Showing posts with label Credit Cards. Show all posts
Showing posts with label Credit Cards. Show all posts
Tuesday, August 17, 2010
Saturday, December 26, 2009
Person's Financial vs Government Risk Viability
When calulating an individual person's financial risk and viability, we look at his/her debt to income level (DTI), but when talking about a country we always look at debt to GDP.
However, is this valid?
Every dollar government borrows and spends makes the GDP go up.
This is akin to looking at an individual person and counting everything he has purchased with his credit cards as "income".
(Also, the GDP is not the Government's income. It is ours. As soon as the government starts creating something of value and selling it at a profit, it can count it as it's income.)
However, is this valid?
Every dollar government borrows and spends makes the GDP go up.
This is akin to looking at an individual person and counting everything he has purchased with his credit cards as "income".
(Also, the GDP is not the Government's income. It is ours. As soon as the government starts creating something of value and selling it at a profit, it can count it as it's income.)
Wednesday, July 22, 2009
Truth Behind Common Financial Advice and Conventional Wisdom
This is a guest post by Mr Credit Card from www.askmrcreditcard.com. Mr Credit Card normally writes about credit card reviews, debt reduction topics and his site obviously has got tons of credit card offers. He has also put together a list of the best credit card offers and deals. Please check out his blog and subscribe to his rss feed. Today, Mr Credit Card is going to branch out and write about a topic that we should all be aware of. So here is his post
If you read the mainstream press and even most personal finance blogs, you will have come across many standard common advice. However, if you look deeper into these "standard advice or thinking", you will find that most of them are just not true or that it comes with a few caveats. Today, I am going to highlight some of these and hope that you will be more discerning whenever the mainstream press gives any so called "standard" advice.
The stock market always goes up in the long run - This common statement derived from studies in the US only from 1926 till present day. Some studies went further back to the late 1800s and came to the same conclusion. Based on this "empirical evidence", the common advice now had been to telling folks that in the 'long run', stocks are always the place to be. Problem with this analysis is that there are many assumptions that have been left out.
The first is that this study holds true only in the US because the United States. In countries like Russia (where communism happened in 1917, or parts of Europe, where there were 2 major world wars in the last century, or even in South America), this conclusion is simply nonsense. Germany went through hyperinflation in the 1930s and a change in currency. One that was pegged to gold and one that was not. South American countries went from being the richest nations in the world to one with massive debt problems in the 80s and 90s. If you were living in those countries, this 1926 US stock market analysis is meaningless when your country faces crisis of epic proportions.
Truth - It only went up in the US (and perhaps Britain) from the time frame of analysis. But bear in mind that the US has not been conquered in war in the last century. We have not had massive currency devaluations or flight of capital. Being careful of the definition of long run. There have been 20 year stretches where the US stock markets did nothing. So if you do not have a 20 year horizon or longer, be very wary about putting the bulk of your money in stocks.
US treasury bills and bonds are the safest investments - The US government treasury bills is considered the safest investments because the US government has never defaulted on its debt obligations. And hence, its historical yield is used in calculations. Because of such assumptions, academics have used the yields on treasury bills as the "risk free asset" (for those of you who study CAPM and stuff). However, there are some flaws to this assumptions.
But in the 1930s, President Roosevelt devalued the dollar by more than half when the dollar was re-pegged to Gold. In the 1970s, President Nixon took the dollar off the gold standard after the French President Charles DeGaulle wanted to exchange the French US Dollar Holdings for gold! In the 1950s, interest rates on long bonds was actually capped at 2+%!
Truth - While in many instances, US T-bills can be considered the safest assets, this only holds true if the US currency does not devalue massively. Today, we are seeing signs that countries like China are wary about their US Dollar reserves and also do not like the fact that the US Dollar's role as the international currency of choice means that we can get away with deficit spending. There is no guarantee that the dollar may lose it's reserve currency stature in future and if that happens, the US dollar will have depreciated a long way. Moral of the story is : have some of your other savings in other currencies and study how to keep your money safe. Perhaps, some gold investments would be good for you?
