The Ins & Outs Of Balance Transfers

August 30, 2017

One way to speed up the process of paying off debt while saving money in the long run is by transferring balances to credit cards with lower interest rates. This is a strategy that I used to dig myself out of over $8,000 of credit card debt after college.

Moving even a $2,000 balance from a 16.99% interest rate to one with a 3.99% rate while continuing to pay the $40 minimum payment can save you over $1,300 in interest and reduce the time you’re paying by almost 3 years. It’s really just a form of refinancing debt using credit cards. But there are some nuances to understand when employing this strategy.

Here’s how it works.

When you perform a balance transfer, you’re essentially using your new credit card to pay off the original obligation by paying what you owe to the original card, loan or bank. Your original lender can’t stop this, as they simply see the transfer as a payment being made on your behalf.

Timing

You can request a balance transfer to a credit card you hold at any time, although many card companies offer special deals if you transfer a balance to the card within 30 days of opening the account. If you are opening a new card to transfer your balance, it’s a good idea to include that request at the same time as your application, as this may help ensure that the credit limit of your new account will be high enough to enable a full transfer of your old balance. If not, it’s still worth it to lower the interest on at least part of your balance, just make sure you stay on top of your payments.

Beware the final payment

Even if your balance transfer pays your former account off in full, you may need to make one more payment the following month for any interest that had accrued up to the day you transferred, so make sure you plan for that. I remember thinking I had finally broken free of a super high rate card back in the day, only to be hit with a late fee for not paying the final $30 of interest that had been charged to my account after I’d paid off the balance. That’s perfectly legit, so double check your balance is at zero for good for a couple statement cycles before you officially forget about your original account.

Length of promo rate

If you are taking advantage of a special interest rate offer (they typically last between 6 and 24 months), make sure you know how long the low rate will last so that you can try to have the balance paid off (either by paying it down over the months or by transferring your balance to another card in the future) before the rate increases. Set a reminder on your calendar at least a month out from the expiration date to make sure you don’t miss it.

Transfer fees

Most cards charge a balance transfer fee, which is typically a percentage of the amount you transfer, especially if you’re transferring to a 0% card. If you can find one that doesn’t charge a fee, that’s a great deal! Make sure you take that in to consideration when you’re evaluating the total cost of the move (interest plus fees) to make sure it’s still a good deal.

Also know that sometimes card companies will send you checks in the mail with special offers for using them, such as a lower interest rate or bonus reward points — double check the fees to use those checks before you take advantage, as sometimes it’s higher because it’s considered a “cash advance,” even though you’re not actually getting any cash.

What you can transfer to a credit card

All major card companies will allow you to transfer your balance from any other major credit cards and most also allow you to transfer balances from store cards. If you’re looking to transfer other types of debt, like a car loan, student loan, business loan or payday loan, you’ll want to check with the card company to see if they will allow that — some do, some don’t.

What you’ll need to initiate a transfer

  • The account number of the balance you’re looking to transfer
  • The amount you wish to transfer
  • The personal information required when opening a new credit card (social security number, income, employment info, etc.)

Other things to consider

  • Your credit score might go down, but it should bounce back as you pay down the new account — Chances are your balance transfer will take up most of the credit limit of your new card, so your credit utilization score might take a hit. As long as you pay down the balance (that’s the reason you’re doing this in the first place, right?), that issue will go away, so it shouldn’t stop you unless you’re also planning to apply for another loan like a mortgage or auto loan before you can get your credit utilization back down.
  • Keep your original account open, even if you don’t use it — This will not only help your credit utilization score, but it will help to maintain your credit history as well. If you’re worried that you might be tempted to run the balance up again, you can cut up the card, just don’t close the account. That’s what I did.
  • Avoid new purchases with your balance transfer card — You may start to receive nudges from your new card company encouraging you to use the card for purchases by offering you things like cash back or reward points, but don’t take the bait! I’ve seen too many people fall into this trap and wind up in way worse shape than they started because they used their new card to shop while also trying to pay down the original balance they transferred. When I was paying off balance transfer cards, I didn’t even carry the card with me to avoid this pitfall.

