If you have an outstanding bill and you think the creditors will write it off, think again. Now, you’re probably thinking, “But that bill is six years old!” It doesn’t matter; there is no Statute of Limitations when it comes to credit card bills. What can you do? Here are some suggestions in case you've found a bill that you’ve haven’t paid in years.
If a lender doesn’t receive payment within six months, they will most likely write it off their books. The terms used by companies who do not receive payment of an outstanding bill is called a charge-off. While the term may sound as if the company will forget that the bill is due, in reality it means that (1) it will appear on your credit report as a charge-off, and (2) it will be listed on your report as "in collection". They will also likely the debt over to a collection agency. That thump you just heard is your FICO score take a tumble down the proverbial rung of a ladder.
Now, there is some good news. If you pay off a bill that is more than six years old, and the creditor has rendered the bill as a charge-off, there may be ample time to ask the creditor to note the balance has been paid, thus leaving you with a zero balance on the credit report.
On the downside, however, if a collection agency has taken over the payment of the bill and you have paid the bill to the collection agency, it will have an adverse affect on your FICO score. It should be noted here that with regard to the FICO score, it is the report by the creditor that carries the most weight and not the collection agency.
Here’s an example of what could happen if you do not pay off that six-year-old bill. Let’s assume you wish to buy a new car. Your credit report is checked and it indicates there is an open collection. The auto dealer will require you to pay off the debt before you can proceed with the car loan. But, since you haven’t paid the bill for six years, your credit report will show a negative mark for that particular bill. This mark can remain on your report for seven and a half years from the time the bill first became delinquent. It’s a catch-22 situation.
Now there are some who theorize that not paying the bill would be beneficial. How? Some suggest that having a bad mark on the report for seven and a half years is acceptable and after the mark has been removed, experts assert the credit score may increase. There is no guarantee that it would, however. The flip-side to this debate is that FICO scores tend to drop if a bill has never been paid. Again, how the FICO score is determined can make the difference in the point spread.
The bottom line is to ensure that bills are paid on time. If one bill “gets away from you”, make sure that you pay it immediately and/or contact the creditor to make arrangements for payment so they can give a positive report to the credit bureaus. Finally, check your credit report annually.
Wednesday, August 6, 2008
Cut Up Those Credit Cards
Credit cards are the bane of society. Yet, ironically, without some type of credit it may be difficult to get a loan, purchase a home or a car. It’s a catch-22 situation in that the FICO score on your credit report is determined by the amount of credit you have. The higher the score, the better positioned you will be to buy the house or the car. Too much credit and you become a risk; not enough credit and you’re still a risk. What’s the alternative? Cut up those credit cards; pay with cash.
If this sounds like a contradiction, perhaps it is. Consider the consequences, however, when you have multiple credit cards with high interest rates. Do you have trouble sleeping because the sheer burden of carrying so much debt is keeping you up at night? You are not alone. Statistics show that consumer debt is over 2 trillion dollars and that most households carry at least $9000 in debt.
Between the credit card applications that arrive in the mail and the credit card machines that are located at every register in just about every venue, there has been a subtle manipulation by the credit card companies that tell you it’s better to use a card than to pay with cash.
Think about it. With millions of websites offering every conceivable item you may ever need – all requiring a credit card, it’s no wonder plastic has replaced the dollar bill.
This is not to say there aren’t card holders who use credit responsibly. But there are just as many individuals who have maxed out their credit cards and are now faced with the reality that these debts have to be paid one way or another.
Declaring bankruptcy is not an answer; it is only a short term solution. Statistics assert that even though there is a ten-year mark on a person’s credit report after filing for bankruptcy, they are more likely to begin the vicious cycle all over again. In fact, judges advise people how to regain their credit standing.
If you are in debt, there is only one solution. First, cut up all the credit cards except one. Keep that in reserve only for extreme emergencies. Next, pay off the high interest rate cards first, by doubling payments if you can. Then proceed to pay off each subsequent credit card using the same method. Call the credit card companies and ask to have the interest rates lowered.
Make a promise to yourself that from now on you will pay with cash. Make a monthly budget to determine how much you owe, the household expenses, and how much you can put towards paying down the debt. If you have to, put the one credit card you do have in a safe deposit box or give it to a family member to hold on to. The less temptation you have, the better. When you go out shopping - if you can’t afford it, you can’t buy it.
