Tag Archives: Credit Cards

YOU MAY BE BROKE BECAUSE….

stress over debt

Stressing over bills? Is your paycheck already spent before payday? Are you running out of money before the end of the month? Can’t make ends meet even if you had two magnets? Are you robbing Peter to pay Paul? Are you sick and tired of being sick and tired?

Debt can be particularly frustrating, especially if you’re drowning in it with no one to throw you a life preserver. Even if you are able to tread water, at some point you’re going to get tired. I know, because I’ve been there. Yep. Back then you could call me the “B” word… BROKE. My secret. No one knew. Broke can take on many meanings, so for all practical purposes, let’s assume “broke” means not having enough money to cover your monthly obligations.

Have you ever stopped to ponder the reason(s) WHY you’re “broke?” If this is you, stop and think about it for a minute. What can you do differently to change your current situation? While you do that, let me list a few behaviors/attitudes contributing to your “brokeness.” Yes, I am aware “brokeness” is not a word, but it should be.

  1. You Don’t Budget: I love it when I hear people say, “Oh I’ve got it all up here” while gently tapping the side of their head. Unless you’re a mathematical genius, how could you possibly have all those numbers and figures inside your head? Yes, you may have a general idea of what comes in and what goes out, but just imagine if you were to transfer “what’s in your mind” onto paper. This way you can see clearly what’s coming in and most importantly where it’s going. After writing it down and seeing it in black and white, you’re easily able to identify “blindspots” you didn’t know existed.
  2. Instant gratification is your “modus operandi:” We live in a society of heavy consumption. We want more more more, and WE WANT IT NOW. It’s too easy to whip out a credit card and purchase the latest iPhone, flat screen plasma television, that expensive pair of heels or those Jordans that just came out yesterday knowing you don’t or won’t have the money to pay the bill in full when the credit card bill comes due. This is where Jesus (and discipline) should take the wheel. You have to be disciplined enough to “walk away” no matter how loud those items are calling your name. I love shopping at discount retailers (Marshalls, TJMaxx, Home Goods, DSW etc.) and when I decided to check myself into “financial rehab,” I literally had to alter my driving route so I wouldn’t pass the strip mall that housed these stores. Out of sight out of mind.
  3. Keeping Up With The Jones: When I look back now over my days of “Keeping Up With The Jonses” it was quite silly because I eventually realized, the Jonses were just as broke as I was. I’m not ashamed to say I went through my phase of believing driving a Mercedes Benz, carrying Gucci and Louis Vuitton handbags, having a closet full of  clothes and shoes and living in a big house complete with swimming pool when it was just me and my two dogs somehow made me feel “important.” At the time I felt having those “material things” somehow validated me. All it did was expose my weakness, and that weakness was a lack of self-esteem. Anyone who is secure within themselves doesn’t need materialistic things for validation. Let me be clear. I still have all of those things mentioned above (minus the Mercedes Benz,) but I realize those things do not define me. There’s nothing wrong with wanting nice things, it’s simply nonsensical going deep into debt in order to obtain them.
  4. Financial Literacy Wasn’t Taught In The Home: My father was always good at saving money. He worked hard and sacrificed for his family. He taught me how to write checks and balance a checkbook when I was 11 years old, and even after I got a job at 15 and was buying my own school clothes/paying for school activities and such, he never stressed to me the importance of saving, yet he was a HUGE saver. I’m still puzzled by that. I’d like to think he was proud because I was being responsible. Not every one my age had a job. I didn’t need a job, I just wanted financial independence. Asking for $10 to hang out at the mall with friends turned into a two hour lecture about how money didn’t grow on trees, but I digress.  I also remember my Dad telling me, “If you can’t pay cash, you can’t afford it.” To some extent, I do agree with him now that I’m older and wiser. He also advised me not to get caught up in credit cards when I went off to college, however, he didn’t explain to me why. I wished he had. It would have saved me a ton of angst and grief. If financial literacy isn’t taught at an early age, it’s easy to fall into the “debt trap.”
  5. You Refuse To Take Responsibility For The Actions Stated Above: This is the most important of all the habits/attitudes/behaviors listed above. If you don’t acknowledge that your spending is out of control, that you don’t budget, that you mismanage your money, or that you seek validation by obtaining material possessions, you will forever remain in a state of “broke.”
Perhaps one or two of these habits apply. Perhaps all of them apply. Either way, you are in control of your financial destiny. It’s never too late to make changes. It took me until age 39 (when I married) to understand how important it was to build a financial future. Living the single life for so long allowed me the freedom (or so I thought) to be reckless with my spending because I only had myself to hold accountable. However I changed my financial mindset, even after divorcing. I adjusted my spending habits. I budgeted my money and I am now able to truly enjoy what I’ve accumulated over the years. So you see, I no longer need that Mercedes Benz for validation. I look better driving this “PAID FOR” Honda Coupe anyway.
~The Financial Hack 2015
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REWIND ON PERISCOPE TV: THE SECRET TO A “STRESS FREE” VACATION