The ability to transfer my balance from card to card as I paid down the balance was a huge reason I was able to dig out of my $8,000 debt in about 5 years. If you’re serious about doing what it takes to get out from carrying credit card debt for good, mastering the art of balance transfers will help significantly.

 

Failure Is All Around Us – And That’s a Good Thing

April 14, 2017

One of the consistent themes in life – in virtually every facet – is failure. It was one of the things that the University of North Carolina basketball team talked about after they beat Gonzaga for the national championship. Last year, UNC lost in the national championship game to Villanova University. This year’s team used last year’s loss as motivation. There are countless examples in the sports world of a failure being used as a motivation for a future success, but it only works if something is learned in the process.

We see that when we are interviewing candidates for positions here at Financial Finesse. At some point in the process, the conversations usually turn toward their biggest successes and failures in life. It’s amazing the stories that we hear about both sides of that equation.

More often than not, the lessons learned from the failures are much more valuable than the lessons learned from the successes. The same concept has proven to be true in the financial lives of many employees I talk to each week. There are a few “rules” that I use when coaching a person through a failure to help them not repeat it and to end up in a better place because of the lesson learned in the failure.

1. Forgive yourself. There is absolutely nothing to be gained from berating yourself and giving yourself negative messages. Say “I messed up this time, but I’ll get better.”

One of the more common “failures” people talk to me about is amassing credit card debt. They view it as a personal failure, and many people think that they’re the only person in the world who has gotten a little bit in debt. When they learn that others have been in this position (and MUCH worse) and then gotten themselves out of debt with just a few slight tweaks, they can exhale, begin to forgive themselves for the debt, and prepare to move forward.

2. Figure out why it happened. What exactly led to the failure? Was it a lack of attention? Was it a disregard for the consequences? A lack of information/education or something outside of your control?

Once you figure out the why, the real learning is possible. In the debt situation, it’s usually a simple lack of attention to detail that created the issue. A $20 purchase here, $25 there, a doctor’s visit with a copay and a night out with friends and all of a sudden there is more month than paycheck – and the need to use a credit card is there. If that pattern persists for long enough, there can be a few credit cards approaching their credit limits.

It’s not malice or blatant carelessness. It’s a gradual slow creeping up of credit card debt that happens when there isn’t a focus on exactly where each dollar is going. I’ve met a lot of people with significant credit card debt. Exactly zero of them woke up one day and said “I’m going to max out four different cards today and then struggle to pay them back.” It’s a slow build, and once there is a realization of that – the pay down can start.

3. Recognize that whatever the failure is, it isn’t YOU. It’s usually just one behavior that if modified ever so slightly, can be turned into a strength/reason for your next success. The tired old movie line “it’s not personal, it’s just business” is important here.

Don’t take a financial speed bump as a personal failure. It isn’t you. It’s situational…and situations can change.

4. Change whatever that behavior is! This is by far the most important step. The old “if you keep doing what you’re doing, you’ll keep getting what you’re getting” phrase comes to mind.

Usually, changing a behavior isn’t as tough as we think it is. I’ve started to use an app to track my exercise and nutrition and as a result, my level of fitness is increasing while my level of body fat is decreasing. One quick change – using an app to log my meals and my exercises – is helping me make very small changes that are providing good results.

5. Stick to the positive change. The world is filled with stories of people who have made progress, only to regress after a short period of time. I’ve had friends lose 25-50 pounds, only to put on 30-55 after burning out of the program they used to lose it. I’ve seen people file bankruptcy because of massive credit card debt, only to rack up another $40-50k in credit card debt within a year or two of the bankruptcy.  Progress is best when it’s sustainable.

It’s impossible to go through life without experiencing failure. If someone does, it means they’ve either never tried anything difficult or they have absolutely zero self-awareness and don’t recognize their failures. Neither is ideal. So if it’s virtually impossible to go through life without experiencing it, embrace the failure that is all around us and use it to motivate you to a future success.

 

Don’t Spend $25k on a $10k Vacation

February 02, 2017

The winter months get many of us dreaming about our next vacation to a warm place. But would you spend $25k for a $10k vacation? My colleague, Steve White, recently wrote about how this could happen:

Everybody likes a vacation. If you could take a $10,000 vacation where would it be – Vegas, Miami, the beach, LA? If you could choose between spending $10,000 or $25,000 for the same Vegas vacation (same airfare, same hotel, same restaurants, same clubs, same blackjack losses), which would you choose? The $10,000 dollar one, right?