Our parents and grandparents didn’t believe in credit and they were better for it. Credit cards can become the financial ruin of the least among us. The stress alone can cause ill health. One can make this analogy: Computers are like credit cards - utilizing them can be a wonderful experience but when they crash, it can be a nightmare.
If this sounds like a contradiction, perhaps it is. Consider the consequences, however, when you have multiple credit cards with high interest rates. Do you have trouble sleeping because the sheer burden of carrying so much debt is keeping you up at night? You are not alone. Statistics show that consumer debt is over 2 trillion dollars and that most households carry at least $9000 in debt.
Between the credit card applications that arrive in the mail and the credit card machines that are located at every register in just about every venue, there has been a subtle manipulation by the credit card companies that tell you it’s better to use a card than to pay with cash.
Think about it. With millions of websites offering every conceivable item you may ever need – all requiring a credit card, it’s no wonder plastic has replaced the dollar bill.
This is not to say there aren’t card holders who use credit responsibly. But there are just as many individuals who have maxed out their credit cards and are now faced with the reality that these debts have to be paid one way or another.
Declaring bankruptcy is not an answer; it is only a short term solution. Statistics assert that even though there is a ten-year mark on a person’s credit report after filing for bankruptcy, they are more likely to begin the vicious cycle all over again. In fact, judges advise people how to regain their credit standing.
If you are in debt, there is only one solution. First, cut up all the credit cards except one. Keep that in reserve only for extreme emergencies. Next, pay off the high interest rate cards first, by doubling payments if you can. Then proceed to pay off each subsequent credit card using the same method. Call the credit card companies and ask to have the interest rates lowered.
Make a promise to yourself that from now on you will pay with cash. Make a monthly budget to determine how much you owe, the household expenses, and how much you can put towards paying down the debt. If you have to, put the one credit card you do have in a safe deposit box or give it to a family member to hold on to. The less temptation you have, the better. When you go out shopping - if you can’t afford it, you can’t buy it.
Our parents and grandparents didn’t believe in credit and they were better for it. Credit cards can become the financial ruin of the least among us. The stress alone can cause ill health. One can make this analogy: Computers are like credit cards - utilizing them can be a wonderful experience but when they crash, it can be a nightmare.
To Tell (our Children) or Not
There is an ongoing debate among parents as to whether or not children should be told about household finances. Several questions arise such as: At what age should children be informed about the household budget? Should children be included in a family budgeting discussion? While many parents have been pondering these questions, there is one underlying theme; don’t let your debt worry your child.
With the economic downturn casting a burden on most families, there are obvious concerns how children will react to overheard conversations between moms and dads who are struggling to pay their debts.
While some parents feel it is important to discuss family finances, age appropriate of course, others include their children in family budget meetings. However, the one aspect of finance that some parents will not divulge to their children is their take-home pay.
Many have cited their own circumstances as children. While many have said that their parents never discussed finances or debts with them, others felt that perhaps it may have been better to disclose at least some information. They asserted that listening to their parents argue over money made them feel they were the cause as well as the result of the family debt.
Conversely, one parent stated that her and her husband held weekly budget meetings including the children. She offered an instance when she took her daughter to the supermarket and when the daughter asked if she could buy a certain item, the mother told her it wasn’t in the family budget.
So how much do you tell children? Certainly, you want to teach children the importance of saving and how to appropriately spend money. Some parents who have spoken to children about the family debt waited until the child was in college. Others talked to their children when they were ten years of age by explaining that the reason the family was in debt was due to overspending. Still others decided to tell their children how much debt they were in by showing them bills and explaining how the cost of running a household caused the debt.
Perhaps this is too much information to give to a child. When we were growing up, we didn’t have any inkling as to the cost of running a household. We had no concept of paying bills or having to pay off debts. All we knew was that mom and dad worked and, from time to time, a new washing machine or a new refrigerator would suddenly appear. There was money available for school books, clothes, and whatever we needed – to a point.
Children today are often more intuitive. They can sense when something is wrong in the household, especially when it comes to finances. They hear the arguing late at night and wonder if it’s their fault mommy and daddy are fighting.
It seems that today, as parents are struggling to make ends meet, some form of discussion should begin so that children can understand that (1) they are not to blame for any problems that arise; (2) that even though mom and dad owe money, they are working hard to pay the bills; and (3) parents should allow children to be children and not saddle them with the burden or the worry that somehow the debt is due to their existence.
