The economy is diving like a deep sea explorer and everyone seems to just be oblivious to the consequences. The American people seem to think, "Oh, well, home prices are dropping, but that doesn't effect me because I am not looking to sell my house." Then it was, "Oh, well, the mortgage companies and banks are failing, but that doesn't effect me because I am not looking to get a loan." And now it is,"Oh, well, the government is bailing out the stock market so my stocks will be guaranteed by the Government, so we are still OK." and "Gas prices keep going up, but I have to drive to work, so I have to pay it."
Does no one actually understand what banks failing and rising gas prices actually means. I means that any money you have may not be readily available if you want to withdraw it. It means that the CD you have may or may not be there when you get ready to cash it in. It means the credit card that you are paying 15% interest on may go up to 20 or 30%. It means that businesses cannot get operating loans to stay in business. It means that transporting goods from the port cities and distant farms is more expensive so the prices of everything will be going up.
And the real joy of all of this is the $700 Billion Pork Bill that just passed into law means that taxes on everything will be going up. Isn't that GREAT? That, all by it's self, means we will be paying for all of the piddly little special interest programs that couldn't get passed by themselves are now going to happen. And we get to pay for it. Whether we want to or not.
So as a recap, No credit available to anyone, might not be able to get to our money, food and gas prices will be skyrocketing, and taxes will be raised to an insane level.
I am not normally one to predict doom or believe in conspiracies, but I just cannot see how any of this is recoverable. Europe is beginning to suffer the same way and the Asian markets are beginning to fall as well. If something doesn't change soon, the entire world economy will just be going to hell in a hand-basket.
Is anyone really ready for this? Do you have a plan ready in case it all falls apart?
Showing posts with label no more credit cards. Show all posts
Showing posts with label no more credit cards. Show all posts
Sunday, October 5, 2008
Tuesday, September 30, 2008
Not putting our lives on Credit
With the economy turning the way it is, it is more important than ever that we all take a good hard look at our spending practices. Do we really need that I-Phone? Is it really necessary to drive thru the burger joint or can you make burgers, or anything else for that matter, at home? Do you really need a new pair of shoes or do you just want them?
With Christmas coming up, it will be more important than ever to watch how and where you spend. Advertising will be aimed at getting you to go on one last spending spree before the New Year. Key indicators are showing that what has happened to the housing market will happen to the credit card industry in early 2009. So that credit card you have been struggling to pay off will more than likely try to bury you in the spring. When credit companies go under, it will be because too many of their cardholders can't make their payments and they have no cash on hand to meet the company's expenses, like payroll, building rent, electric, etc. and they will either need a bailout like the housing market, or they will collapse as well. That will mean that no one will be able to get new credit and the credit you already have will suffer from extreme interest rates.
The best way to handle this is to get out of debt NOW. If you do not have any credit cards or pay them off every month, why not just stop using them altogether? Just don't have one. If you have relatively low balances, pay them off completely and stop using them. Paying for something on credit just isn't worth the interest rates in the long run. If you find something that is on sale for $100 dollars and it looks like a really good deal, you buy it on the credit card that you are already carrying a balance on, at 19% interest, you are paying $119.00 for it the second month, $141.61 the third month, $168.51 the forth month, etc, until it is paid off. That $100 purchase doesn't look like such a good deal anymore, does it. And that is considering you don't have a late fee in there somewhere that causes your interest rate to skyrocket upward of 25-30%. Best bet is to just stop using credit. If you can't pay cash for it , don't buy it.
We paid off all of our credit cards a couple of years ago. We refinanced the house at a lower interest rate and a shorter term. We knocked 2 years and 2.5% off of our mortgage and managed to cash out some of the equity to pay off 4 of our 5 credit cards. We were left with 1 card that had a 5k+ balance. By not having the other cards to pay, we were able to pay that one on time every month. A large cash gift from the in-laws allowed us to pay that one off as well as the truck. So now all we have left is the mortgage. And we try to pay extra on that principle as well, when we can.