Reaching a retirement savings of a million dollars is a desirable goal - Another one of those myths that floats around the mainstream media. What puzzles me is that nobody questions this number at all. If a great retirement is your goal, I think that you will find that this number is really not enough. Why?
Using monte carlo analysis, it has determined that by withdrawing up to 4% of your retirement nest egg, you have a more than 85% chance of having your portfolio intact after 30 years. 4% of $1mm is $40,000 a year. And this is after tax money. Firstly, I doubt anyone can live with that amount in a high cost city like New York. Secondly, after factoring in health insurance and all other cost, there ain't much left!
What the mainstream media fail to tell folks is that planning for a career in "retirement" is more important than just "saving for retirement" itself. Afterall, savings can evaporate (ask anyone what happened to their 401ks in 2008). Your countries currency can become worthless (ask any middle Argentinian, or Russian). In the 30s, Germany went through hyperinflation.
Truth - With inflationary monetary policy as part of the western developed world for the last century, the whole million dollar is enough notion will face greater scrutiny sooner or later. You'll probably need much more to enjoy the same standard of living as you have now. If you are earning $100,000 a year today, based on 4% withdrawal rate, you'll need $4 million in retirement savings to have a good chance of achieving the same standard of living.
Small Deficits are OK - The US government has no problems perpetually running budget deficits (saying 3% deficit is OK!). All I can say is that if any household runs a budget deficit for too long, they will sooner or later have to file for bankruptcy. Well, I guess developed countries government like the US can run budget deficits for a longer time than most ordinary households. But sooner or later one's past sins will always catch up.
Deficit spending has a nasty habit of being justified by something that is "really needed". We need to provide health care (very expensive) for the elderly. We need massive military spending. We are fighting two wars. We need to spend money on various programs.
But this mentality spills over to our individual's personal financial life as well. Many folks will say it is "OK" to put the plumbing repairs on the credit card, because we'll "pay it off soon"! Problem is that just like the federal government, most folks do not pay it off. Once in a while, certain "freebies" come along that make our debt load easier. In the case of the federal government, easy monetary policy allows US government debt to be issued at relatively low interest rates. The easy monetary policy has trickled down into the consumer world via promotions like 0% financing for cars, 0% balance transfer credit cards, or even low interest credit cards. For quite long periods of time, these easy monetary policies enabled the federal government and US consumers to "fund deficit spending".
Truth - Debt should be shunned at all cost. What starts as a small amount eventually becomes a habit that becomes very hard to kick.
Global Savings Glut by Emerging Countries Responsible for Global Imbalance - Here's another common economist rant. China, and the Asian emerging economies are savers (which everyone actually acknowledges is good). But they save too much! Because global trade is conducted in US Dollars, countries with trade surpluses have excess savings in US Dollars. And the dollars has to be invested somewhere. The most natural home is US treasuries (ie US government debt). Hence, even if the US is running a persistent budget deficit, savers abroad have no where else but to invest with us. The result for all that is that interest rates and mortgage rates remained low even though our debt picture shouldn't have allowed it.
So what do we tell China and the rest of the world's savers? Don't save so much. Introduce social welfare and health care so people do not have to save so much and they can "spend"! This is one of the worst advice I've heard. We have trouble controlling spending in medicare and social security and now we're telling savers to follow our vices!.
Truth - Truth is the problem is not with savings. It is with the fact that the world conducts it's commerce mainly in US dollars. Savings is the only way to wealth. Savings (just like an emergency fund) gives you cushion. China, for example, could pump billions into their economy without having to borrow from anyone! The good old US however authorized over $700 billion in spending (which by the way they printed!) and they actually have to borrow it from the financial markets. And that is the big problem with having debt. You have to keep issuing IOUs! China's billions was simply gotten by converting their US dollars reserves into Yuan! In personal finance, the same principals apply. When you have debt, whether it is a mortgage, a home equity line of credit or credit card debt, you are constantly on the treadmill trying to find a better card or loan with a better rate. Contrast that to someone who, for example, pays his balance in full. That person can actually use a cash back credit card or gas credit cards to earn cash rebates. Unlike the person having to pay down his or her balance, the person paying in full actually makes money!