Let me tell you how you can spend $25,000 on that Vegas trip. Book that $10,000 trip using a credit card and make the minimum payments on it. The minimum payments would be about $175 a month and it would take you 12 years to pay if off at that rate.

$175 a month times 12 years is $25,200. Think about it. You could have taken 2 1/2 trips to Vegas for what you spent on 1 trip.

So how can you avoid this fate? One option is to simply not take vacations, but if you value your emotional and ultimately physical health and productivity, that’s probably not a good idea. In fact, spending money on experiences like a vacation generally gives a much bigger “happiness bang” for your buck.

Instead, set a goal for your vacation and estimate how much it will cost. You can even use this tool to find a trip based on your goals and budget. Once you’ve set a target, subtract any savings you’ve managed to set aside for that trip and divide the remainder by the number of months between now and when you want to take your vacation to determine how much you need to save each month. But where will you come up with that money? Steve suggests starting with a spending plan:

A spending plan allows you to focus your money on what is important to you – like a vacation.  The best way to do this is to set a 30 minute weekly appointment with yourself to review your finances. I recommend scheduling this when your energy level is high and you’re able to concentrate. I am a morning person so mine is Saturday morning. 

Whether you use our Easy Spending Plan, our Expense Tracker, Mint, or any other system for your spending plan doesn’t matter. What matters is that you have a spending plan. Personalize it and continually ask yourself, “I see where I am spending my money. Is this really where I want to spend it?” If the answer is no, find one area to adjust and make that the topic of the next week’s money meeting.

This isn’t about anyone lecturing you on what to spend money on but about you taking control over your own finances. Ask yourself if each expense is more important to you than your vacation. (Remember that you generally buy more happiness with experiences than with things.) If not, pay yourself first by reducing that expense and have the savings automatically transferred each month into a separate designated savings account for your vacation. Now you have a savings plan to complement your spending plan.

What if you can’t reduce your expenses enough to fund your vacation? In that case, you’ll have to adjust your goal either by postponing it or by choosing a lower cost trip. Financial planning is all about trade-offs. There’s no one right answer as long as you’re making an educated and conscious decision.

Finally, you might want to use a rewards credit card to pay for your trip. This way you can earn cash or points towards your next trip and actually come out ahead…as long as you pay the balance off in full from your savings. Do this often enough and maybe you can eventually spend $10k on a $25k vacation!

 

 

4 Financial Moves I’m Glad I Made in My 20s

August 31, 2016

It’s easy to dwell on the shoulda, coulda, woulda’s of our past – those things we wish we’d done differently. But I’m also a big believer in reflecting on what went right! After all, if history is bound to repeat itself, wouldn’t we want the good stuff to repeat as well? So here are the financial moves I made in my earlier years that I would be glad to repeat.

Contributed to the match in my 401(k) since day 1. It’s worth noting that with my first two employers, I actually didn’t get to keep my full match as I left the companies before I was vested, but I still had the money I’d saved to start my nest egg. I also had the established habit of saving as I went on to higher-earning jobs, where I eventually qualified for and got to keep the match. So even if you’re quite certain you won’t be around long enough to keep matching dollars, you should still save enough to earn it. You never know when plans might change, and it’s silly to give up the chance at free money. Isn’t that why we buy lottery tickets?

Aggressively paid off credit card debt. There have been two occasions in my life when I used credit cards to get through times of income challenges. Both times I also reached a point when it was time to pay them off, and I committed to an aggressive monthly payment in order to eradicate the debt as quickly as possible. I also put any windfalls toward the debt, including things like tax refunds (Remember the “stimulus” checks we all received in 2001? Mine went straight to VISA), work bonuses and freelance income. I also made sure my spending reflected my desire to get out of debt and saved the luxuries as my reward for financial dieting. The Financial Finesse Debt Blaster calculator is a great way to make a debt pay-off plan.