This has allowed us to build up some savings. Now if something happens to my husband's job, we have enough to get by for a couple of months until he can either find a new job or we can sell the house and move. Or in an emergency comes up, we do have some reserves.
All of this means that we cannot go out every weekend, or buy the latest gadget on the market, but you know what, we don't really need it. And it feels much better to have the reserves in the bank than to have the coolest video phone on the market. Especially now.
With Christmas coming up, it will be more important than ever to watch how and where you spend. Advertising will be aimed at getting you to go on one last spending spree before the New Year. Key indicators are showing that what has happened to the housing market will happen to the credit card industry in early 2009. So that credit card you have been struggling to pay off will more than likely try to bury you in the spring. When credit companies go under, it will be because too many of their cardholders can't make their payments and they have no cash on hand to meet the company's expenses, like payroll, building rent, electric, etc. and they will either need a bailout like the housing market, or they will collapse as well. That will mean that no one will be able to get new credit and the credit you already have will suffer from extreme interest rates.
The best way to handle this is to get out of debt NOW. If you do not have any credit cards or pay them off every month, why not just stop using them altogether? Just don't have one. If you have relatively low balances, pay them off completely and stop using them. Paying for something on credit just isn't worth the interest rates in the long run. If you find something that is on sale for $100 dollars and it looks like a really good deal, you buy it on the credit card that you are already carrying a balance on, at 19% interest, you are paying $119.00 for it the second month, $141.61 the third month, $168.51 the forth month, etc, until it is paid off. That $100 purchase doesn't look like such a good deal anymore, does it. And that is considering you don't have a late fee in there somewhere that causes your interest rate to skyrocket upward of 25-30%. Best bet is to just stop using credit. If you can't pay cash for it , don't buy it.
We paid off all of our credit cards a couple of years ago. We refinanced the house at a lower interest rate and a shorter term. We knocked 2 years and 2.5% off of our mortgage and managed to cash out some of the equity to pay off 4 of our 5 credit cards. We were left with 1 card that had a 5k+ balance. By not having the other cards to pay, we were able to pay that one on time every month. A large cash gift from the in-laws allowed us to pay that one off as well as the truck. So now all we have left is the mortgage. And we try to pay extra on that principle as well, when we can.
This has allowed us to build up some savings. Now if something happens to my husband's job, we have enough to get by for a couple of months until he can either find a new job or we can sell the house and move. Or in an emergency comes up, we do have some reserves.
All of this means that we cannot go out every weekend, or buy the latest gadget on the market, but you know what, we don't really need it. And it feels much better to have the reserves in the bank than to have the coolest video phone on the market. Especially now.
Friday, February 1, 2008
Debt, Debt, and more Debt
For the last several months I have been scouring the web for tips on how to live well on less money. I have found a lot of good ideas. And some that are a little bit out there. But they all say about the same thing. Get rid of your debt.
I know that for some people that sounds nearly impossible. As a society, we have all gotten used to the instant gratification that comes with being able to buy whatever you want on credit. You find that great pair of shoes that are on sale for only $75 and you whip out the Visa or "Store" card and buy them on the spot. But if you don't pay off the balance every month, and how many of us can actually do that, you wind up with interest that will make those $75 pair of shoes cost well over $100 in the long run. And did you really need another pair of strappy black heels anyway?
With the way the economy is headed (and the credit crisis, housing crisis, and unemployment going up) a lot of people are beginning to realize just how over-extended they really are. If your house payment, car payments, utilities, and credit card bills are more than your income for the month, you are in big trouble.
Credit card companies are the world's biggest scam. They offer credit to just about anyone on the hope that people will buy more than they can afford to pay off every month. They make billions of dollars a year off of the interest. And the real kicker is that if you are ever late getting your paying in, they can legally double, or in some cases, triple your interest rate, making it even harder to get it paid off. Trust me, I have been there. And it really sucks.
I have found a couple of ways to get out of debt that don't involve bankruptcy. I will use our situation as an example of what not to do, or how to fix it if you already have.