Term Life Insurance is Always Better Than Whole Life - Here is another phrase that has been hyped up by the Suze Ormans of the world and literally the whole finance bloggers world. Everyone hates whole life. What nobody has ever properly explained is the cons of term life. So let's look at a few here:
Term life insurance ends after a term - proponents would claim that
1. You can save the money on whole life and invest the difference
2. You do not need insurance after 20 or 30 years cos you have saved enough
3. Term is more cost effective
Problem is nobody tells the downside. The first downside is that
1. The annual premium for term life goes up every year!
2. To maintain the same insurance, you have to keep paying premiums every year. When you are retired and have no "work income" but only portfolio income, monthly payments are a really pain in the B***. For whole life, once you have paid up, it really means you have paid up!
3. By the time you are 50 or 60, you may not have saved enough and your beneficiaries still need money from insurance if you pass away!
4. You have a disabled child and whole life or permanent insurance is the only way to fund it (after all, their needs are permanent!)
Truth - Term life may or may not be more suitable for you. It really depends on your particular situation.
I think I'll stop here. I hope this post makes you think harder and question common teachings and assumptions in the world of personal finance, or anything in fact.
Please leave a comment and tell Mr. Credit Card your thoughts.
If you read the mainstream press and even most personal finance blogs, you will have come across many standard common advice. However, if you look deeper into these "standard advice or thinking", you will find that most of them are just not true or that it comes with a few caveats. Today, I am going to highlight some of these and hope that you will be more discerning whenever the mainstream press gives any so called "standard" advice.
The stock market always goes up in the long run - This common statement derived from studies in the US only from 1926 till present day. Some studies went further back to the late 1800s and came to the same conclusion. Based on this "empirical evidence", the common advice now had been to telling folks that in the 'long run', stocks are always the place to be. Problem with this analysis is that there are many assumptions that have been left out.
The first is that this study holds true only in the US because the United States. In countries like Russia (where communism happened in 1917, or parts of Europe, where there were 2 major world wars in the last century, or even in South America), this conclusion is simply nonsense. Germany went through hyperinflation in the 1930s and a change in currency. One that was pegged to gold and one that was not. South American countries went from being the richest nations in the world to one with massive debt problems in the 80s and 90s. If you were living in those countries, this 1926 US stock market analysis is meaningless when your country faces crisis of epic proportions.
Truth - It only went up in the US (and perhaps Britain) from the time frame of analysis. But bear in mind that the US has not been conquered in war in the last century. We have not had massive currency devaluations or flight of capital. Being careful of the definition of long run. There have been 20 year stretches where the US stock markets did nothing. So if you do not have a 20 year horizon or longer, be very wary about putting the bulk of your money in stocks.
US treasury bills and bonds are the safest investments - The US government treasury bills is considered the safest investments because the US government has never defaulted on its debt obligations. And hence, its historical yield is used in calculations. Because of such assumptions, academics have used the yields on treasury bills as the "risk free asset" (for those of you who study CAPM and stuff). However, there are some flaws to this assumptions.
But in the 1930s, President Roosevelt devalued the dollar by more than half when the dollar was re-pegged to Gold. In the 1970s, President Nixon took the dollar off the gold standard after the French President Charles DeGaulle wanted to exchange the French US Dollar Holdings for gold! In the 1950s, interest rates on long bonds was actually capped at 2+%!
Truth - While in many instances, US T-bills can be considered the safest assets, this only holds true if the US currency does not devalue massively. Today, we are seeing signs that countries like China are wary about their US Dollar reserves and also do not like the fact that the US Dollar's role as the international currency of choice means that we can get away with deficit spending. There is no guarantee that the dollar may lose it's reserve currency stature in future and if that happens, the US dollar will have depreciated a long way. Moral of the story is : have some of your other savings in other currencies and study how to keep your money safe. Perhaps, some gold investments would be good for you?