CHECK OUT THE REPLAY OF LAST NIGHT’S “SCOPING AFTER DARK”

https://www.periscope.tv/w/aUBDQjFheWpWWUFkcExLcHJ8MWVhSmJNZERRbGFHWEPvoDeCcyeveEDpb6tZkUA1xpJBGfTxoNXpTil4Pn6y

Look for new “Scopes” where I’ll be dropping plenty of “F” bombs… We’re talking FINANCES that is, EVERY MONDAY NIGHT AT 8:30pm CST. Join us.

THE ULTIMATE STRESS-FREE VACAY


Oh if I could only have SEVEN MORE DAYS… I’d probably ask for seven more.

I’m back from vacationing feeling relaxed and refreshed but slowly transitioning back to “the real world.”  As I reflect on the good times, the smiles and the laughter, there was something different about THIS particular vacation. It wasn’t because Mista and I were together (although that had a lot to do with it,) and it wasn’t necessarily because I got to spend time with a great group of people (although they played an integral role in making my vacation more enjoyable~Happy Birthday Teresa!) but looking at my vacation canvas from a financial perspective, this vacation was like that of no other. But what was different about this vacation? I couldn’t put my finger on it at first, then it hit me…..

THIS WAS MY FIRST DEBT-FREE VACATION!!!

In all my years of traveling, I had never traveled DEBT FREE. A weekend getaway here, a few days there was fun, but it was nothing compared to the feeling from my past trip that still lingers. I casually strolled about the ship as if I didn’t have a care in the world. I could truly appreciate taking in the sea air, closing my eyes and slowly exhaling while watching the sun set from our balcony. For the first time in my life, I felt an overwhelming sense of “calm.”

The key to having the “ULTIMATE STRESS-FREE VACATION” is to travel debt-free. Being debt-free is a feeling like no other and traveling debt-free is an even greater feeling. 

How many times have you vacationed and had the time of your life only to have those feelings of euphoria doused after returning home because of the dreaded credit card statement that is sure to follow?

If you are not debt-free, you should not take a vacation.

While traveling, I was able to read Michelle Singletary’s book “The 21-Day Financial Fast” ($15.99-Barnes and Noble.) She wrote of a speaking engagement where a young lady stood and proudly stated she was able to save approximately $2500-$3000 on an impending vacation. She was asked by Ms. Singletary if she had any debt, to which the young lady replied, “Yes.” Ms. Singletary advised her she should not take the vacation she saved for and to use the money to pay down her debt. I’ve got your back on that one Michelle. She spoke absolute truth.

In the past, I could never truly relax going on “vacation” even on those weekend getaways (sometimes alone) knowing I was in debt. I have passed on TWO trips to Africa and one trip to London because my finances were not in order. I felt if I was in debt, it was in my best interest NOT to go on vacation.

Now. That doesn’t mean you shouldn’t take time off from work. We ALL need that. However, if you are in debt, it is wise to use any monies saved towards a vacation to pay down debt and delay that vacation. NO SACRIFICE NO REWARD. Look at the big picture. It all boils down to discipline and delaying gratification. I’m sure this isn’t what you want to hear, but I promise you, If you follow this principle, you’ll thank me later.

Don’t misunderstand me. Just because I’m debt free, didn’t mean I broke the bank while traveling. Budgeting for my vacation was like budgeting for any other task. I gave myself a set amount to spend and even allowed myself to splurge a little (like arranging for car/limo service to and from the airport.) After calculating the amount it would cost to use the Park and Fly airport shuttle service coupled with the fact I saved boarding fees for my dog Sherlock because my Mom kept him, I was actually saving money, so why not? I was even able to purchase a few Christmas gifts with the spending money allotted for myself, so I still came in under budget.

So the message I pray you take from this posting is simply this: THE BEST WAY TO TRAVEL IS TO DO SO DEBT-FREE.