With the economic downturn casting a burden on most families, there are obvious concerns how children will react to overheard conversations between moms and dads who are struggling to pay their debts.
While some parents feel it is important to discuss family finances, age appropriate of course, others include their children in family budget meetings. However, the one aspect of finance that some parents will not divulge to their children is their take-home pay.
Many have cited their own circumstances as children. While many have said that their parents never discussed finances or debts with them, others felt that perhaps it may have been better to disclose at least some information. They asserted that listening to their parents argue over money made them feel they were the cause as well as the result of the family debt.
Conversely, one parent stated that her and her husband held weekly budget meetings including the children. She offered an instance when she took her daughter to the supermarket and when the daughter asked if she could buy a certain item, the mother told her it wasn’t in the family budget.
So how much do you tell children? Certainly, you want to teach children the importance of saving and how to appropriately spend money. Some parents who have spoken to children about the family debt waited until the child was in college. Others talked to their children when they were ten years of age by explaining that the reason the family was in debt was due to overspending. Still others decided to tell their children how much debt they were in by showing them bills and explaining how the cost of running a household caused the debt.
Perhaps this is too much information to give to a child. When we were growing up, we didn’t have any inkling as to the cost of running a household. We had no concept of paying bills or having to pay off debts. All we knew was that mom and dad worked and, from time to time, a new washing machine or a new refrigerator would suddenly appear. There was money available for school books, clothes, and whatever we needed – to a point.
Children today are often more intuitive. They can sense when something is wrong in the household, especially when it comes to finances. They hear the arguing late at night and wonder if it’s their fault mommy and daddy are fighting.
It seems that today, as parents are struggling to make ends meet, some form of discussion should begin so that children can understand that (1) they are not to blame for any problems that arise; (2) that even though mom and dad owe money, they are working hard to pay the bills; and (3) parents should allow children to be children and not saddle them with the burden or the worry that somehow the debt is due to their existence.
It Takes Two
Do you discuss your finances with your partner? If not, you may be in the minority on that score. Experts assert that approximately 95% of all couples make joint decisions on spending. So, honey, do you know our finances?
Our parents handled finances in an entirely different way – some husbands always took care of the bills and doled out weekly allowances to their wives. In fact, today, one partner may handle the bills and balance the checkbook. This type of control by one person can be the catalyst for many arguments, particularly about overspending. Unless, of course, the other partner doesn’t mind and is given constant updates as to how much is spent and saved.
Today, given the rising costs of food and gas prices, it's hard not to discuss the household finances. Moreover, engaged couples find it necessary to talk about what they are bringing to the table, so to speak, so that each has an idea of what they are facing after marriage. Pre-nuptial agreements aside, there should be a candid discussion from the outset.
Experts advise that couples should sit down and not only discuss their individual finances, but together set up a household budget with the caveat that all future decisions about spending will be made together. This is especially important if a couple decides to get married only to find out that one partner may have debts and is not forthcoming about them. This can put a major strain on the future of the relationship.
There is another aspect in discussing each other’s finances and that is accepting and respecting one another’s approach in how finances are handled. That’s why a budget will offer a suitable compromise for both parties and any questions that arise could be talked about at that time.
Statistics show that men spend more money on electronics and women spend money on clothes for themselves and the kids. The problem arises when credit card abuse causes many couples to wind up in debt, which may require one or the other to pay off the debt utilizing the savings account.
Other statistics have determined that more than 50% of couples today do not disclose their assets to one another. While most couples have joint bank accounts, the desire to have separate accounts can lead to suspicious confrontations.
It’s important for couples to be upfront and honest about their finances. Without that trust, questions will always arise and bitter feelings will ensue.
Although in our parents’ day, it was the “breadwinner” who felt the need to control the household budget, it’s different today because there are often two breadwinners in the family. There is an old expression, “What’s mine is mine and what’s yours is mine.” That may have been the case at one time, but no longer.
Couples need both paychecks to survive in this economic recession. Holding back debts or assets serves no purpose. An honest and open discussion about what each couple is bringing to the relationship is the only way to bridge the gap and work together as a unit rather than separate entities.