Reaching a retirement savings of a million dollars is a desirable goal - Another one of those myths that floats around the mainstream media. What puzzles me is that nobody questions this number at all. If a great retirement is your goal, I think that you will find that this number is really not enough. Why?
Using monte carlo analysis, it has determined that by withdrawing up to 4% of your retirement nest egg, you have a more than 85% chance of having your portfolio intact after 30 years. 4% of $1mm is $40,000 a year. And this is after tax money. Firstly, I doubt anyone can live with that amount in a high cost city like New York. Secondly, after factoring in health insurance and all other cost, there ain't much left!
What the mainstream media fail to tell folks is that planning for a career in "retirement" is more important than just "saving for retirement" itself. Afterall, savings can evaporate (ask anyone what happened to their 401ks in 2008). Your countries currency can become worthless (ask any middle Argentinian, or Russian). In the 30s, Germany went through hyperinflation.
Truth - With inflationary monetary policy as part of the western developed world for the last century, the whole million dollar is enough notion will face greater scrutiny sooner or later. You'll probably need much more to enjoy the same standard of living as you have now. If you are earning $100,000 a year today, based on 4% withdrawal rate, you'll need $4 million in retirement savings to have a good chance of achieving the same standard of living.
Small Deficits are OK - The US government has no problems perpetually running budget deficits (saying 3% deficit is OK!). All I can say is that if any household runs a budget deficit for too long, they will sooner or later have to file for bankruptcy. Well, I guess developed countries government like the US can run budget deficits for a longer time than most ordinary households. But sooner or later one's past sins will always catch up.
Deficit spending has a nasty habit of being justified by something that is "really needed". We need to provide health care (very expensive) for the elderly. We need massive military spending. We are fighting two wars. We need to spend money on various programs.
But this mentality spills over to our individual's personal financial life as well. Many folks will say it is "OK" to put the plumbing repairs on the credit card, because we'll "pay it off soon"! Problem is that just like the federal government, most folks do not pay it off. Once in a while, certain "freebies" come along that make our debt load easier. In the case of the federal government, easy monetary policy allows US government debt to be issued at relatively low interest rates. The easy monetary policy has trickled down into the consumer world via promotions like 0% financing for cars, 0% balance transfer credit cards, or even low interest credit cards. For quite long periods of time, these easy monetary policies enabled the federal government and US consumers to "fund deficit spending".
Truth - Debt should be shunned at all cost. What starts as a small amount eventually becomes a habit that becomes very hard to kick.
Global Savings Glut by Emerging Countries Responsible for Global Imbalance - Here's another common economist rant. China, and the Asian emerging economies are savers (which everyone actually acknowledges is good). But they save too much! Because global trade is conducted in US Dollars, countries with trade surpluses have excess savings in US Dollars. And the dollars has to be invested somewhere. The most natural home is US treasuries (ie US government debt). Hence, even if the US is running a persistent budget deficit, savers abroad have no where else but to invest with us. The result for all that is that interest rates and mortgage rates remained low even though our debt picture shouldn't have allowed it.
So what do we tell China and the rest of the world's savers? Don't save so much. Introduce social welfare and health care so people do not have to save so much and they can "spend"! This is one of the worst advice I've heard. We have trouble controlling spending in medicare and social security and now we're telling savers to follow our vices!.
Truth - Truth is the problem is not with savings. It is with the fact that the world conducts it's commerce mainly in US dollars. Savings is the only way to wealth. Savings (just like an emergency fund) gives you cushion. China, for example, could pump billions into their economy without having to borrow from anyone! The good old US however authorized over $700 billion in spending (which by the way they printed!) and they actually have to borrow it from the financial markets. And that is the big problem with having debt. You have to keep issuing IOUs! China's billions was simply gotten by converting their US dollars reserves into Yuan! In personal finance, the same principals apply. When you have debt, whether it is a mortgage, a home equity line of credit or credit card debt, you are constantly on the treadmill trying to find a better card or loan with a better rate. Contrast that to someone who, for example, pays his balance in full. That person can actually use a cash back credit card or gas credit cards to earn cash rebates. Unlike the person having to pay down his or her balance, the person paying in full actually makes money!
