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, Debt Free, Financial Freedom, Saving for Your Future, Winning with Your Money, You and Your Money

When It Rains, It Pours

There is one thing I can guarantee you – no matter where you live, it is going to rain.  Maybe just one day a year, but it will rain.  When it rains on you, are you prepared with an umbrella or are you going to get soaked?

The same way it will rain on you literally at some point this year, it will also rain on you figuratively.  Something unexpected is going to happen.  An emergency is going to happen.  Life is going to happen.  Do you have an umbrella or are you going to get soaked?

Right now, many people in this country are wishing they had an umbrella – even a small one.  It is raining on them right now.  They are not getting paid because of a situation that they couldn’t control.  Some were prepared, but many were not.  Some will be able to continue to pay their bills and put food on the table, but many will not.  This is just an example of what happens everyday in this country and in our lives.  Life happens – some things we know might happen and some things we have no clue are going to happen.  This is why an emergency fund (umbrella) is so important.  If really should be the number one priority in your finances.

So how big should your umbrella be in order to not get soaked the next time it rains.  Ideally, you want to have one year of expenses set aside.  But start somewhere, even $50. And just keep building it.  You want to get $1000 to $1500 as soon as you can.  This way you can handle a sprinkle if it comes through.  Next, set aside 3-6 months of expenses.  This will cover a regular rainstorm.  And then save up to one year of expenses.  This size umbrella will cover any storm that comes your way – sprinkle to hurricane.

It is going to rain this year.  Are you ready?  Today is the day to start.  Whether you are starting at the bottom, or building what you have into a bigger umbrella, today is the day.  As people find out each and every day, you never know when a storm is coming.  The best thing you can do is be prepared.  Having an umbrella can be the difference in the rain being just a little nuisance and it being a drowning storm.

Listen to Debbi’s podcast on this subject and so much more.  

 

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.