Our parents handled finances in an entirely different way – some husbands always took care of the bills and doled out weekly allowances to their wives. In fact, today, one partner may handle the bills and balance the checkbook. This type of control by one person can be the catalyst for many arguments, particularly about overspending. Unless, of course, the other partner doesn’t mind and is given constant updates as to how much is spent and saved.
Today, given the rising costs of food and gas prices, it's hard not to discuss the household finances. Moreover, engaged couples find it necessary to talk about what they are bringing to the table, so to speak, so that each has an idea of what they are facing after marriage. Pre-nuptial agreements aside, there should be a candid discussion from the outset.
Experts advise that couples should sit down and not only discuss their individual finances, but together set up a household budget with the caveat that all future decisions about spending will be made together. This is especially important if a couple decides to get married only to find out that one partner may have debts and is not forthcoming about them. This can put a major strain on the future of the relationship.
There is another aspect in discussing each other’s finances and that is accepting and respecting one another’s approach in how finances are handled. That’s why a budget will offer a suitable compromise for both parties and any questions that arise could be talked about at that time.
Statistics show that men spend more money on electronics and women spend money on clothes for themselves and the kids. The problem arises when credit card abuse causes many couples to wind up in debt, which may require one or the other to pay off the debt utilizing the savings account.
Other statistics have determined that more than 50% of couples today do not disclose their assets to one another. While most couples have joint bank accounts, the desire to have separate accounts can lead to suspicious confrontations.
It’s important for couples to be upfront and honest about their finances. Without that trust, questions will always arise and bitter feelings will ensue.
Although in our parents’ day, it was the “breadwinner” who felt the need to control the household budget, it’s different today because there are often two breadwinners in the family. There is an old expression, “What’s mine is mine and what’s yours is mine.” That may have been the case at one time, but no longer.
Couples need both paychecks to survive in this economic recession. Holding back debts or assets serves no purpose. An honest and open discussion about what each couple is bringing to the relationship is the only way to bridge the gap and work together as a unit rather than separate entities.
How Much Should I Save
With the economy in a downturn, it is increasing difficult to save money. Depending upon your salary and household budget, how much should you save?
To begin with, the general recommendation is to contribute at least 10% of your paycheck towards your pension. In addition, it is also advised that an increase of 10% should be added once you reach the age of fifty. The maximum of 20% will ensure that, by the time you do retire, you will have enough money to live on. However, most people cannot afford 10%, let alone a 20% contribution these days.
However, if you begin with a 5% contribution and then increase it by 1% annually, the amount saved will not seem as dramatic as if you started with 10%. Moreover, the net paycheck will not significantly decrease and you will be able to budget accordingly.
Saving money requires making sacrifices. First, a budget is recommended so that you can ascertain how much money you can put into a savings account. If you ask people how much they save, you may be given a variety of answers depending upon their circumstances. Some put away $5.00 a week; some $10.00 a week. Taking into account mortgage or rent, food, utilities, clothing, gas, car payments, school supplies, tuition, and any credit card debt, you may find your budget does not yield any extra money.
Unfortunately, today most people live paycheck to paycheck. So how much should I save? While we have covered the pension contribution, which is the most important, the decision on how much money to save varies with every individual.
Most banks have Vacation and Christmas Clubs. Let’s assume, for argument’s sake, that you open a $5.00-a-week Vacation Club. By the end of the year, you will have $260.00. If you open a $10.00-a-week Vacation Club, you will have amassed $520.00. The same applies for the Christmas Club.
Or, if you prefer, you can save $20.00 a week and put it into your savings account. By the end of the year you will have $1040.00 saved, not including interest. Perhaps your company has a savings plan wherein the money is deducted from your paycheck.
The secret is to decide on an amount that you can put away weekly without feeling the pinch. It is not required that you start with a hefty sum, but add a column to your budget such as “dollar-away” or ”rainy day” and then figure out, after all the bills have been paid, how much you can easily put away in a savings account.
For most people, it’s not how much you should save, but whether you can faithfully put away a set amount every week. As stated earlier, the only way to determine how much you can afford to put away is via the budget. If you stick to the budget, you should be able to put away a maximum of $20.00 a week. But, then again, it solely depends on your own circumstances. If the budget allows less, then it’s less. If you can afford more, this is great too!
As long as you set aside a dollar amount, whether it's less one week or more another week, you will not only feel less stressed about your finances, but you will be able to establish a realistic budget that you can stick to.
