Thinking OUTSIDE the BOX for Financial Freedom
Remember when going to school was all about finding a job. Deciding on a CAREER. Obtaining the Highest wage or salary that you could negotiate. So where did personal finance fit in your life? It is never too late but the sooner you begin… the greater the personal and financial rewards! As author of several pathbreaking books, including CREDIT CARD NATION, LIVING WITH DEBT, and CROSSROADS OF DEBT, I will provide a blue-print with specific tips from my next book for beginning the TRANSFORMATION from a debtor to a saver to an investor. And, these phases of your personal life are NOT mutually exclusive; you can proceed separately in a step-by-step approach. Or, together at the same time! It is never too late to change your financial life… just like changing your diet and lifestyle for a HEALTHIER, LONGER and MORE SATSIFYING LIFE.
SIMPLIFY Your Financial Life
Today, Personal Finance is so different from your parents’ generation! In the OLD DAYS, one’s work life was commemorated with a gold watch and a company financed (‘defined’) pension after the end of a successful career. I remember my grandfather, who retired from his white-collar middle-management job, was able to enjoy over 30 years of blissful retirement. Today, of course, the world has changed dramatically. Defined company pension plans have gone the way of Blockbuster video rentals and 401 (k) personal retirement plans risk the volatile rise and fall of the economic and financial markets.
RISK MANAGEMENT: How to Navigate the Financial Turbulence
There are THREE KEYS to Financial Empowerment. FIRST, increase your income that comes into YOUR CONTROL This includes the money from your job and income that you make from other activities. SECOND, reduce the amount of money that leaves your control like interest on credit cards, car payments on rapidly depreciating new cars, and expensive habits from discretionary purchases such as online memberships, Starbucks lattes, and costly insurance products. THIRD, begin investing as soon as possible. The MAGIC of Compound interest during your life is AMAZING. You have control over embracing this power. It is not how much you SAVE but how you invest it. Instead of paying $200 for a pair of new NIKE sneakers, do you realize that you could buy 3 shares of the corporation?!! Strive to become an owner rather than a consumer…
What’s Debt Got to Do With It?
Did you know that NOT ALL DEBT IS EQUAL? In the 1980s, consumer debt like credit card and auto loan interest was tax deductible. That made the cost of debt much cheaper when you filed an itemized tax return (More on this later!) Today, owning a home has many advantages such as deductibility of mortgage interest and Home Equity line of Credit (HELOCs). And, credit card debt is an ‘unsecured’ debt which means that banks can charge much higher interest rates. In another blog, we will explain what happened to Federal usury laws. Remember when Jesus kicked out the money lenders from the temple? Prioritizing debts to be paid off and when is a crucial to following the KEYs to FINANCIAL SOLUTIONS and EMPOWERMENT.
Why Is Debt Such a Big Deal?
Did you know that the payment on your debts—especially credit cards—determines how much banks charge you? Sadly, banks are allowed to set the rules that benefit them to your disadvantage. Do you know that paying your debts just a couple of days late every month greatly increases the cost of credit and thus how long it takes to pay it off? In the “old days,’ consumer loans were granted a late “grace” period where a delay in mail delivery (outside of your control) did not result in an additional late penalty fee. And, even worse, the date of the payment of your loan payments greatly influences your personal credit score. In essence, your Financial DNY! Did you know that your credit score may have a greater impact on getting a job than your work history? We will explain in a later blog.
When Is Consumer Credit A Responsible Choice For Solving Financial Challenges?
Consumer Credit is essential in modern society, today. How many purchases can you think of that require a credit card or other electronic payment card? Can you rent a car, hotel room, or make an online transaction without one? Do you feel safe carrying a large amount of cash when you are travelling? How about using your monthly credit/debit card statement to create your monthly budget and monitory cash flow ?
Hard to believe that there was a time that local ‘main street’ merchants were the primary business zone for consumers AND they actually knew their customers! Like local community banks that served the needs of both households and retailers on a personal basis. Today, big retail corporations have replaced local merchants in suburban malls and online retail stores.. Although they don’t know you, they want to become your best friend and sell as much as they can to you as soon as possible. READ MY LIPS: “Impulsive Buying!”
If you make some purchases a few days before your next paycheck with your credit cards, the convenience and/or immediate gratification/satisfaction is financed by high interest rates. BUT, when your monthly credit card bill arrives, would you have made the ALL of the purchases if you had to pay with cash? Are purchases made on-sale worth still a bargain after 20% finance charges? Are you prepared to pay extra the next month for the finance charges? Do you have ‘buyers’ regret’ over some purchases? Research studies confirm that people spend more money when they use credit than if they only use cash! Can you really afford the savings of buying items on sale with your credit cards! Is managing your finances with cash payments better for you?
HOW TO ACHIEVE FINANCIAL EMPOWERMENT?
In this blog, I will share with you some SECRET tips that I have learned during my 30-year career from teaching Personal Finance, Money & Banking, Financial Institutions, Financial Innovations, and Portfolio Management. Also, I have developed a FinTech system that levels the playing field between banks and consumers. Can you imagine how upset the banks have been with this innovative system! Do you think that the subsidized corporate financial system benefits the citizens that pay for it? Recent estimates are that the US banks made over $1 trillion on YOUR money that was deposited in checking, savings, and long-term deposit accounts. In my next post, we will discuss the ‘baby steps’ necessary to achieve economic empowerment. This will begin with an innovative and more realistic approach to budgeting—that the banks do NOT want you to learn--that requires personal discipline if you cannot manage your financial affairs without costly credit cards.
Let’s Take This Financial Empowerment Journey Together!
In ending this post, I challenge you to discipline your spending for a month without using any consumer credit—only cash or debit cards. HOW HARD was it? Like going on a low carb diet and not eating Red meat. How many purchases did you decide NOT to make? How much money did you save? Did you use the savings to pay down your credit card and other debts? How much faster will you be able to pay off your credit cards if you manage your expenses primarily with cash or debit cards?
NEXT STEPS
We will proceed with your journey to FINANCIAL EMPOWERMENT with introducing some Financial ‘Tips’ that offer solutions to reducing your debt. Are you ready to tackle your high interest consumer debt? Are you waiting to begin building wealth until AFTER you finish paying off your debts? Did you know that the U.S. government encourages you to begin investing into tax-deductible or tax deferred Individual Retirement Accounts (IRAs). Why Wait? Are you NOT INVESTING because you don’t know how?
In my next blog, we will discuss the psychological issues that shape some of your attitudes toward credit and debt by exploring your consumption behavior on a cash diet. Then, we will proceed with how to create a realistic Budget and the responsible role that credit cards can play in your financial Life.
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