CHECK OUT MY LATEST POSTING PERISCOPE TV: THE ULTIMATE “STRESS-FREE” VACATION HERE:

https://www.periscope.tv/w/aUBDQjFheWpWWUFkcExLcHJ8MWVhSmJNZERRbGFHWEPvoDeCcyeveEDpb6tZkUA1xpJBGfTxoNXpTil4Pn6y

As always, thank you for visiting my site. Feel free to leave your comments/feedback and/or email me at AndreaColeman@TheFinancialHack.com

~The Financial Hack ©2015

 

FINANCIAL FITNESS BOOT CAMP WEEK 10: WHAT’S ALL THE “BROUHAHA” ABOUT MY FICO SCORE ANYWAY?

is-a-fico-score-the-same-as-my-credit-score

Credit score this, FICO score that. Blah Blah Blah. Our ability on whether credit is extended to us (or not) can hinge on our FICO/Credit score. What is a Credit/FICO Score? Why is it so important? Some of you may be reading this and thinking, “I already understand credit, it’s importance and how it works.” If you are that person, that’s great. This post isn’t for you. This posting is for the person who doesn’t know what a FICO score is, doesn’t quite understand the importance of the FICO/Credit score, how to mange credit responsibly and how it can impact variables such as interest rates on loans (home, car etc.,) whether additional credit will be extended to you, whether a deposit is required for certain utilities, whether you’re in contention for a job offer, and even car insurance rates. How is it that an insurance underwriter is able to assume because someone’s credit score is fair/poor they are prone to being involved in more car accidents or more susceptible to irresponsible/reckless driving? The same holds true for a potential employer who dismisses an applicant because their credit score is “less than stellar.” Is the employer taking into consideration WHY a person’s credit score is what they deem to be “less than stellar” when making the selection process even though the applicant is qualified for the job? These are serious questions that require serious answers, but let’s not get ahead of ourselves. Let’s first understand what a FICO/Credit Score is.

FICO score and Credit score are usually used interchangeably. Most people call it your “Credit Score” but allow me to give you a bit of background on what the term FICO stands for and what it consists of.

FICO was founded in 1956 as “Fair, Isaac and Company” hence the name FICO by engineer William Fair and mathematician Earl Isaac. The two met while working at the Stanford Research Institute in Menlo Park, CA. Selling its first credit scoring system two years after the company’s creation, FICO pitched its system to fifty American lenders.

FICO went public in 1986 and is traded on the New York Stock Exchange. The company debuted its first general-purpose FICO score in 1989. Scores are based on credit reporting and range from 300 to 850. (Historical information taken from Wikipedia.)

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Lenders use FICO scores to gauge a potential borrower’s creditworthiness. Scores are provided by the three credit bureau reporting agencies, Experian, Equifax and TransUnion. There are FIVE components that make up a person’s FICO/Credit score.

  1. Payment History (35%)
  2. Debt/Amounts Owed (30%)
  3. Length of Credit History (15%)
  4. New Credit/Inquiries (10%)
  5. Types of Credit (10%)
FICO SCORE BREAKDOWN:
Print
The two categories of the five that are the most important are Payment History (how long you’ve had your credit account(s) such as a credit card) for instance, and Amounts Owed (debt-to income.) Be careful of “maxing out” credit cards or keeping a balance that is too close to your credit limit. As a good rule of thumb, your credit balance SHOULD NOT exceed 50% of your credit card’s limit. Any balance above 50% of your credit limit can actually lower your credit score. It’s always good to have a good mix of credit: Installment Credit (home/car loans,) Revolving Credit (credit cards,) Charge Credit (the balance is due IN FULL at the end of the month) and Service Credit (Utilities, gym memberships, etc.) NOTE: Service credit is not always reported to credit bureaus however a letter can be provided to a potential creditor by the company if necessary.
Having a good credit score can get you better interest rates on homes, cars and even credit cards whereas less than stellar credit will yield higher rates simply because the risk to the lender is much greater.
NOW LET’S GET TO THE NITTY GRITTY…..
A lot of people brag about having a good credit score and having a good credit score is certainly important but please bear this in mind: A CREDIT SCORE IS MERELY AN INDICATOR TO THE LENDER OF HOW WELL A PERSON CAN HANDLE DEBT. I know people who have EXCELLENT credit scores but are up to their eyeballs in debt. A high credit score IS NOT an indicator of wealth. It simply means some people are better managers of their debt. A person with a good credit score can look great on paper, but in some cases that’s pretty much the extent of it.
Now let’s take a look at the person who has a fair/poor credit score. Bankruptcy, divorce, unemployment, disability, medical issues, or death of a loved one are among many factors that can play a role in a declining credit score. Don’t misunderstand me. Irresponsibility, immaturity, mismanagement and just plain ole ignorance are culprits as well. Before you discredit the person who has a fair/poor credit score, find out why. We automatically assume it’s because the person is irresponsible, immature or even broke. Think again.
FICO SCORES ARE INTERPRETED A LITTLE SOMETHING LIKE THIS:
ficoratings
You are entitled to one FREE copy of your credit report. Go to http://www.MyFreeCreditReport.com to order yours. If you are denied credit for any reason, the lender/creditor is required to inform you (via letter) their reason(s) for making their decision. You are then given a report number you can use to access a copy (free of charge) of your credit report as well. IT’S IMPORTANT TO KNOW WHERE YOU STAND.
I hope this posting gave you some introductory insight regarding credit and how it works. Next week we’ll delve a bit deeper into how to read a credit report, what can help your credit score, what can hurt your credit score and ways you can improve your credit score. YES, YOU CAN REPAIR YOUR OWN CREDIT!!!
As always, I appreciate you taking the time to read this posting. Feel free to comment below. If you have any direct questions, email me at Andrea.Coleman@TheFinancialHack.com.
~The Financial Hack ©2015

