Finance Book

In today’s society, credit cards are a part of our life. It can be very difficult to live completely without credit cards, but it can also be very expensive to live with credit cards. If you use credit cards in a healthy way, however, they can be very useful.

The thing about credit cards is that the expenses in using them are very high. The interest you are charged is most likely much higher than the interest rate you can borrow at from other financial institutions, they charge a high yearly or monthly fee for just having the card and, if you charge cash to your card, you have to pay a fee again. On top of this, it makes it almost too easy to buy on credit, thereby increasing your expenses to more than what is good for you.

But there are also advantages to having a credit card. It makes it a lot easier to purchase the things you need, since you don’t have to carry a lot of cash and don’t have to go to the bank very often. Your credit score will be positively affected if you use the credit card right. If you travel abroad, it is also a lot easier, since you don’t have to exchange for the local currency, but can use your credit card instead.

The important part for you is to use the advantages of the credit card and limit the disadvantages for using it. Here are the actions I suggest you take to achieve this.

1. Always pay back the complete outstanding balance on your credit card every month. It limits the amount of the high interest you are paying for the credit provided by the credit card company. If you already have an accumulated credit card debt, take steps to repay it as soon as possible.

2. Accept only one credit card. This will make sure you don’t get too tempted by the extra credit as well as reduce the monthly or yearly fee you pay. Of course you should choose the cheapest option of the credit cards you are offered, unless you have a very good reason not to.

3. Reduce the transactions you have to pay extra fees for. This is usually to withdraw cash. If you do need cash, go to the bank or make larger withdrawals of cash so you can last longer without making another withdrawal where you have to pay a fee.

4. Consider only carrying the credit card with you when you know you will need it. This will also reduce the number of impulse purchases you make. You will have time to consider if you really need the item before buying.

These are the main issues to consider when you use credit cards and if you take action to implement them in your life you will have taken an important step towards healthy personal finances.

By: Brian Ullitz

When the burden of debt becomes unbearable, you search for all options to get rid of it. One tempting option is using your home equity. It’s simple and easy. Your credit card debt will melt in no time. But remember, it is a double edged weapon.

You may buy your first home in the beginning of your career. You make your mortgage payments promptly. Real estate market also moves up gradually. Over a few years, you build up a good margin over your mortgage. That is your money and you will require it for buying a bigger house or for moving to a posh locality. This is an investment for your retirement also.

However, over the number of years your habits may change. You may go on spending a lot with the help of those ‘powerful’ credit cards. But in the periods of downturn, these credit cards are hard to maintain. With higher interest rates, unreasonable fees and penalties you end up with huge balances on your credit cards. Your income is unable to cope up with re-payments.

There are companies offering instant solutions to get rid of such situation. Their solution is – take loan against your home equity and pay off the entire debt.

You can take such a loan in two ways – either use a home equity line of credit (HELOC) or use a home equity loan (HEL). Both these loans are easy to get if you have built up a good equity over the years. However, you should take such a decision only after weighing major risks.

1. This loan is against your home. If you are unable to pay it off in time, there is a risk of losing your home. You will be quickly spending the loan amount towards discharging debt but if your spending habits continue, you may create further credit card debts in a short time.

2. Consider the market price of your home. If the real estate market is falling, the value of your home may go down and finally your mortgage plus home equity loan may exceed the value of the house. This is a trap of bankruptcy.

3. Your monthly payments on home equity loan will be lower than the payments for your credit card dues. However, the repayment period may be longer and you will have to make the monthly payments regularly all the time.

4. Determine the exact amount outstanding on your credit card. If you are taking your home equity loan, take only the minimum required. If you are planning to take the home equity line of credit, be very careful while spending that money. You may be tempted to use this money for spending further! That will be a very dangerous move.

You should always remember that this loan is second mortgage. It is backed by the security of your home. If you make any defaults, there is a risk of losing your home. Moving from your own home to a rented apartment is never a good idea.

By: Chintamani Abhyankar

The Richest Man in Babylon by George S. Clason was one of the first books I read on the subject of wealth. I was fascinated by the storyteller’s simple principles to acquire wealth and riches and I thought, “This is too easy”. Yet, all those years ago with the knowledge held within the pages of this simple book, I did not take heed. It would be many years before I understood what the story had foretold and I, like many others, would learn the hard way about building a relationship with money.

With our economy in a state of influx and our country’s future uncertain, it would be prudent to teach our younger generations the importance of establishing a strong relationship with money. So many books have been written on the subject of money management and yet 8 out of 10 households have credit card debt in excess of $10,000. Why haven’t we learned the simple rules of building wealth? Where did we miss the mark? Lack of discipline and respect for money has caused much of this country’s default status. A small portion of blame can be placed upon the educational system. That’s right…the curriculum is not inclusive of finance and money management. Our children are learning how to count, but not how to spend. Parents should be more proactive in teaching their children about the realities that lay ahead in the real world concerning money.

The lessons are simple; the action is difficult for those who have never systematically implemented a plan. However, with commitment and a goal bigger than your immediate wants, you will achieve your financial goals with ease. The following is a rudimentary outline of the seven prosperity principles as this author has interpreted them from the famous book:

Principle 1 – Pay You First

Principle 2 – Create a Spending Plan

Principle 3 – Make Your Money Multiply

Principle 4 – Avoid “Get Rich Quick” Schemes

Principle 5 – Own Your Own Home

Principle 6 – Insure Your Future

Principle 7 – Increase Your Ability to Earn

The old cliché “it’s not how much money you have, it’s what you do with it that counts” is true and there aren’t enough of us doing what we should with our money. The downside to this is we are in a race against time, never knowing when we will run out. Each of the seven principles outlined here gives you the foundation for establishing a financially secure future. You can choose not to be a statistic of the working poor, or worse, never reaching retirement age. Start right where you are; it’s never too late.

By: Kim Harris