Posts Tagged ‘manage finance’

Cash only money management

A recent CNN Money article highlighted people from all over the USA who have switched to cash only transactions to better manage finances. William Hazelgrove, from St. Charles, IL., is tired of mortgage loans, auto loans, unsecured loans and debt. He isn’t alone in his sentiment – but unlike a lot of people, he’s doing something about it. In the past Hazelgrove and his family dealt with credit much like most people did. When he received bills, he’d pay them with his credit card. It wasn’t until the credit card company egregiously raised the interest rates due to the recession when he realized the problem. “I realized if I ever wanted to live within my means, I would have to switch to using cash only.”
Hazelgrove took charge of his finances, and steadily paid off debt and increased savings. He got a second job, and put the funds right into both. His complete solution included:

• Keeping a debit card balance above $100
• Liquid savings of $5,000 for emergencies
• Using Quicken to keep track of every expense

One of the main commitments he had to subscribe to was not spending when cash was low. He said, “It was hard, especially towards the end of the month, but I had to forego credit card spending. If I couldn’t afford it, then it had to wait.” It was difficult, he admitted, but now his goals are all realized. Living without using a lot of credit isn’t exactly a bad idea.

Statistics on credit

When it comes to credit, almost everyone has it. A recent study by Hoffman & Brinker revealed that Americans totaled up to $ 917 billion in credit debt by September 2009. Almost 70 percent of that credit debt is past due.

It’s not exactly classified information that a lot of people used too much credit, and the truth is that lenders changed rules in terms of lending and limits. Without an action plan, many Americans will find themselves at a difficult juncture in their finances. Mortgage loans, car loans and unsecured loans are no longer given out to just any applicant. Prior to the recession lending laws were lax. It was easy to get funding and almost every credit-scored applicant could find some lender to extend money. Granted, that money often came with a hefty interest rates, but many people were willing to pay the price.

Today’s world of cash management

The lending crash had the biggest effect on people going cash-only. Because of the huge number of defaulting borrowers, credit card companies decided to take drastic action in an effort to mitigate their losses. They raised their interest rates to where they were unmanageable, and then cut limits. One consumer, Daphne Harringe of Cincinnati, Ohio, said, “We always used credit to manage our monthly bills. Always. Then suddenly our interest rate shot up to 27 percent after one delinquency. It was difficult to manage, but we realized that we had to switch to cash if we were going to save our future.”

More and more consumers are heading towards a cash-based money management system. In particular because of the way credit lenders handled the recession, borrowers realized how unreliable credit can be. More consumers are moving away from funding methods like credit cards, mortgage loans, and unsecured loans. They are opting to use cash instead of credit, and take their future in their own hands.

Learn to Manage Credit Cards

Consumers are suffering financially due to the recession and need to know how to manage their credit cards, savings and investment accounts. In today’s society, credit carsd are staples. The convenience and utility of cards makes them very easy for purchasing things. Unfortunately, they are also a very easy way to get into financial trouble if consumers are spending more than they earn. Not using or establishing credit can also be detrimental. Most people can’t afford the big purchases, like cars, homes and large appliances without credit. Because of the importance of credit, consumers need to understand how to manage it. Here are some types of credit to know about and use wisely.

What’s Installment Debt?

Installment debt is what allows consumers to get a 30-year home mortgage at eight percent or a car loan at nine percent. Credit is extended for the item, and then the loan is repaid throughout a set amount of time on an amortization schedule. Monthly payments are a fixed amount over the course of the loan. The loan repayment begins with mostly interest being paid off, but later principal is repaid.

Installment debt is easy to budget in and for. When a consumer knows what their payment is, they can figure it into their monthly expenses. Installment debt can be good if a consumer earns a higher return on the investment and pay on the installment debt.

Revolving Credit

Revolving lines of credit, also referred to as “open-ended credit,” is available to consumers from Visa, MasterCard, American Express and department stores. When a consumer applies for a card, they get a standard limit based on credit rating and may use it for purchases. There are monthyl payments to consider and some lines of credit have monthly and annual fees.

Though revolving credit can be convenient, consumers need to know the minimum payments benefit only the credit card company. Because credit cards charge rates upwards of 18 percent, it pays for you to pay above the minimum. Companies make huge revenues from interest payments. For instance, minimum payments on a $ 2,000 credit card debt could mean interest payments only for the next decade.

There are some benefits to revolving credit. Consumers can purchase items they normally couldn’t afford and spread out payments. Unfortunately, a lot of people go overboard with credit cards and end up in serious trouble. Spending more than is coming in is always a dangerous decision, but consistently doing it can mean a quick financial demise.

Using Credit Wisely

Regardless of the type of credit consumers have, they need to use it wisely. A way to do this is to examine every loan agreement and read the fine print. Keep track of all rates, balances and fees to understand how much money is truly being used for beneficial purposes and how much is going directly to credit companies.

Eliminating Credit Debt

Some people are opting for completely eliminating credit card debt as a response to the economy. If consumers think this is the route they want to take, they should first evaluate their individual spending habits and see where money drains are. It’s simple to track money and where it goes with a little research. Problem areas will manifest themselves and consumers should get down to nipping them buds expeditiously. Based on spending habits, consumers should retool their budget so it allows them to pay off debt on credit cards, pay bills, and manage expenses.