HOW I DID IT: TALES FROM A SELF-PROFESSED IDENTITY THIEF

After being the victim of identity theft (as I too have also been,) Steve Noviello, award-winning FOX 4 News Journalist, speaks to a former IDENTITY THIEF. Learn how easy you can be targeted.

NOTE: I wanted to post this Wednesday night after I saw the news story however, it was taking too long for the station to upload the footage. Well I’ve got it here so TAKE NOTES!

For helpful tips/tricks and product reviews on just about anything, follow Steve Noviello on Facebook (Facebook.com/SaveMeSteve)

REMAIN VIGILANT when it comes to protecting your credit/identity: Here are A FEW ways to protect your information.

  1. Place a FREEZE on your Social Security number with ALL THREE credit bureaus (Experian, Equifax and TransUnion.) Keep in mind however, although identity thieves cannot access your information to apply for credit online for example, NEITHER CAN YOU. PRIOR to applying, you will need to have the freeze lifted (there is a fee involved to do so,) specify the length of time your SS number is to be “unfrozen” and once that time frame has expired, your social security number is “frozen” once again. NOTE: There is a fee involved for EACH freeze lift.
  2. It’s worth it to use a reputable CREDIT MONITORING service when it comes to protecting your credit. This can be obtained through any of the three credit bureaus. ANY (and I do mean) ANY change on your credit report (credit inquiries, address changes, changes in credit score, information that has negatively impacted your credit score (late pays,) even increases/decreases in credit card usage (just to name a few) will trigger an automatic alert that will be sent to you via email.) It also give you full access to your credit report MONTHLY. Trust me. Being the past victim of identity theft, USING A CREDIT MONITORING SERVICE IS WORTH THE MONEY!
  3. When using your credit card while shopping in public, keep it in your wallet/pocketbook/purse/pocket until it is time to pay. If someone is standing behind you in the check out line at the store for instance, it’s easy to snap a photo of the front of your credit card, and if the identity thief is lucky, because you’re tussling with it as you wait to complete your transaction, they can get a pic of, or at least see, the three digit code on the back. Credit cards now have microchip technology which is now making it more difficult for identity thieves.
  4. USE CASH. I’m always leery when it comes to giving my debit card to anyone to swipe, especially at restaurants. I’m always afraid, my info will be compromised. Many banks will place a “security freeze” on your debit card if they notice “suspicious activity” and notify you via text message, email, or you may receive a call from the fraud department. Depending on the severity of the situation, ALL FORMS of communication may be used. Last year, my debit card info was compromised. I’m 99.99999% sure who and how my info was compromised, unfortunately, I’m unable to prove it. The thieves attempted to charge approximately $300 worth of clothing online as well as purchase long distance minutes to make international calls. My bank immediately froze my account, reversed the transactions, and issued  another card WHICH WAS MAILED TO MY PO BOX. Problem solved.
  5. CHECK YOUR MAILBOX DAILY: If your neighborhood does not have community mailboxes, it is imperative you make a daily habit of checking your mail. For some, credit card offers come in the nail on a regular basis. If you’re going to be out of town for a few days, arrange to have your mail held at your local post office or ask a reliable friend or relative to check and pick up any mail left in your box daily.
These are only a few things you can do to protect yourself from being the victim of credit card/identity theft. Do you have any additional tips on protecting yourself? If so, feel free to leave your comments below.
~The Financial Hack (copyright 2015)