When my husband and I first got married, we each had a credit card(visa) and I had a department store card. We didn't use them much, only for necessities like getting the cars worked on or replacing worn out clothes. Then I got pregnant with my daughter and my husband got a new job in a new town. So we had to move. No one would hire a pregnant girl so I couldn't work and we had the expenses of moving and setting up a new household. Visa time. Well, since I was pregnant before he got hired, the new insurance considered it a pre-existing condition and wouldn't pay the doctor visits. So that was $200 a month out of our already slim budget. Utility deposits, rent deposits, moving expenses, gas back and forth to get everything moved, all of that left us eating mac and cheese and ham sandwiches. And it also raised our credit card bills. By the time my daughter was born, we had bought the house we were renting, so we also had closing costs and insurance to pay. We were almost $2000 in debt in a matter of a couple of months. Now we had diapers, formula, baby clothes, doctor visits for the baby in addition to my hospital bills for the delivery on top of the student loan payments that were coming due, house payment, car payment, utilities, and the credit cards. So more credit card debt was building up.
By the time we finally decided that it just had to stop, we had 5 credit card with high interest rates (almost $22,000 in debt), 2 gas cards, 2 department store cards, a car payment, a house payment, and 2 kids in daycare. Even with minimum payments on the cards, the total everything combined was more than our monthly income. Then we discovered the Debit Card.
That was actually a wonderful day for us. It allowed us to completely stop using the credit cards. If we didn't have the money to cover it in the bank, we simply couldn't buy it. We were 13 years into a 30 year mortgage so we refinanced the house for a lower interest rate, cashed out enough equity to pay off 4 of the 5 credit cards(boy was it fun to cut up those cards) and continued to pay on the last one until we got the truck paid off. Then we began to apply the amount of the truck payment to the payment we were making to the credit card ( an extra $334 a month) and finally started getting that one paid off. A large cash gift from the Mother-In-Law took care of the rest of it.
Wow! No more credit card debt.
I know that most people cannot expect a large cash gift, but there are ways to get out of debt without going crazy.
1) STOP USING CREDIT CARDS! If you cannot afford to pay cash for it, do not buy it.
2) Actually sit down with all of your bills, bank statements, loan payment books, and a calculator. Make 3 columns, one with income amounts with every dime that comes in from every source for the month, one with the payment amounts due for the month not counting groceries, and the last column is for the amount of outstanding debt left on that bill. Add up each column and see if your bills are more than your income. Also compare your income to the balances due on all of that credit. You may be shocked to realize that you have $15,000 in credit card debt and that if you only make minimum payments every month, it will take you 12 years and $50,000 in interest to pay it off, if you don't add any more to the balance. That is an eye opener. And a real motivator for getting out of debt.
3) When you pay off a debt, you do NOT have extra money each month. Use that payment on another debt. If you paid off a debt that you were paying $250 a month on, like a car payment, you now add $250 to the highest interest payment that you have. Keep doing that until that debt is paid off. Then you take the combined payment amount (say...$550) a month, and add that amount to the next highest interest bill. And you keep doing that until everything is paid off. This is actually a fast and rather painless way to pay off your bills. You are not used to having the extra money anyway, so why not use it to get rid of debt.
Now, this is not a step by step guide for getting out of debt. There are a thousand different ways to do that, and just as many opinions on which way is the best. But you cannot get out of debt by using credit to make all of your day to day purchases. You have to make the decision to get out of debt all by yourself. No one can do it for you. If you are not willing to give up those shopping sprees or eating out every night, then no one can help you.
I know that for some people that sounds nearly impossible. As a society, we have all gotten used to the instant gratification that comes with being able to buy whatever you want on credit. You find that great pair of shoes that are on sale for only $75 and you whip out the Visa or "Store" card and buy them on the spot. But if you don't pay off the balance every month, and how many of us can actually do that, you wind up with interest that will make those $75 pair of shoes cost well over $100 in the long run. And did you really need another pair of strappy black heels anyway?
With the way the economy is headed (and the credit crisis, housing crisis, and unemployment going up) a lot of people are beginning to realize just how over-extended they really are. If your house payment, car payments, utilities, and credit card bills are more than your income for the month, you are in big trouble.