Participated in my employee stock purchase plan. I’ve worked for three publicly traded companies that offered employee stock purchase plans, which basically allow employees to buy stock in the company at a discount through payroll deductions. This is another example of free money but was also a fun way to build up some side savings that made me care a little bit more about how my company did beyond just my own job. I never invested more than I could afford to lose, so in all three cases, I was just saving a small amount, but it was worth it to have that little investment nest egg that I could access before retirement. Caution though: make sure that your investment in any one company doesn’t exceed more than 15% of your total investments. If your employer match goes into company stock too, keep an eye on when you may need to diversify out of the stock.

Earned my BODYPUMPTM certification. What the heck does teaching a fitness class have to do with finances? Well, since I became a certified instructor in 2005, I’ve not had to pay for a gym membership, plus I get paid to work out. It’s not a ton of money, but it’s better than paying to work out! I try to make the most of it by transferring 50% of my BODYPUMPTM pay into a separate savings account. I can’t quantify the health benefits of teaching three times per week, but suffice to say, I probably wouldn’t make it to the gym more than once a week if I wasn’t paid to be there, so it’s worth it for the health benefits too.

How about you? What financial moves did you make early on that are paying off today? Please share them with me on Facebook or Twitter.

Did you know you can sign up to receive my blog posts every week, delivered straight to your inbox? Just head over to our blog main page, enter your email address and select which topics or bloggers’ posts you’d like to receive. Obviously I suggest at least ‘Posts from Kelley.’ Thanks for reading!

 

 

A Debate on 401(k) Loans

August 04, 2016

Asking questions and challenging assumptions are important components of financial self-defense. That’s why I was glad to see one reader take the time to raise some interesting points contesting some of what I wrote a couple of weeks ago in a blog post called “The Hidden Downsides of a 401(k) Loan.” Since other readers may have similar concerns, I thought it would be useful to address them. Besides, I love a good, friendly debate! Here are the 401(k) loan downsides from the original post, the reader’s critiques, and my responses:

Downside #1: You lose out on any earnings:

Critique: “You are wrong because the 401(k) loan continues to be a plan asset – bearing a fixed rate of interest. Instead, you should have encouraged her to reallocate so as to maintain her asset allocation (equity position) – treating the 401(k) loan principal as the fixed income investment it is.”    

My Response: Yes, it’s true that the 401(k) loan continues to earn a fixed interest rate, but that’s interest you’re paying yourself. If you take money out of your savings account and then pay it back with “interest,” I wouldn’t call that earnings. Reallocating the remainder of your 401(k) balance is an interesting idea though that could help make up for the lower earnings.

Downside #2: Your payments may be higher.

Critique: “Are you seriously suggesting that a cash advance using a credit card (with interest rates of 15% – 30% or more) is a better liquidity solution because the minimum monthly payment might be less if you stretch repayment out over 20 – 30 years instead of 5 years?  That is so obviously bad financial advice I don’t know what to say.”     

My Response: I certainly wouldn’t say that a credit card cash advance is generally better than a 401(k) loan. I’m simply pointing out that using a 401(k) loan to pay off high-interest credit card debt could actually increase your cash flow problems because the payments on the 401(k) loan may be higher than the credit card debt.

Downside #3: You also can’t eliminate a 401(k) loan through bankruptcy.

Critique: “Are you are suggesting that when entering into a debt obligation, one consideration should be that if the combination of mortgage, car and 401(k) debt become unsustainable, you should anticipate being able to stiff the creditors? Remember that a plan loan is secured debt, secured with your vested assets. So, you can default on a 401(k) loan anytime you want (just stop repayment) – you don’t even have to declare bankruptcy.  However, I am not sure why you would want to stiff yourself.”

My Response: I’m suggesting that if you’re considering filing for bankruptcy protection, you may not want to use a 401(k) loan to pay off debt that would otherwise be discharged in the bankruptcy. (As for “stiffing creditors,” keep in mind that creditors assume the risk that you may employ this legal protection and charge higher interest rates accordingly.) It’s also hard to default on a 401(k) loan when the payments are withheld from your paycheck.

Downside #4: You may not be able to take another loan.