FINANCIAL FITNESS BOOTCAMP WEEK 9: MAMA SAID KNOCK YOU OUT… CREDIT CARD DEBT, THAT IS

As we gear up for the Labor Day weekend, let me finish Part 2 of “Charge Now, Pay Later: Overcoming Debt.” As I stated last week, I know everyone may not have the option to withdraw/borrow from retirement plans or even borrow against the equity in their homes, but never fear….

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WEEK 9: MAMA SAID KNOCK YOU OUT…. CREDIT CARD DEBT, THAT IS.

People that know me know not only am I a huge football fan, but a huge fan of boxing as well so what better way to illustrate getting rid of credit card debt than with a boxing analogy. At face value boxing looks like a no-brainer (no pun intended.) One would think the goal is to knock your opponent out as early as possible. Pretty cut and dried right? Not quite. Boxing requires skill and it requires quick thinking. The old “bob and weave” routine may not always work if your opponent is good at anticipating your moves. A boxer’s opponent is watching his eyes, he’s paying attention to his boxing stance. One boxer may have an orthodox stance, another may have a southpaw stance and still another may be able to switch up between the two. Unless you outsmart and/or outbox your opponent, you may end up being the one down for the count. The same applies to “the bout” you’re about to have with credit card debt. And credit card debt WILL NOT be your sparring partner. This isn’t practice, this is the “Real Deal” Holyfield (if you know a little bit about boxing, you understand the lingo.) If not, look it up. There’s nothing wrong with learning new information. You can still overcome credit card debt but once again, this will take some sacrifice on your part and you may be in for a real fight. Don’t underestimate knocking out credit card debt the way some boxers may underestimate their opponent because they’ve been labeled the underdog. Underdogs have been known to upset champions. We see it all the time. Not just in the game of sports, but in the game of life.

By now you should have long tracked your spending and found ways to cut costs. Here are links to a couple of prior posts you may want to reference.

WEEK 2: KNOW WHERE YOUR MONEY IS GOING: https://wordpress.com/post/96150968/19/

WEEK 3: IT’S TIME TO TRIM THE FAT: https://wordpress.com/post/96150968/22/

The extra money you found can be used to pay off credit card debt. Here’s the best “ONE, TWO PUNCH” I recommend for “knocking out” credit card debt:

  1. Start with the credit card that has the LOWEST balance. Others may suggest starting with the card that has the highest finance charge rate however, paying off the card with the lowest balance FIRST gives you a sense of accomplishment when you make that final payment.
  2. Use the “Domino Effect” to pay off the next card and so on and so forth. The “Domino Effect” is simply taking the monthly amount used to pay off the FIRST credit card balance and apply it to the amount being paid on the SECOND credit card, the THIRD and… hopefully you don’t have more than three major credit cards. The goal is to pay larger monthly amounts with each card until you have paid them all IN FULL.

Depending on your credit card balances, the process can take a few months or a few years. Think of boxing. Some fights end within the first few rounds, while others go the 12-round distance. How aggressively you attack your credit card debt, as a boxer attacks his opponent, is strictly up to you. Once your credit card balance is paid in full, you can move to other areas of debt such as student loans, car loans and even mortgages (if applicable.) The satisfaction of saying “I have no credit card debt,” is one of the best feelings in the world, especially if that debt was causing unnecessary stress and anxiety. You did it, you stayed the course. VICTORY OVER CREDIT CARD DEBT BELONGS TO YOU!

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So there you have it. A simple one, two step plan to overcome credit card debt. I know. It’s easier said than done, but the moment you become sick and tired of being sick and tired, is the moment you take action. The question you must ask of yourself is “Am I sick and tired of being sick and tired?” When you are, you won’t have to ask the question. You’ll already know.