To begin with, the general recommendation is to contribute at least 10% of your paycheck towards your pension. In addition, it is also advised that an increase of 10% should be added once you reach the age of fifty. The maximum of 20% will ensure that, by the time you do retire, you will have enough money to live on. However, most people cannot afford 10%, let alone a 20% contribution these days.
However, if you begin with a 5% contribution and then increase it by 1% annually, the amount saved will not seem as dramatic as if you started with 10%. Moreover, the net paycheck will not significantly decrease and you will be able to budget accordingly.
Saving money requires making sacrifices. First, a budget is recommended so that you can ascertain how much money you can put into a savings account. If you ask people how much they save, you may be given a variety of answers depending upon their circumstances. Some put away $5.00 a week; some $10.00 a week. Taking into account mortgage or rent, food, utilities, clothing, gas, car payments, school supplies, tuition, and any credit card debt, you may find your budget does not yield any extra money.
Unfortunately, today most people live paycheck to paycheck. So how much should I save? While we have covered the pension contribution, which is the most important, the decision on how much money to save varies with every individual.
Most banks have Vacation and Christmas Clubs. Let’s assume, for argument’s sake, that you open a $5.00-a-week Vacation Club. By the end of the year, you will have $260.00. If you open a $10.00-a-week Vacation Club, you will have amassed $520.00. The same applies for the Christmas Club.
Or, if you prefer, you can save $20.00 a week and put it into your savings account. By the end of the year you will have $1040.00 saved, not including interest. Perhaps your company has a savings plan wherein the money is deducted from your paycheck.
The secret is to decide on an amount that you can put away weekly without feeling the pinch. It is not required that you start with a hefty sum, but add a column to your budget such as “dollar-away” or ”rainy day” and then figure out, after all the bills have been paid, how much you can easily put away in a savings account.
For most people, it’s not how much you should save, but whether you can faithfully put away a set amount every week. As stated earlier, the only way to determine how much you can afford to put away is via the budget. If you stick to the budget, you should be able to put away a maximum of $20.00 a week. But, then again, it solely depends on your own circumstances. If the budget allows less, then it’s less. If you can afford more, this is great too!
As long as you set aside a dollar amount, whether it's less one week or more another week, you will not only feel less stressed about your finances, but you will be able to establish a realistic budget that you can stick to.
What do Judgements Mean?
Just as filing bankruptcy can hurt your credit score, so too can judgments on your credit card. A judgment is a decision made by a court when a bill goes unpaid. If the money you owe is past due, and all other actions by the company to whom you owe the money have been exhausted, then the court will make the determination and declare you liable.
How does a judgment affect your credit score? It can lower the score significantly. More specifically, if you apply for credit in the future the creditors will check your credit report, and decide you cannot qualify for credit because you still have an unpaid debt listed on the report.
If a judgment is listed on the credit report as open, this information can remain on your report for ten years. This also applies to bankruptcy filings. Having this judgment asserts that you not only fail to pay your bills on time, but that you are considered a risk for future loans or credit. This can have a detrimental effect on applying for a mortgage, buying a car, or needing any other type of loan or credit card. The odds are you will be turned down for any type of loan or credit card.
This is why it is so important to check your credit report annually. If there is any unpaid or open debt that resulted in a judgment, it is recommended that you pay the bill as soon as possible and then have it erased from the credit report. In addition, if you find there is a judgment on your report that may be incorrect, you can dispute it accordingly.
Anytime there are unpaid bills, it is a prudent course of action to contact the company involved and discuss payment options before it becomes a judgment on your credit report. However, in such cases you can make an arrangement with the creditor and once the bill has been paid they may agree to vacating the judgment via the court. Basically, all they have to do is state that the judgment has been satisfied and it can then be removed from your credit report. Note that under law, if there is no verification by the credit bureaus, the judgment must be removed from the report.
Therefore, if you have a judgment on your credit report, it is advised that you contact the clerk of the court in your state to determine the best way to obtain the necessary information, pay the bill, and then seek removal of the judgment.
Judgments on credit cards can be a stressful time. Not only does it damage your reputation, but it implies that you do not pay your bills on time and are considered a risk when applying for any type of credit. Thus, your credit score has no significant value.