Critique: “Really. If the plan only provides for a single loan, your recommendation is to borrow all you can and put the amount you did not need at this time into a passbook savings account or a money market fund? That is almost as bad as your recommendation concerning credit card debt. However, I will agree with you that this is one likely result where, based on “expert” advice, plan sponsors amend their plans to limit access to a single loan.”  

My Response: If you’re going to take your only allowable loan and have no other emergency funds, you might want to borrow more than you need and put the remainder in savings. This can help you avoid accruing high interest debt or even worse, missing car or rent/mortgage payments in the event of an emergency. At least with a 401(k) loan, you’re paying yourself the interest.

Downside #5: You may be subject to taxes and penalties if you leave your job.

Critique: “The better response is for the plan sponsor to amend the plan to permit repayment post-separation. In the 21st Century we call this electronic bill payment. Your response confirms that service providers/recordkeepers have failed to keep pace with 21st Century electronic banking functionality.  The other response is to prepare for any potential change in employment by obtaining a line of credit.”

My Response: I agree that plan providers should offer electronic bill payment after leaving employment, but if your employer doesn’t, you need to be aware of the risk of getting hit with taxes and early withdrawal penalties on the outstanding balance. Also, lines of credit can be cancelled. This is even more likely if you lose your job or if the economy is weak, which are two times when you’ll probably need it.

Downside #6: You’re double-taxed on the interest.

Critique: “When you receive a payout of interest earned on investments, it is taxed just like interest on any other fixed income investment. In terms of tax preferences, if you secure the plan loan with a mortgage, the interest you pay on your plan loan may be tax deductible. And, importantly, if the plan loan is secured with Roth 401(k) assets, the interest you pay may be tax free at distribution – just like it would be for the interest received on any other fixed income investment where Roth 401(k) assets were the principal.  So, no, interest is not “double taxed”.”

My Response: I agree with the point about interest from Roth 401(k) accounts not being double-taxed. However, most 401(k) accounts are pre-tax and so the interest will be taxed on the interest when it’s eventually withdrawn. Since that interest was paid by you with money you already paid taxes on, I would call that “double taxed.” That’s one reason why the loan isn’t completely free (the other being the lost earnings from point #1).

Conclusion: The employee I was talking with decided to dip into her savings rather than borrow from her 401(k) due to the double taxation of her interest.

Critique: “Since she could take out multiple loans, there was an “emergency option” even if she borrowed this time. And, assuming the tax status of interest paid to the condo was the same as the tax status of interest paid on a plan loan, the calculation you should have performed was whether, after the loan was repaid, her total net worth (inside and outside the plan) would have been higher. In this case, because the condo rate was 3.75%, she might have been better off using that liquidity option – but nothing in your response suggests you proved which alternative was superior.”

My Response: I do think her choice was the most likely to maximize her net worth the interest she gave up on her savings was less than the the 3.75% the non-401(k) loan would cost her and what her 401(k) could be expected to earn (plus the taxes on her interest payments). That’s why she made the decision she did.

Final point: Finally, don’t forget that the real purpose of your 401(k) is retirement.

Critique: “Your suggestion is that people should avoid using plan assets for any purpose other than post-employment income replacement.  However, if you (self-) limit liquidity, people will only save what they believe they can afford to earmark for retirement.  Those who limit their saving by earmarking money for retirement are more likely to fall short of their savings goals. Importantly, reasonable liquidity access has been shown to increase (not reduce) retirement savings.”

My Response: I’m simply saying that you should understand both the pros and cons before taking a 401(k) loan. In some cases, the 401(k) loan may indeed make the most sense. However, I do think that the 401(k) is not the best vehicle if you’re saving for liquidity. After all, putting your emergency money in your 401(k) could leave you short in an emergency since you can generally only borrow up to half of your vested balance (up to $50k) and the loan will have to be paid back at a time when money might be tight. Saving first for emergencies in something more accessible like a savings account is not going to make or break your retirement.

None of this is to say that 401(k) loans are always a good or bad idea. It all depends on the situation. Just make sure you’re making an educated decision even if it means having a little debate with yourself (or a qualified financial professional).

 

 

Have You Made a Big Financial Mistake?

June 24, 2016

Lately, I have been spending more time in the kitchen. One of my sons has become addicted to the Food Network and we have been watching a lot of Chopped lately. We will watch a few episodes and come up with a few dishes that we want to cook, head to the grocery store and then come back and experiment.