I hope you benefitted from this posting and as always, I greatly appreciate you reading it. Feel free to SHARE. Your commentary is always important so ALL FEEDBACK IS WELCOMED. If there is a specific topic you’d like me to talk about regarding “Financial Fitness Boot Camp” on this blog, feel free to shoot me an email at Andrea.Coleman@TheFinancialHack.com. Don’t miss a posting so be sure to follow me at http://www.thefinancialhack.com.

FOLLOW THIS BLOG AND/OR JOIN THE EMAIL LIST SO YOU DON’T MISS A POST.

HAPPY LABOR DAY!

~The Financial Hack ©2015

FINANCIAL FITNESS BOOT CAMP: WEEK 8 CHARGE NOW…. PAY LATER: HOW I OVERCAME CREDIT CARD DEBT

A couple of you may have been looking for and wondering why there was no posting last week. Simply put, I allowed distractions to get me off task. My lack of focus made it impossible to blog. It wasn’t because I was tired or didn’t have anything to say. I allowed “outside noise” to drown out my internal thoughts. Thank God I’m back on track. Hopefully the “Daily Motivation” postings encouraged you and kept you focused in the interim. Each day is a work in progress for me because there is always a personal/spiritual/professional/financial goal I’m striving to reach. Currently, I’ve set a goal to save a SPECIFIC amount of money over the course of this next year. As a constant reminder of my goal, I’ve written that amount on a piece of paper, taped it to my bathroom mirror and each time the amount increases (i.e. a deposit is made,) I record the date and the adjusted amount. Recording the date helps me track possible patterns in saving.

But it wasn’t always this way. At one point in my life, I wasn’t able to save because (in the words of my younger cousin Bobby,) “I made just enough money to “stay broke.”” That’s certainly what it felt like. This didn’t mean I didn’t make enough money to fulfill my obligations. I simply wasn’t financially mature enough to modify my spending habits. I was still shopping, going on trips (and everything else under the sun) and using credit card(s) when I didn’t have the money. The bills were paid on time every month but without an emergency fund or some type of savings in place, ONE monthly setback could set me back THREE months. For example. What happened if my car was in need of repair? Where would the money come from? My quick fix? I simply incorporated the “Rob Peter To Pay Paul Principle.” I’m sure you guys have heard of it. If you’re honest with yourself, some of you have done it. And if you’re brutally honest with yourself, you’re doing it now. The “Rob Peter To Pay Paul Principle” is sacrificing paying one bill and/or bills to take care of another. This principle worked a few months for me, but eventually imploded in my face.

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Let me explain further….

STEP 8: CHARGE NOW…. PAY LATER: HOW I OVERCAME CREDIT CARD DEBT

I was never taught how to use credit responsibly. By the time I entered college, the only advice given to me regarding credit (credit cards in particular) was, “DON’T GET ‘EM!!! DON”T USE EM!!!” That came from both my mother and father. They were the traditional “old school” types who believed in cash and carry. But how could a broke freshman pass up the opportunity to get a free college t-shirt just for “signing up?” Before I knew it, I had THREE FREE T-SHIRTS and was issued TWO CREDIT CARDS with a credit limit of $500 each. Now how did this credit thing work again?

I was responsible with the charges I made but not responsible with how I made the payments. I thought I could make payments at my discretion as long as the balance didn’t exceed the credit limit. That’s the way credit cards work. Right?

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One day (at the mall of course,) a purchase for a pair of shoes was declined. I gave the salesperson my other card. Declined as well. I didn’t understand why. I hadn’t gone over my limit, so why were the cards being declined? The salesperson suggested I contact the credit card company. After sifting through unopened mail, I found a statement and proceeded to contact them. Not only had I not paid in three months, but my balance exceeded the credit limit. What? How could this be? APR? Finance charges? What is that? Late fees? For what? The Customer Service Representative I spoke to was kind enough to explain the abbreviated version of Credit Card Management For Dummies to me. (Hmmm. I like that. I’ll file that in my mental mailbox and blog about Credit Card Management for Dummies in a future post.) Long story short, Mom to the rescue. She paid the balances on the cards provided I close the accounts. Those were her terms and in my case, the one with the money calls the shots. Fast forward to my ADULT adult years. I’m well out of college with two degrees, still couldn’t manage my credit card debt and in my late 30s. By this time, I had knowledge of credit cards and how they worked, making timely payments etc., but the temptation to spend spend spend when one bank is offering you a $15K line of credit and another a $10K line of credit was too great. There’s a little way banks can really “stick it to you” if you’re not careful. I’ll give you two words: CASH ADVANCE (which yield HIGHER interest rates than making regular purchases.) When I was going through my “Keep Up With The Joneses” phase, where I had to have the Mercedes Benz, the larger home, and designer handbags to feel validated, those 3-4 little checks the bank would send with my monthly statements came right on time. The next thing I knew, the balance on one credit card was near maxed out, and I was working on maxing out the second card. What to do? Back then, the minimum payment on the TWO credit cards combined at the time totaled half of the mortgage on my home.  Plus I also had a car payment on my truck. There was no way I was going to ask my parents. I made my bed, now it was time to lie in it. I had credit card debt in excess of $20K. My credit was shot as my debt to income ratio was so high, there was no way a creditor/lender would extend another dime of credit to me for anything. There was the constant anxiety and worry. Anger and irritability. Sleepless nights. Dreams of falling then waking up in cold sweats. Worry that I’d have to sell my investment properties, face foreclosure and file for bankruptcy. Thinking of it as I type now makes me anxious. That’s a place I never want to visit again.