Term Life Insurance is Always Better Than Whole Life - Here is another phrase that has been hyped up by the Suze Ormans of the world and literally the whole finance bloggers world. Everyone hates whole life. What nobody has ever properly explained is the cons of term life. So let's look at a few here:
Term life insurance ends after a term - proponents would claim that
1. You can save the money on whole life and invest the difference
2. You do not need insurance after 20 or 30 years cos you have saved enough
3. Term is more cost effective
Problem is nobody tells the downside. The first downside is that
1. The annual premium for term life goes up every year!
2. To maintain the same insurance, you have to keep paying premiums every year. When you are retired and have no "work income" but only portfolio income, monthly payments are a really pain in the B***. For whole life, once you have paid up, it really means you have paid up!
3. By the time you are 50 or 60, you may not have saved enough and your beneficiaries still need money from insurance if you pass away!
4. You have a disabled child and whole life or permanent insurance is the only way to fund it (after all, their needs are permanent!)
Truth - Term life may or may not be more suitable for you. It really depends on your particular situation.
I think I'll stop here. I hope this post makes you think harder and question common teachings and assumptions in the world of personal finance, or anything in fact.
Please leave a comment and tell Mr. Credit Card your thoughts.
Thursday, June 18, 2009
Identity Theft: What to do If you become a victim?
I wrote a guest post about my experience with identity theft over at Ask Mr Credit Card, but what happens when you become a victim? Your life changes forever and unfortunately, the victims are burdened with resolving their credit issues. It is very important that you act fast to minimize the further use and damage that the thief can cause.What to do if you become a victim:
Set up a folder:
Set up a folder:
It is crucial for you to keep a detailed folder with the history of this crime. You are going to have a ton documents that you are going to need and be available once everything is resolved. The crime itself will stay with you for at least 7-10 years and you want to make sure if something comes up, you have the documents to prove you where innocent .
Keep a log of contacts/documents:
Keep a log of contacts/documents:
From the time you realize you identity has been stolen, you need to start making copies of paperwork. Whether it is a collection agency or credit card company, copy any document associated with the theft. You will need to send these documents to various agencies.
Contact creditors:
Contact creditors:
Unfortunately you will need to contact all creditors by phone and in writing to inform them that you have had your identity stolen.
Contact credit bureaus:
Contact credit bureaus:
Make sure to ask for the fraud units of the three credit report, ask them to have a "Fraud Alert/Victim Impact" statement placed in your credit file asking that creditors call you before opening any new accounts. You will also need to obtain and monitor your credit reports and make sure nothing else shows up that is or looks suspicious.
File a Police report:
Equifax
www.equifax.com/home/
Services, Inc.
P.O. Box 740241
Atlanta, GA 30374
Fraud Alerts:
1-888-766-0008
www.fraudalerts.equifax.com
Opt-out of mailing lists:
1-888-567-8688
Experian
www.experian.com/
PO Box 9532
Allen TX, 75013
Opt-out of mailing lists:
1-888-567-8688
Trans Union:
www.transunion.com/
P.O. Box 6790,
Fullerton, CA 92834.
Fraud Alerts:
fvad@transunion.com
1-800-680-7289
Opt-out of mailing lists:
1-800-680-7289
File a Police report:
Report the crime to your local police department ASAP. Give them as much details, paperwork or any other evidence for the report to help catch the criminal. Make sure the police report lists the fraudulent accounts. Make sure to get a copy, and make sure it is called an "Identity Theft Report". Keep a log of the agent or who you filed the report with and give it to creditors and banks.
