Website DIVISIONS (Over 600 articles to help you to grow in every facet of your life) Written by Jimmie Burroughs Email to a friend
There are 5 financial red flags that everyone needs to be aware of and avoid the financial pitfalls that they cause. While each of the five have a positive side, it is the negative side that does its damage. These 5 financial red flags have been the cause of more despair, loss, and financial disaster than anything else. If you don’t learn how to deal with these five things, you might as well forget about ever reaching financial independence, because you are more than likely going to spend the rest of your life struggling to make ends meet.
The average credit card debt per family in 2012 is $16,000. Paying minimum payments on a debt that size means a lifetime of payments and enormous interest. Credit cards have a psychological motivator to their interest, and that is it seems somehow that when you use a credit card that you are getting something for free.
The history of credit cards have proven that most are unable to discipline themselves to use a credit card properly, therefore it is the best policy for most to pay off their credit card and cut it up. If a credit card is necessary, the best way is to use a prepaid one.
If you are one of the few who are able to control credit card spending, make it your policy to never charge more than you can pay off at the end of the month. If there is an emergency where credits is absolutely necessary, then try to keep it within a three month limit for the payoff if at all possible.
Same as cash deals
Why do you suppose a company would offer to allow you to buy their product and pay no interest for six months or a year? Because they know that most people will not pay the amount off by the due date, therefore they are able to charge back interest, which can be at a very high rate of 20% or more. This is what that means: For example, if you charge a $2,000.00 lawn mower and fail to pay it off in the specified time, you can be charged an additional $400.00 or more which is added on top of the $2,000.00 and then continuing at that high rate of interest until it is paid in full which can add several more hundreds of dollars. If they could not win, they would never offer a same as cash deal. The only time a same as cash deal is a good deal is if you have enough reserves to make sure that you can pay it off on time, otherwise it is for suckers only.
The only time a consolidated loan is feasible is if it is the only way you can keep financially afloat. If you make such a move in order to allow you to purchase more, it is a big mistake. Your goal, in order to ever become financially independent, is to get out of debt and stay out of debt and absolutely abstain from adding new debt.
Forget about refinancing in order to keep up with the preverbal Joneses. Simplify your life rather than complicating it with a bunch of things you don’t need and could do without. Only the very wealthy are able to own a lot of things without it becoming cumbersome. The reason being that they are able to hire someone to care for the pool, manicure the garden and landscaping, manage a huge lawn and maintain the cars, boats, and all the other stuff that the ordinary person thinks they can’t live without, but which burdens them down both in trying to keep them up and paying for them.
Line of credit
A line of credit is a great temptation to try and find some way to spend it. Unless you own a business where a line of credit is essential for cash flow, never have one, or do as I do and never use it. If I have an emergency, I can use mine rather than bothering my investments which could result in a penalty for early withdrawal, but the idea is like having a spare tire that you never use unless you have a flat.
Debit cards are just a little better than credit cards. Better because they do not rack up debt, but they make spending money too easy and still give a bit of that credit card feeling that you are getting something for free. They are also more risky to use than a credit card, and could give an unscrupulous person access to your bank account which they could empty for you very quickly.
If you, like I, are able to control your spending, it is wise to use a credit card to charge things like dinning out, groceries, clothing purchases and gasoline, and pay it off at the end of the month; this way you get points that can be used for flying or cash. I usually budget myself with some cash to buy small items during the week. As a word of caution, this is only for you if you are on top of your spending, otherwise forget this option.
The things above are words to the wise. If you can follow these principals, you are on your way to financial success, otherwise the road ahead is going to be rough. If you are like most, it will take some time to reorganize your financial affairs and reach the point where you are in full control, but it will be worth every sacrifice. Don’t put off getting started; start right now and draw up your plan for getting out of debt and staying out of debt. Put these principals in effect in your life.
Jimmie Burroughs: Founder of Christian personal development.
About the author: Jimmie Burroughs is a motivational speaker and author who has been involved in teaching Christian Personal Development for more than 30 years. There are hundreds of articles to help you on this website, Website Contents , in your person growth. If I can help you personally, please send your concerns via: Contact me.
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