If, in the worse case scenario, you were not successful in removing the judgment from your credit report, the only process by which you can repair the credit card score will entail applying for a debit card. Once you have shown that you can pay the bills on time, and do not over-extend your credit, you can convert the debit card to a credit card. This should take about one year.
Judgments on credit cards, like bankruptcy, carry a heavy toll on your credit score as well as the denial of any of future credit. Check your credit report annually, pay bills on time, and act expeditiously if any judgment has been declared by a court.
How does a judgment affect your credit score? It can lower the score significantly. More specifically, if you apply for credit in the future the creditors will check your credit report, and decide you cannot qualify for credit because you still have an unpaid debt listed on the report.
If a judgment is listed on the credit report as open, this information can remain on your report for ten years. This also applies to bankruptcy filings. Having this judgment asserts that you not only fail to pay your bills on time, but that you are considered a risk for future loans or credit. This can have a detrimental effect on applying for a mortgage, buying a car, or needing any other type of loan or credit card. The odds are you will be turned down for any type of loan or credit card.
This is why it is so important to check your credit report annually. If there is any unpaid or open debt that resulted in a judgment, it is recommended that you pay the bill as soon as possible and then have it erased from the credit report. In addition, if you find there is a judgment on your report that may be incorrect, you can dispute it accordingly.
Anytime there are unpaid bills, it is a prudent course of action to contact the company involved and discuss payment options before it becomes a judgment on your credit report. However, in such cases you can make an arrangement with the creditor and once the bill has been paid they may agree to vacating the judgment via the court. Basically, all they have to do is state that the judgment has been satisfied and it can then be removed from your credit report. Note that under law, if there is no verification by the credit bureaus, the judgment must be removed from the report.
Therefore, if you have a judgment on your credit report, it is advised that you contact the clerk of the court in your state to determine the best way to obtain the necessary information, pay the bill, and then seek removal of the judgment.
Judgments on credit cards can be a stressful time. Not only does it damage your reputation, but it implies that you do not pay your bills on time and are considered a risk when applying for any type of credit. Thus, your credit score has no significant value.
If, in the worse case scenario, you were not successful in removing the judgment from your credit report, the only process by which you can repair the credit card score will entail applying for a debit card. Once you have shown that you can pay the bills on time, and do not over-extend your credit, you can convert the debit card to a credit card. This should take about one year.
Judgments on credit cards, like bankruptcy, carry a heavy toll on your credit score as well as the denial of any of future credit. Check your credit report annually, pay bills on time, and act expeditiously if any judgment has been declared by a court.
Pay With Cash
With the surge in home foreclosures, homeowners have unfortunately had to resort to utilizing their credit cards to pay their monthly mortgage. Credit cards, although great to have in an emergency, are the bane of society. In our parents’ day, the rule of thumb was to pay with cash. If you couldn’t afford it, you couldn’t but it.
The credit crunch today has forced many well known banks to borrow money from the Federal Government. Here are some startling statistics: According to the Federal Reserve, for the year 2006-2007 the total US consumer debt was $2.46 trillion dollars. This is mainly credit card debt. Another source indicates that 8.3 percent of households owe $9,000 or more in credit card debt.
The problem with credit card debt is that is it so easy to obtain. Every day millions of applications are sent to households throughout the nation. We have become a nation in debt. The only way to alleviate this problem is to change our attitude towards debt. We have to learn to live within our means. That means paying with cash for the things we want. Credit cards make it too easy to buy on impulse. How many times have you lived this scenario: Here is a scenario that may sound familiar: Let’s assume you take a trip to an electronics store to browse. A salesperson comes along and asks if he or she can help you. It is then mentioned that they are having a sale on a flat screen TV. No harm in looking, right?
After a while, the salesperson has you sitting down and watching this fabulous TV and you begin asking yourself the ultimate question. Can I afford this? Do we really need this TV? After all, the one we have isn’t high definition, plus this particular brand comes with a built-in DVD. My husband would love this TV. He could watch his sports games and I am really growing tired of the TV we have. You then hear yourself ask the dreaded question: “How much is it again?”
While you have been having this conversation with yourself, you have actually talked yourself into buying this item. You most likely didn’t need it but rather, desired it. That desire overruled your need. Remember, need is akin to lacking something. Now, you have a perfectly good TV at home, so there is no need to have a new one. But, oh, the desire is there and ultimately wins.