Surprisingly, it has produced some very nice results. We’ve eaten some very tasty meals and laughed a lot at our mistakes. It has been a great learning experience for us.

Laughing at mistakes is easy when it’s in the kitchen. When it’s in our financial lives, it’s not as easy. I can scrape some overcooked or horrible tasting food into the trash can and order a pizza. We can’t make such a quick correction if we really botch something up in our financial life.

For instance, I met someone recently who made the mistake of putting her name and her name alone on a lease for a rental house. She and her new boyfriend went from first date to wanting to live together within about 6 weeks. They found a place that fit both their lifestyles and when they went to sign the lease, she discovered that his credit score was very low and that he had a checkered financial past. She was in love so she overlooked those data points and merrily signed the lease for a place that required each of them to pay a bit more than they had been paying on their own.

It was a very beautiful place…or it was until 3 months into the lease, when he decided that he’d opt out of the relationship and into one with someone else. She was left with her name alone on a lease that she couldn’t afford. It was tough just to cover her half of the rent.

Paying the whole amount…impossible. She still had 9 months to go, and the landlord had very inflexible terms. She would be responsible for the rent, even if she moved out, until it was rented to someone else.

It was a terrible lease, but she signed it willingly. She put two months’ rent on a credit card while sorting out the details of her life and her short-lived relationship. Eventually, one of her friends moved in and was able to share the rent, but the credit card bills still lingered.

The rent was a challenge to pay, especially after a few car repairs – which also went on the credit card. When I met her, she had $10,000 on the credit card and was only able to pay the minimum payment. The balance was going nowhere, and she was not patient. She wanted it gone and gone fast.

We put together a plan for her to increase her income since she couldn’t reduce her expenses in any significant way. She was very knowledgeable about wines so she took on a part-time job as a server at a very high end restaurant with an extensive wine list. The upside…she had very few tables on any given night and was able to talk about spectacular wines. She decided that every dime she made from that job was going to be used to pay off the credit cards and when they were paid off, she’d use the money to save for the down payment on a house.

When she checked in with me last, she was halfway through the debt and loving the job at the restaurant. Not only can she talk about great wines, she gets to sample some ridiculously good food and pair it with spectacular wine at the end of her shift.  She figures that by the end of the year, the debt will be paid, and she’ll have enough to put 3 ½% down on a house. If she goes another year beyond that, she might get 10% down.

If you find yourself in a position where you’ve made a critical mistake in your financial life, don’t panic. One of my friends is fond of saying that once you dig a hole for yourself and you’re ready to get out, the first step is to simply put down the shovel.  A great way to do that is to ask for help! And be patient. While it’s not as easy as dumping a plate of food and ordering a pizza, with the right strategy and some effort, you’ll be able to dig yourself out of any jam.

 

4 Things I Wish Someone Told Me Before I Graduated From College

May 10, 2016

As I talk to my friends’ graduating children, I am always struck by the hope in their faces. They believe that they control their futures and that their lives will be better. It makes me think about my own graduation and reflect on what I wished someone would have told me about finances:

#1- I will actually have to pay back the money I was taking out in student loans. I do not remember thinking about paying back my student loans. I probably thought that the student loan fairy dropped into my college’s financial aid office after graduation and deleted my debts. If I had known how long and painful it would have been to pay back my student loans, I may have made different choices. I encourage parents to sit down with their kids, calculate repayment costs, estimate their starting salary and give them a cold dose of reality as to what their paycheck may look like after taxes and deductions come out.

#2- The car I stupidly bought after college graduation will become the story I tell people about what not to do when you graduate. I worked so hard to graduate and my car was old so I purchased a car I really did not need. It was cute and in the showroom and the second I saw it, I said “I do.” What I did not realize was that I was also saying “I do” to a 5 year car loan that took almost a 4th of my income at that time. I wished someone would have told me that the car I get will dictate my ability to save money, take vacations and contribute to my 401(k) plan.