You are going to need and check your credit reports regularly and make sure to keep a lock on all things related. I am actually a Lifelock member, but I pay around $120.00 a year. I don't think you need it, but it is that extra protection. With Lifelock get my credit reports free and if I was to lose my wallet or anything I can call them and they will do all the leg work for me...is it worth $10 month? Probably not, but I enjoy the extra comfort
If you need to write a letter here is a sample letter to write to any collection agency to dispute any identity theft. Whatever you do, never pay a collection agency for identity theft, even if they pressure you and say stuff like "You will be reimbursed once case is solved"
Related Links
I hope this helps and I hope that you never have to experience it. If you do bookmark this page and follow these steps! Have a great weekend
Thursday, April 23, 2009
Purchasing a Diamond Engagement Ring: Part III
This is the third of a three part post which I give you my whole story of purchasing a diamond ring for my now fiancé. This post describes how I am using a credit card to buy the diamond ring. One of the most important thought process is thinking about what you, as a couple can afford (even though you are paying for it). One of the last things you want to do in this new phase of your life is begin with new debt or more debt. This is very hard to consider when you have a PR scam that says that the cost of an engagement ring should at least be 2 months salary and that you want to give them the best. I took a hard look at my fiances and choose a price range that was slightly higher than I had saved up for but realized that I would just have to be tighter with my budget...but I could afford it. I would say to anyone who is nervous that their someone special wants an expensive ring that you cannot afford, is to have in place a special way of letting them know that if money wasn't an object that you would give them the world. You are going to be with them forever and money is going to be a huge part of your marriage so don't start off on the wrong foot. You can always upgrade a diamond 5yr, 10yr, and so on for anniversaries if you like.
One of my problems I had was how was I going to actually pay for this purchase, cash, credit, or financing. I started saving up for the ring a little late but when I got serious about it I really tighten my buckle and beefed up my "wedding ring fund" every paycheck. At the time I was saving for the vacation trip as well, so I wished I would have started saving earlier...dont we always say that. I had, sitting in my "wedding ring fund" about 1/3 of the cost I had budgeted and I had the other 2/3 sitting in my saving account that I did not really wanted to tap into, especially in these economic times. I have 2 credit cards that are fully paid off and are only used for points. I started to look for credit cards with 0% APR for the first 12 months and found the one I wanted. I have great credit, so fortunately I was able to open it up and put the ring on the card. So this might not seem like a good idea but here is my full thought process of why I decided to put it on plastic.
1) I knew that it would help my credit and with trying to purchase a house later this year every bit helps these days. (I know I could still use credit to purchase and pay it in full so I don't have any debt.)
2) I could write a check and pay it off today if I needed to. Meanwhile my money is sitting in a high yield saving account with ING Direct. So I am borrowing money interest free and making money off the interest I am making in the saving account.
3)My monthly payment is 2.5% of the remaining balance on the credit card so I only pay the minimum every month. I am acting as if I am sending the full amount by sending the 2.5% to the credit card and putting the remaining into a savings account which is creating some interest for me. On the 12 month I will cut a check for the remaining balance that is left on the credit card from my savings account. At the end of the day I am borrowing money interest free to invest for a 2% return.
Just as an example, let just say the ring cost $1000.00. Divide that by 12 months, around $83.30 a month. My credit card payment is 2.5% of that, so it is about $25.00/month. I send the remaining $58.30 to my saving account to make interest for me. So at the end of twelve months I have paid around $300.00 to the credit card and have made interest off the remaining $700 sitting in the saving account. I write the check for the remaining 700 and have a few dollars from the interest I made.
4) With borrowing interest free I can still have more cash on hand if something were to happen to my employment.
So there you have it, overall I would say that it is a very nervous, exciting , and really cool experience for purchasing something that is a) so important and b) so expensive. These three post might sound like I am just concerned with spending money on something that is very materialistic, I am just giving you my personal experience. Just remember that at the end of the day, if you can not afford a diamond, it is ok. It's not so much about the diamond but about your love and the statement to their family and friends by saying, 'I have found the one person I am ready to settle down with and start a new life with.' I hope you have gain some inside knowledge with making that next step, so please leave comments and suggestions to others.
