Posted in Building Wealth, Credit Cards, Debt Free, Financial Freedom, Winning with Your Money, You and Your Money

Lifehack – Truth About Credit Cards

Back in the day, I always associated credit cards directly with debt. If you had a credit card, you were in debt. If you didn’t have a credit card, you were wealthy.

During my journey, I learned the real truth about credit cards.

Credit cards are simply a form of payment – the same as cash, checks (for us older folks) and debit cards. That’s it – plain and simple. The feature of credit cards that is our downfall is the fact that the bank they are issued through gives us a special “limit” that they will allow us to spend without them saying “no more”. This is where people, and I was one of those people, turn a simple credit card into debt. We make purchases with an intention of paying for it when the bill comes, but when it comes, something new has come up and we can’t pay in full. And after a few months of this, we find ourselves on the hamster wheel of debt and paying interest.

Here is the truth about credit cards – credit cards have great benefits if they can be used as intended, as a form of payment. This means that you pay for something using your credit card and once a month, you make one payment to the bank, paying the bill off in full. This is what I do with all of our monthly bills. They all go on one card I have – a Disney Chase card – and once a month, I pay it in full. This has several benefits: Disney points to use on our vacations, one payment per month instead of multiple and it automates all of my payments, giving me one due date instead of 12.

For many years, I was unable to use a credit card as intended. And in the process, accumulated a butt load of debt. When I paid the debt off, I still shyed away from them because I never wanted to go back on the hamster wheel again. Once I knew, for sure, that I could use a credit card as intended, I decided to take advantage of the benefits.

Here’s the moral of the story – if used as intended, as a form of payment, a credit card can be beneficial. However, if using a credit card is causing debt in your finances, then stop using them immediately. It’s not about the card – it’s about how it is used.

Posted in Building Wealth, Credit Cards, Debt Free, Financial Freedom, Winning with Your Money, You and Your Money

Building Credit Without Debt

 

There is a big myth out in the money world – you must have a credit file and the only way to get it is to go into debt.  Both are simply not true.

You can exist with a zero credit score just fine.  However, if you want to get a mortgage, it can be a little more tedious than if you have a credit score.  But it is possible and as a matter of fact, many millionaires have a zero credit score simply because they do not ever borrow money.  If you never borrow a dime, your score will be zero.  If you have borrowed in the past, it will take many years to get down to a zero credit score, but it can be done.

Most debt free people however have a high credit score.  How do they obtain this without going into debt?  It is simple – you get a credit card that you use for something like a utility, cell phone or any recurring monthly payment and then you pay if off every month.  This will give you a great credit score because your credit utilization will be low (and it will be zero if you pay before the statement date) and you will pay everything in full every month.

Having a credit file of some kind does make life easier and less expensive.  Insurance companies, utility companies and even some employers are using credit reports to determine your rates, to see if a deposit is necessary and even to see if they should hire you.  I highly recommend a credit report, but you don’t have to go into debt to obtain it.

Credit cards were designed to be a form of payment – just like a check, cash or now, a debit card.  However, over the years, we have let that get out of hand and we use them to get what we want now instead of waiting until we have the money.

So as you can see, you can build a credit score without going into one dollar of debt.  If you are already there, it is not too late.  If you already have debt, the best thing you can do for your score is to pay it off and never use cards again (at least until you can use them as a form of payment).  If you are new to the money thing and don’t have any credit yet, don’t hop on that hamster wheel.  Simply get a small card, use it once a month and pay it off immediately.  Voila – credit with no debt!

Learn more about Debbi’s journey from having $200,000 in debt to becoming financially free and debt free.

Posted in Building Wealth, Credit Cards, Debt Free, Financial Freedom, Saving for Your Future, You and Your Money

I Plan to Get Out of Debt

Anyone who has debt says this all the time.  Nobody wants to stay in debt.  However, getting out of debt takes more than just words and intentions.  It takes action and a plan. In my podcast this week, I go in depth about how to take action and how to develop a plan yourself to get out of debt starting today.  In my last blog post, we talked about how planning is something you can do immediately to begin the journey to wealth and financial freedom.  So let’s look at how to plan to get out of debt successfully and as quickly as possible.

No one would ever build a house without a blueprint – a visual of every aspect of the house and a plan on how to build it successfully.  And that’s what you need to get out of debt – the first step is to develop a blueprint.  This is a visual of your finances – your real finances.  This first step is actually what keeps most people from ever getting out of debt. They don’t want to walk in their truth, so they stay right where they are.  If you are ever going to successfully get out of debt, you are going to need to be honest about your financial situation and be true to what you are willing to do to change it.  You need a list of all of your income and all of your expenses – this includes accounts in collections.  You need to know exactly what you owe in order to develop the best plan to pay it off.

Once you have your blueprint in place, you need to figure out the best plan for you to pay everything off.  I want to caution you about paying for this.  Most of the “debt consolidation” programs charge thousands of dollars and basically all they do is get you behind on every bill so they can get you a settlement offer.  Doing this will make your credit score even worse than it probably already is.  Once your score is damaged, it takes a long time to build it back up and even though you hopefully aren’t going into debt again, your score is your financial reputation and should be kept at a good number.  We offer a coaching service and something like that is okay – getting advice from someone who’s been there to support you is one thing, but you don’t want to pay thousands to a company for something you can do yourself.

So now you know what you owe – next, you need to figure out how to pay it off.  Using either the debt avalanche or the debt snowball method, you want to arrange your items in the order you want to pay them off.  I always recommend the snowball method because of how quickly you can pay off items in full, but pick the method that will work best for you and keep you motivated.  Once you start seeing debts being paid, you will continue to be motivated resulting in more sacrifice and more ideas on how to bring in more income.  Developing a plan and actually starting the process are the keys to success when it comes to paying off debt.

I hope after today you will stop saying “I plan to get out of debt” and you will start getting out of debt by developing a plan and taking the actions required to finish the plan as quickly as possible.  Even without any extra money, if you stop using debt and continue to make all of your debt payments, you will eventually be debt free.  But your goal should be to take actions that get you there as quickly as possible so that you can truly begin your journey to wealth and financial freedom.