#3- A business wardrobe is not a reason to get into credit card debt. I was lucky enough to land a job with a large corporation but I realized that I needed to get business clothes. I used this as an excuse to run up $3,000 in credit card debt on a new wardrobe. I think this included a Coach bag and wallet that I never used. I wish someone would have told me that credit card debt is not necessary and worked with me on a plan to pay it off

#4 – The earlier you contribute to a 401(k) plan, the less you need to contribute. I wish someone would have told me how important it was to contribute early, the power of compound interest and how starting with even a small amount makes a big difference, especially when your employer is giving you free money in the form of a match to help you save for retirement. Talk to younger people about how your choice to save early has helped you or about your regret in not starting earlier. Run an estimate for them so they can see how a little makes such a big difference .

Looking back, I wished I would have gotten a cold dose of “adult” reality. I wished I would have known that being on my own meant that my financial choices had consequences that can easily be taken care of if I had been willing to buckle down and pay off my debts instead of using credits cards to upgrade my lifestyle. The best gift you can give a college graduate is to help them start off their futures on the right financial footing. Work with them on a budget, encourage them to pay off credit card debt, teach them the importance of contributing to a 401(k) plan and help them come up with a game plan to pay off their student loans before their children are in college.

 

 

My Declaration of Financial Independence

December 07, 2015

As I take over Financial Wellness@Work on Mondays (following in the very big shoes of Dr. Scott Spann, who is bringing Financial Finesse wisdom to the retirement planning pages of About.com), I thought I’d take some time upfront to tell you my story so you know my perspective. Twenty years ago, I declared financial independence. I remember my Financial Independence Day very clearly… Continue reading “My Declaration of Financial Independence”

You Might Be a Credit Card Addict If… (Part II)

May 02, 2014

Last week, I wrote about signs that you might have an issue with credit cards and potentially even be a credit card addict. Do any of those behaviors ring true with you? If so, you might want to make some serious tweaks to the way you manage your financial life. Continue reading “You Might Be a Credit Card Addict If… (Part II)”

You Might Be A Credit Card Addict If…

April 25, 2014

When I sit down to talk with someone about their finances, I get the basic information about how they are positioned in various areas of life such as age, kids, income, 401k contribution percentage and balance, other investments, rent/mortgage, other debts, etc…the standard questions a financial planner asks to quickly assess a situation. Something that is more common than I’d like it to be is hearing about the way people “manage” their debt load. When I read this article about credit card addiction, it really struck a chord with me.  I have heard each of the 10 behaviors that indicate a potential problem with credit cards…recently. Actually, I’ve heard all of them in just the last week.  Continue reading “You Might Be A Credit Card Addict If…”

How to Dispute a Credit Card Purchase

December 04, 2013

Have you ever paid for a service with a credit card and just weren’t satisfied? Or bought something and found yourself unable to return it because of some obscure policy? If your answer to either of these questions is “yes,” take solace in the fact that you’ve got some recourse. As long as you made your purchase with a credit card that provides a dispute process – which almost all do – you may have a way to get your money back. However, there’s a right way and a wrong way to engage this process. To learn more about how to properly dispute your credit card purchases, read on. Continue reading “How to Dispute a Credit Card Purchase”

Credit Score Myths That Drive Me Crazy

January 18, 2013

When I meet with people who are dealing with building credit for the first time or rebuilding/repairing their credit after some financial misadventures, we often talk about the components of their credit score and how they can make an impact on that score.  Fairly often, someone will say “I have heard…” and then tell me something they’ve heard about credit scores.   After hearing the same “I have heard” items or myths repeatedly, I thought it might be a great time to address a few of them so that you can start the new year with a few facts instead of myths. Continue reading “Credit Score Myths That Drive Me Crazy”

Tips to Keep Your Holidays Debt and Stress Free

November 30, 2012

As I write this, it’s only a month before Christmas and all I’ve seen and heard today are ads about Black Friday & Cyber Monday.  I have to admit that it makes me not want to shop at all this year!  (If you’re on my Christmas list, you might want to read another planner’s blog this week!)  Continue reading “Tips to Keep Your Holidays Debt and Stress Free”