Related Post
Purchasing a Diamond Engagement Ring: Part I
Purchasing a Diamond Engagement Ring: Part II
Purchasing a Diamond Engagement Ring: Part III
Should you Calculate a Diamond in your Net Worth?
Monday, April 20, 2009
eWallet - One of my favorite iPhone apps
eWallat was one of the first applications that I purchased for my iPhone. I always wanted to keep my passwords, account information, security questions, etc...somewhere that I could always have them and be secured. This is the perfect application for those who have a ton of different accounts who want different passwords without having to remember all of them. I would say that I use it at least every other day. With this app you can: from their website
Store Your Information Securely: Using extremely secure 256-bit AES encryption, eWallet protects your personal information from falling into the wrong hands.Never Forget Another Password: eWallet remembers your passwords so you don't have to. Now you can use strong passwords that can't be guessed or cracked for your online finances, plus the convenience of having all the passwords you need with you, all the time.
Use Your Data Anywhere: Easily synchronize your wallets between your iPhone or iPod touch and a WiFi connected Windows PC. Keep all your important info up-to-date wherever you are!
Personalize Your Wallet: Your info can be as personal as your playlists. Get the look – and the info - you want with custom icons, card backgrounds, and over 30 pre-built card templates.
At a price of $9.99, it might seem expensive, but it is like having an exact electronic copy of my wallet. (hence the name eWallet) For me it is hard to keep up with so many passwords and its way easier than carrying around a hard copy, like a little notebook or something. Plus if you were to lose the hard copy it is not password protected like eWallet. So if I am at work or traveling and I try and access one of my accounts but don’t have the information, I simple log onto eWallet and its all right there.
I am pretty tight with my money when it comes to purchasing apps for the iPhone but this one I have to say is well worth the money. It is a nice feeling to know that you have all your account information with you at all times. I am waiting for the eWallet desktop app for my MAC.
If anyone else has any apps that are a must please leave comments and share your suggestions.
Monday, March 2, 2009
Small Lesson about Credit Cards
I was fortunate enough to have parents that paid for my college, and gave me an allowance every month during my college years. I didn’t have an open bank account with endless amount of money, but enough to Pay rent, bills, food, and just enough to party more than I needed to. I had a credit card with a $1000.00 limit (was my first) that was for books, supplies, and emergencies. These were given to me by my parents to teach me about responsibility with money. They never mentioned bailing me out if I didn’t use the money for other things beside bills or if I ran up my credit card. My father told me that he would have the credit card bill come to him and he would pay for the things he outlined for me. One of the first small lessons I learned was running up a credit card. I spend my first semester putting only books and supplies on the credit card. Second semester rolled around and I was sick of eating cafeteria food and realized that restaurants took credit cards. I started off just once a week then next thing I was eating out and using the credit card more than I should. My father wasn’t saying anything so I started using even more. I came home one weekend when dad and me had a sit down. He showed me the credit card bill and had highlighted the items he paid for (ones he promised to pay) and non-highlighted items that were all fast food and stuff he hadn’t promised to pay for. The total bill from the credit card had added up to $500.00!!! I turned to him and said sorry and I wouldn’t use it again for stuff I didn’t need. He looked at me said “I hope so because at this point you are in charge of paying the bill” and that he would write me a check for the things I need for school. How, why, I cant believe my dad set me up! I don’t have $500 sitting around? Well…2 years later, I finally paid off that $500.00.
I learned a lot that day my father sat me down and handed the credit card bill over to me. I couldn’t spend whenever I wanted…I think my dad was on to something knowing that I couldn’t get into to much trouble with $500 debt…I mean he gave me enough to live on and I could have paid if I wanted to budget my money. Unfortunately, I just didn’t. The lesson I learned was that if you don’t know what your spending next thing you know you can be in a lot of trouble with debt. He was willing to let me make a mistake to learn from it. I thank him for that lesson now.
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