YEAH YEAH YEAH. WE GET IT. YOU WERE DROWNING IN CREDIT CARD DEBT. SO HOW DID YOU OVERCOME IT? I know this is what you guys want to know. I had to set the scene in order to illustrate how the CHARGE NOW….PAY LATER way of thinking caught up to me.

Here’s how I did it: I “settled” with the two credit card companies. 

“Settling” with a credit card company means you agree to pay the credit card company (i.e. bank) an amount LESS than the current balance on your credit card. The bank will in turn close the account and send you a 1099 (which you MUST declare as income during the tax filing year.) The banks will usually try to work with you on a settlement amount. For them, It’s better to get SOME of the money back, than no money at all. Here was my settlement break down:

Credit Card 1: Balance $15,000 (apprx) Settlement Amount: $7,500.

Credit Card 2: Balance $8,000 (apprx) Settlement Amount: $3,000.

The bank refused to accept any thing less than half the balance on Credit Card #1. For Credit Card #2 I told the bank $3000 was all I had to settle with. They accepted what I offered.

IF YOU SETTLED FOR APPROXIMATELY $10K AND PREVIOUSLY STATED YOU HAD NO SAVINGS, HOW WERE YOU ABLE TO PAY? Answer: I was forced to tap into my IRA and take the hit (penalty) for a partial withdrawal. Some of you may have been in the workforce long enough to have a retirement account saved up. If so, you can take a partial withdrawal from your retirement account (if allowable) or take out a loan against it, which of course will have to be repaid. It may not sound attractive, but it’ll get the “monkey” off your back. The downside. My credit score would suffer, but who cares! It was beyond insufferable anyway. But wait. there was a silver lining to this credit card debacle. A THIRD credit card which I rarely used. Let’s just call it a “rainy day” card. It had a pretty sizeable credit limit like the others so if push came to shove, it was there to use. Or so I thought. That lone credit card that once had a limit in upwards of $10K had been reduced to $2000. Couple that with my POOR credit rating at the time, and that was just the motivation I needed to become more responsible when it came to my finances. I was sick and tired of being sick and tired.

My father’s ever so redundant line when it comes to credit cards, “If you have to use a credit card to buy it, you can’t afford it,” still resonates with me today. That may make sense to him, but I would tweak that line just a bit. “If you can’t pay your credit card balance in full when you get the bill, you MAY NOT be able to afford it.” I like my wording better. Less harsh and more accurate. Everyone’s “financial collage” is different and no two collages will ever look exactly the same. Today I still have the one credit card and although the bank has been gracious to increase its limit (enticing me to use it no doubt,) the only action it gets is the random fill up at the gas station and the occasional dinner with me of course paying the balance in full at the end of the month.

This happened at age 40. I am now 44. And I’ve come a LONG WAY in four years. It only took about a year and a half of strictly managing my finances responsibly to INCREASE my credit score rating from POOR to GOOD. And you can do it too. Even if you don’t have a retirement account, you can still eliminate credit card debt. Look for tips in next weeks blog posting.

I hope you benefitted from this posting and I do appreciate you reading it.Your commentary is always important so ALL FEEDBACK IS WELCOMED. If there is a specific topic you’d like me to talk about regarding “Financial Fitness Boot Camp” on this blog, feel free to shoot me an email at Andrea.Coleman@TheFinancialHack.com. Don’t miss a posting so be sure to follow me at http://www.thefinancialhack.com.

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~The Financial Hack ©2015