Securing Your Financial Wellbeing; Paying Off Consumer Debt

Knowing your financial well being is an important aspect of our daily lives. It does not take a genius to be successful in managing our finances. All it takes is a well laid plan and taking the time to educate ourselves on how to invest and save. If you get the facts about saving and investing and follow through with an intelligent plan, you should be able to gain financial security for years to come, and more importantly secure a great retirement, or even better retire early and starting enjoying the benefits of managing your finances. If you plan on saving and investing your money, you are likely never going to get any returns anywhere near the 19.5% -30% that credit cards charge. Assuming you put your money in an investment account, you are most likely going to get a 2% return at very highest. What the banks do, is they borrow your money, deposited in a savings account, and then in turn lend it to you through either a credit card, line of credit etc at a higher interest. It’s the difference in the margins that creates profits for the banks, and that’s why I emphasize, unless you are investing in an appreciating project/investing and the rate of return is higher than you are paying on the loan, paying off consumer debt has to be one of your top priorities when you start off with savings and investing. If you don’t, then that balance will quickly add up, as we learned about compounding interest. Many people carry credit cards; some of them even maxed out (reached credit limit). It’s funny how credit cards make it easy to buy expensive stuff when you don’t have the cash for the same items. Unfortunately, credit cards are not free money. The truth is that any item purchased on a credit card, and not paid in full will always end up costing you more than original price of purchase, sometimes into double figures depending on how long it takes you to pay the balance, and assuming you never make any other purchase. People seem to buy consumer products now, at the expense of the ability to buy in the future. Why not wait and save the cash before buying? We live in a pressure filled society, where we all want to be like our friends/neighbor/relative. But should the purchases come at your expenses of a decent life when your income earning potential declines in the future? Money is a non renewable resource, you can earn more, but once you spend it, it’s gone. My Advice if you want to get ahead with your finances, any consumer debt such as credit cards should be paid in full. If you can’t pay them in full, then stack those cards away. Don’t use a credit card, unless you have the funds to pay it in full. For once try walking around with cash, and you will realize the feeling is not the same when you make any purchases. Some credit cards have some great benefits, but they are of no use if you are going to pay an interest of 19.99%. Let me show you how you can benefit from a credit card, for example I have two credit cards, for different reasons/benefits, I have the cash back card which I get cash back from most of my purchases, and I also have a platinum card which gives me travel insurance/rental car insurance on the card. When I need to travel or rent a car, I use my Platinum Card, when I do everyday purchases like groceries I use my cash back card. No matter how much of a purchase I make, I don’t think my cash back/insurance would be enough to justify the interest rate on the credit cards, but because I pay the cards in full whenever I use them, I get free cash back and free insurance. Track your financial position every other time. Know where you are and where you intend to go. Pay the credit cards/consumer debt with the highest interest rates first. Pay the most that you can afford each month to those cards, while paying the minimum on the other cards, once the balance is at zero, then focus on the next highest interest debt, follow this routine until you have completely no debt. Once you do that, channel those funds that you were paying towards credit cards, and put them in savings and investments. You will soon realize that you are working the magic towards securing your financial future, without being a genius, but following one of the basics of managing your finances