debt free, one of the things you must have is an emergency savings account. But not just any savings account. Many major banks today are paying dismal interest rates, often under 1%. And to top it off they have monthly service charges and minimum balance requirements that can make it where you are actually losing money on your savings account. Especially when you are just starting your savings plan and don’t have a lot of money to save, you need a savings account with no fees and no minimum balance requirements. And, as you progress in your debt reduction and savings plan you will probably end up with thousands of dollars in your emergency savings account. You need to earn the most interest possible, while keeping your funds safe.

This is where online banks come in. Online banking is safe and reliable. You can link your online savings account to your regular checking account, so getting to your money is easy. But not so easy that you will be tempted to make impulse purchases with your emergency funds. And many online banks typically pay much higher interest rates on savings accounts.

I really like HSBC direct. If you open an account before September 15, 2008 you can earn 3.50% APY* in Online Savings. Thats 9 times higher than the average savings interest rate. What makes this even better is that there are no fees for this account, and no minimum balance requirements. You can open an account for as little as $1, and did I mention, no fees. That means no minimum balance fees, no service charges, nothing to cut into the interest that you are earning. Plus your money is FDIC- insured.  You can deposit with confidence.

This is the first post in a series that will explore how you can become debt free, and stay debt free forever. Future posts will talk about when you should and should not use credit cards for purchases. Why you should care about your credit score, how to save money on every day expenses, will credit repair companies help you or hurt you and much more. Make sure to subscribe to our feed so you don’t miss a single installment of this series.

The United States is in a debt crisis. A 2.57 trillion dollar crisis in 2007 according to the Federal Reserve. The average American household caries $8,565 in credit card debt. What makes this particularly scary is that many consumers are not getting over the heads in debt from frivolous spending. As salaries and wages haven’t kept up with rising costs, consumers are turning to their credit cards to make ends meet.

Many people are aware of the problem and would like to become debt free. But they don’t know how. Schools don’t teach finances, and with the amazing amount of both good and bad information on the internet it is hard to know where to turn. In fact, it is easy to get ripped off and end up even worse than before.

In this series I am going to give you a basic financial education and step by step directions that will help you get debt free, and stay debt free forever. You won’t need to buy anything, you won’t need to hurt your credit rating or declare bankruptcy. Each post will talk in depth about a specific credit or money topic. Then I’ll give you an assignment to work on. Stick with me, and you will become debt free forever!

Now here is your first assignment.

Assignment One: Make a Commitment
Let me be honest. This isn’t going to be easy, and you are going to make plenty of mistakes along the way. So you need to make a commitment. A strong commitment to do what it takes, and to keep doing what it takes, until you reach your goal. So today I’d like you to set the goal of becoming debt free, with the commitment to do the assignments exactly as they are assigned. And if you make a mistake and fall off the wagon, make a commitment to get right back up, brush yourself off, and get back with the program. Making a public commitment makes you more accountable, so feel free to post here if you will work with me to become debt free forever!

With all the turmoil in the mortgage markets these days I thought it would be helpful to add a page of mortgage calculators. There are 20 calculators where you can see the effects of refinancing your mortgage, or making extra payments, or even going to interest only payments.

By: Tisha Kulak

It may sound harsh but many parents must think they are crazy for getting their college student a credit card. On one hand, it serves as a security blanket especially for kids traveling far to go to school. On the other hand, it seems to be the perfect recipe for disaster. Granted no parent wants to set their kid up to fail, and providing them with a credit card doesn’t necessarily need to be a set up. As long as responsible spending and budgeting is explored and discussed at great length beforehand, a student having a credit card can benefit both students and parents.

Credit cards created especially for the college crowd are many. Anyone considering such a card should obviously do their homework prior to any application and check out all the fees and requirements that go along with the card. That is obviously a crucial first step. However, sometimes the benefit programs that coincide with the card benefits are overlooked. The programs are varied but they can actually save you money depending on your spending habits and personal needs. Generally most cards designed for college students have an attractive introductory package that includes 0% financing for a specific term but look beyond the introductory period when making a choice. Read all of the fine print and see how each card compares to the others before making a commitment to one company.

In a nutshell, there simply seems to be a credit card designed for almost everyone. College students are no exception. Some of the benefits connected to a student credit card may not always applicable to every college student, so it pays to look at all of the options available. For example, a student who travels home via airlines can research cards that offer free airline miles which can be redeemed for free flights back home or back to school. Some credit cards have an on-going point reward system which can earn free gift certificates, redemption options for special events, and even cash back bonuses. It is especially important that all student-related credit cards be investigated because many are upping the ante and offering academic rewards. Students who acquire and maintain a specific GPA can earn additional credits based on their performance in school. For the most part, students need only to make purchases at common places such as bookstores, supermarkets, movie theaters, gas stations, and the like in order to earn the rewards.

Of course with the ups come the downs. Students, like many others, are often inundated with floods of pre-approval offers and marketing ploys aimed at nabbing attention for kids who are setting out on their own. However if properly utilizing common sense and practical spending habits, credit cards are not the root of all evil and do have their benefits. Researching different credit cards and the companies who sponsor them can help make more informed decisions when it comes to choosing a good credit card for the young adults going to college.

Tisha Kulak is a writer for www.creditorweb.com, where she writes about student credit cards; and responsible credit card use.