5 Financial Planning Moves for Women in Their 20’s

July 16, 2012

Whoever said, “Life is short” did a disservice to thousands of people.  Life is not short.  Life is long.  Research on longevity shows that in married couples that live to age 65, life expectancy for at least one of them is age 94.  When you think about it, 94 years is a very very long time. Someone who is 94 years old this year would have been born in 1918 – does anyone know what was going on in 1918? We were in the middle of World War I, Mississippi was the first state in the Union to ratify prohibition, and Woodrow Wilson was the President of the United States.   In the 1910s, only 14% of homes had a bathtub, only 8% had a telephone and the speed limit in most cities was 10 miles per hour. Continue reading “5 Financial Planning Moves for Women in Their 20’s”

How I Recovered From More Than $30,000 in Credit Card Debt

February 23, 2012

When I was 18, I got my first credit card. What should have been an occasion to mark the beginning of wise financial habits instead began a three-year period of reckless spending and horrible choices. By the age of 21, I found myself in debt to the tune of $30,000 – in addition to nearly $10,000 of personal debt to my parents, who financed my college education. Unfortunately, like many other Americans, I wasn’t able to use credit cards and rewards wisely. Continue reading “How I Recovered From More Than $30,000 in Credit Card Debt”

The Cure for the Financial Hangover

December 28, 2011

Now that the holidays are behind us, do you find yourself carrying a few extra financial “pounds?”  That is, did you put so much of your holiday shopping on plastic that you end up starting the New Year carrying a balance on your credit card?  If so, then you’re probably not alone.  According to First Data, credit card use among holiday shoppers soared, and continued use could make the problem worse.  The good news is that there is a cure to the financial hangover.  It begins with a commitment to get rid of the debt, followed by a plan for reducing it.  To help you get started, here are some simple steps you can take to start shedding the financial weight: Continue reading “The Cure for the Financial Hangover”

A Workplace Twist on Balance Transfer Day

December 20, 2011

In case you missed it, two Sunday’s ago was designated as Balance Transfer Day, based on a Facebook-led protest against big banks that encouraged consumers to switch their high interest credit cards for cards with lower rates or 0% teaser rates.  The December 11th protest was meant  to “beat the banks at their own game and demand the same 0% interest rate that they receive from the federal government,” the protest’s organizers said.  Hopefully, this put the spotlight on the high cost of finance charges that some consumers are facing with their credit card debt.  So where can you shine your own spotlight? Continue reading “A Workplace Twist on Balance Transfer Day”

Financial Planning and Learning to Drive

October 14, 2011

My daughter just got her learner’s permit.  Drivers everywhere, beware!  Last Sunday I let her drive as we ran errands, and she did a remarkably good job for her first time on busy roads.  It wasn’t an empty parking lot this time!  And…that’s not just a proud dad talking.  It’s an honest evaluation of her performance.  This whole “learning to drive” experience has me thinking about our capacity to learn new things. Continue reading “Financial Planning and Learning to Drive”

Financial Lessons from a 23 Year Old

August 22, 2011

I just got off a call to our financial helpline with an amazing young woman.  It is funny how sometimes you get a caller who should be teaching financial planning instead of calling the helpline; this was one of those calls.  I was struck by her insight and maturity for such a young woman.  She had a good idea of what she needed to do but was trying to do everything at once.  I helped her take a step back and look at things a bit differently.  She had all the right pieces but wasn’t sure how to put them together.  The pieces themselves aren’t the important part of this story, but the wisdom behind how she was making her decisions. Continue reading “Financial Lessons from a 23 Year Old”

7 Steps to Make Credit Card Debt Work FOR You

July 28, 2011

NOTE FROM LIZ DAVIDSON, FOUNDER AND CEO OF FINANCIAL FINESSE, ABOUT THIS POST:  The strategy Erik discusses below has huge risks if you are not extremely financially disciplined.  Most of us aren’t.  Erik Carter happens to be the most financially disciplined person I’ve ever met in my life, so I can see how he was able to use this strategy without over-extending himself and getting into serious debt problems.  If you are one of the few who is like Erik, this is a great strategy.  Otherwise, it has the potential to lure you deeper into debt and you need to be very careful to implement it the right way and avoid the temptation to spend money you don’t have.

With that, here’s the post– hope you enjoy it: Continue reading “7 Steps to Make Credit Card Debt Work FOR You”