When it comes to shopping, there is that tendency to justify the purchase. In the above scenario, the individual may go home and say, “Honey, I just got a great deal on this flat screen TV. Come and take a look! It’s so great; just what we needed.”
We tend to play psychological games with ourselves when it comes to defining the difference between needing and wanting something. We rationalize why we may need a particular item rather than ascertaining if we really want it.
Webster’s Dictionary defines need as a “lack of something or being in want”, whereas want is defined as something one “desires earnestly”. Obviously these two definitions can be juxtaposed with each other, but the subtlety is there. If one uses the words “lacking” and “desiring”, then the difference is akin to apples and oranges.
Therefore, needing something because we lack it, and wanting something because we desire it are the questions we face when we go on a shopping trip, no matter what store we enter. Most of us need more than we desire; yet we still desire that which we “think” we need. It’s a conundrum we all face. The key is to make the distinction in our own minds.
The next time you go shopping, think long and hard about the two words "need" and "want". While the two words may be synonymous, they each represent a part of our psyche that requires thoughtful consideration and attention before making any decision. Before you make that purchase, stop! Ask yourself these questions first: 1.) Do you need it or want it; and 2.) Can you really afford it? You don’t have the $2,000 to buy HDTV with build in DVD player, but then the sales associate says those magic words “cash or credit?” All of a sudden it is possible since it will only cost you $40 a month on your credit card. Don’t have room on your current credit card, don’t worry, the merchant will give you 10% off your purchase if you open a credit account with them. The problem is however, that $2,000 purchase will take you 7 years and 10 months to pay off ($40/month at 17.99%). Furthermore, that $2,000 TV will end up costing you $3,760. I know, you’ll pay it off faster. Yeah right, be honest with yourself. That’s the first step to getting yourself off of the debt Merry-Go-Round.
At some point after the purchase, buyer’s remorse rears its ugly head. Did we really need this extra expense? Your realize that your current TV is perfectly fine. Ironically, the desire has lost its potency and the rationalization behind the purchase reveals there was no lack of something - it merely fulfilled one’s desire to own that specific TV. Worst of all, you’re stuck paying for the new TV for another 7 years or so.
While most people think having a credit card is convenient, it is a burden that has become too heavy to bear. While it is advised to have one credit card in case of an extreme emergency and because it helps when applying for a loan or buying a car, one card is sufficient.
What are the advantages in paying with cash? For one thing, you will be able to buy only what you can afford. There will be no debt accrued and, generally speaking, you can live a life free of the stress and not lose sleep over how you are going to afford those monthly bills.
There is a method of paying credit card debt that has become popular lately. It’s called Debt Snowball. Basically how this works is that you make a list of the credit cards you currently have and list them according to the highest interest rate first. Instead of just making a minimum payment on the first high interest card, add any additional money you can afford to it. After you've paid off this card, proceed to the next card on the list and use the same method.
You know, our parents didn’t believe it debt, which is why most of them do not own credit cards. One can debate the merits of this decision, but if you think about it – they are right. They save for those items they truly need and then pay in cash, never overextending themselves with debt.
Debt, in any form, does nothing to improve life but only adds to the emotional angst one feels. Today, with food and gas prices at their highest, one may rationalize that using a credit card may enable one to keep some cash on hand. But, eventually that debt has to be paid. Wouldn’t it be better to find alternative ways to pay with cash, by clipping coupons or printing out online coupons for the supermarket and checking for sales in the newspapers?
Paying with cash has become an exception, rather than a rule and, unfortunately, we are all paying a high price in the name of expediency.
The credit crunch today has forced many well known banks to borrow money from the Federal Government. Here are some startling statistics: According to the Federal Reserve, for the year 2006-2007 the total US consumer debt was $2.46 trillion dollars. This is mainly credit card debt. Another source indicates that 8.3 percent of households owe $9,000 or more in credit card debt.
The problem with credit card debt is that is it so easy to obtain. Every day millions of applications are sent to households throughout the nation. We have become a nation in debt. The only way to alleviate this problem is to change our attitude towards debt. We have to learn to live within our means. That means paying with cash for the things we want. Credit cards make it too easy to buy on impulse. How many times have you lived this scenario: Here is a scenario that may sound familiar: Let’s assume you take a trip to an electronics store to browse. A salesperson comes along and asks if he or she can help you. It is then mentioned that they are having a sale on a flat screen TV. No harm in looking, right?
