Credit Cards
Danger
Many banks will send you Credit Cards or automatically give you an increase in your Credit Card limit and sometimes that seems like a great idea. Especially if it is 0% for the 1st 6 months or so and you think ‘no problem’ I just need to buy such and such and I will be able to pay it off easily by 6 months. However 6 months comes and your visa etc are now maxed and you are suddenly paying 25% interest and your minimum repayment is only just higher then the interest you are paying. It’s a great trick and the banks know that this is what will happen to the majority of people who accept the credit they offer.
Use Credit to your advantage
If you can be disciplined and pay your cards off each month, then you actually save money. Because you can buy something interest free for sometimes up to 55 days. So your money can be sitting in an interest earning account or offset against your mortgage. If you can manage to use Credit Cards to your advantage then great, otherwise cut them up.
Some people feel they need everything now and must buy it as soon as possible. However in most cases if you save up money for something then buy it, you get a great sense of satisfaction. Delayed gratification is such a wonderful thing to learn. In fact if you want to be fabulously wealthy then you will need to learn the principle of delayed gratification.
Paying off Cards
- Ring all your banks and ask them to reduce your interest rate
- Take out a loan with a lower interest rate over a longer time period.
- Choose the one with the highest interest rate and pay it off 1st
- Ask your family for a loan and pay them back at a higher interest rate then what they would get if they had their money in a bank.
Budgeting
Make a budget by writing down how much you earn and all your expenses that you must pay. Then set aside a certain amount of spending money each week and take this out in cash. Make sure you only spend this. Then put all your extra money into paying off the highest interest loan or card 1st. Then when you have finished paying them off either use them to your advantage as suggested, or cut up your Credit Cards. Then you can start putting money into High Yield Savings.