Credit card companies are the world's biggest scam. They offer credit to just about anyone on the hope that people will buy more than they can afford to pay off every month. They make billions of dollars a year off of the interest. And the real kicker is that if you are ever late getting your paying in, they can legally double, or in some cases, triple your interest rate, making it even harder to get it paid off. Trust me, I have been there. And it really sucks.
I have found a couple of ways to get out of debt that don't involve bankruptcy. I will use our situation as an example of what not to do, or how to fix it if you already have.
When my husband and I first got married, we each had a credit card(visa) and I had a department store card. We didn't use them much, only for necessities like getting the cars worked on or replacing worn out clothes. Then I got pregnant with my daughter and my husband got a new job in a new town. So we had to move. No one would hire a pregnant girl so I couldn't work and we had the expenses of moving and setting up a new household. Visa time. Well, since I was pregnant before he got hired, the new insurance considered it a pre-existing condition and wouldn't pay the doctor visits. So that was $200 a month out of our already slim budget. Utility deposits, rent deposits, moving expenses, gas back and forth to get everything moved, all of that left us eating mac and cheese and ham sandwiches. And it also raised our credit card bills. By the time my daughter was born, we had bought the house we were renting, so we also had closing costs and insurance to pay. We were almost $2000 in debt in a matter of a couple of months. Now we had diapers, formula, baby clothes, doctor visits for the baby in addition to my hospital bills for the delivery on top of the student loan payments that were coming due, house payment, car payment, utilities, and the credit cards. So more credit card debt was building up.
By the time we finally decided that it just had to stop, we had 5 credit card with high interest rates (almost $22,000 in debt), 2 gas cards, 2 department store cards, a car payment, a house payment, and 2 kids in daycare. Even with minimum payments on the cards, the total everything combined was more than our monthly income. Then we discovered the Debit Card.
That was actually a wonderful day for us. It allowed us to completely stop using the credit cards. If we didn't have the money to cover it in the bank, we simply couldn't buy it. We were 13 years into a 30 year mortgage so we refinanced the house for a lower interest rate, cashed out enough equity to pay off 4 of the 5 credit cards(boy was it fun to cut up those cards) and continued to pay on the last one until we got the truck paid off. Then we began to apply the amount of the truck payment to the payment we were making to the credit card ( an extra $334 a month) and finally started getting that one paid off. A large cash gift from the Mother-In-Law took care of the rest of it.
Wow! No more credit card debt.
I know that most people cannot expect a large cash gift, but there are ways to get out of debt without going crazy.
1) STOP USING CREDIT CARDS! If you cannot afford to pay cash for it, do not buy it.
2) Actually sit down with all of your bills, bank statements, loan payment books, and a calculator. Make 3 columns, one with income amounts with every dime that comes in from every source for the month, one with the payment amounts due for the month not counting groceries, and the last column is for the amount of outstanding debt left on that bill. Add up each column and see if your bills are more than your income. Also compare your income to the balances due on all of that credit. You may be shocked to realize that you have $15,000 in credit card debt and that if you only make minimum payments every month, it will take you 12 years and $50,000 in interest to pay it off, if you don't add any more to the balance. That is an eye opener. And a real motivator for getting out of debt.
3) When you pay off a debt, you do NOT have extra money each month. Use that payment on another debt. If you paid off a debt that you were paying $250 a month on, like a car payment, you now add $250 to the highest interest payment that you have. Keep doing that until that debt is paid off. Then you take the combined payment amount (say...$550) a month, and add that amount to the next highest interest bill. And you keep doing that until everything is paid off. This is actually a fast and rather painless way to pay off your bills. You are not used to having the extra money anyway, so why not use it to get rid of debt.
Now, this is not a step by step guide for getting out of debt. There are a thousand different ways to do that, and just as many opinions on which way is the best. But you cannot get out of debt by using credit to make all of your day to day purchases. You have to make the decision to get out of debt all by yourself. No one can do it for you. If you are not willing to give up those shopping sprees or eating out every night, then no one can help you.
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