After a while, the salesperson has you sitting down and watching this fabulous TV and you begin asking yourself the ultimate question. Can I afford this? Do we really need this TV? After all, the one we have isn’t high definition, plus this particular brand comes with a built-in DVD. My husband would love this TV. He could watch his sports games and I am really growing tired of the TV we have. You then hear yourself ask the dreaded question: “How much is it again?”
While you have been having this conversation with yourself, you have actually talked yourself into buying this item. You most likely didn’t need it but rather, desired it. That desire overruled your need. Remember, need is akin to lacking something. Now, you have a perfectly good TV at home, so there is no need to have a new one. But, oh, the desire is there and ultimately wins.
When it comes to shopping, there is that tendency to justify the purchase. In the above scenario, the individual may go home and say, “Honey, I just got a great deal on this flat screen TV. Come and take a look! It’s so great; just what we needed.”
We tend to play psychological games with ourselves when it comes to defining the difference between needing and wanting something. We rationalize why we may need a particular item rather than ascertaining if we really want it.
Webster’s Dictionary defines need as a “lack of something or being in want”, whereas want is defined as something one “desires earnestly”. Obviously these two definitions can be juxtaposed with each other, but the subtlety is there. If one uses the words “lacking” and “desiring”, then the difference is akin to apples and oranges.
Therefore, needing something because we lack it, and wanting something because we desire it are the questions we face when we go on a shopping trip, no matter what store we enter. Most of us need more than we desire; yet we still desire that which we “think” we need. It’s a conundrum we all face. The key is to make the distinction in our own minds.
The next time you go shopping, think long and hard about the two words "need" and "want". While the two words may be synonymous, they each represent a part of our psyche that requires thoughtful consideration and attention before making any decision. Before you make that purchase, stop! Ask yourself these questions first: 1.) Do you need it or want it; and 2.) Can you really afford it? You don’t have the $2,000 to buy HDTV with build in DVD player, but then the sales associate says those magic words “cash or credit?” All of a sudden it is possible since it will only cost you $40 a month on your credit card. Don’t have room on your current credit card, don’t worry, the merchant will give you 10% off your purchase if you open a credit account with them. The problem is however, that $2,000 purchase will take you 7 years and 10 months to pay off ($40/month at 17.99%). Furthermore, that $2,000 TV will end up costing you $3,760. I know, you’ll pay it off faster. Yeah right, be honest with yourself. That’s the first step to getting yourself off of the debt Merry-Go-Round.
At some point after the purchase, buyer’s remorse rears its ugly head. Did we really need this extra expense? Your realize that your current TV is perfectly fine. Ironically, the desire has lost its potency and the rationalization behind the purchase reveals there was no lack of something - it merely fulfilled one’s desire to own that specific TV. Worst of all, you’re stuck paying for the new TV for another 7 years or so.
While most people think having a credit card is convenient, it is a burden that has become too heavy to bear. While it is advised to have one credit card in case of an extreme emergency and because it helps when applying for a loan or buying a car, one card is sufficient.
What are the advantages in paying with cash? For one thing, you will be able to buy only what you can afford. There will be no debt accrued and, generally speaking, you can live a life free of the stress and not lose sleep over how you are going to afford those monthly bills.
There is a method of paying credit card debt that has become popular lately. It’s called Debt Snowball. Basically how this works is that you make a list of the credit cards you currently have and list them according to the highest interest rate first. Instead of just making a minimum payment on the first high interest card, add any additional money you can afford to it. After you've paid off this card, proceed to the next card on the list and use the same method.
You know, our parents didn’t believe it debt, which is why most of them do not own credit cards. One can debate the merits of this decision, but if you think about it – they are right. They save for those items they truly need and then pay in cash, never overextending themselves with debt.
Debt, in any form, does nothing to improve life but only adds to the emotional angst one feels. Today, with food and gas prices at their highest, one may rationalize that using a credit card may enable one to keep some cash on hand. But, eventually that debt has to be paid. Wouldn’t it be better to find alternative ways to pay with cash, by clipping coupons or printing out online coupons for the supermarket and checking for sales in the newspapers?
Paying with cash has become an exception, rather than a rule and, unfortunately, we are all paying a high price in the name of expediency.
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