Passive Family Income » Credit Cards

Make a Plan to Reduce Your Debt

Miss T (Former Staff Writer) — Wed, 08 Jun 2011 11:21:23 +0000

Getting out of debt is not a dream. It can be a reality. Anyone can do it. The key is to develop a plan of attack that will work to help to reduce your debt levels. You can slowly pay down your debts month after month until one day, you will be living a debt free life. Use the following three steps to get yourself closer.

Make a List

The first step is to get a handle on how much debt you are in. You can do this by figuring out exactly how much money you owe your creditors in total. Add up all of your current debts including mortgages, loans, and credit cards. Add in student loans and personal loans. Next, add in all of your past due debts. Include any debts that are in collections or late. The grand total is the total amount of debt that you are in. This is how much money you need to be completely debt free.

Don’t worry about the interest rates at this point. Your focus should be on repaying the principal borrowed. This is the money that you agreed to repay to your lenders.

Make a List of Your Income

Now that you know how much all of your debts are, you need to find out how much money you have coming in every month. Add all of the money that you receive each month in your household. Include all full time, part time income, gifts, and other means of support that you receive. Tally up the amount of income received and get a grand total. Then subtract your necessary expenses from that total. The number that you get is the amount of money that you can use to pay your debts right now.

If you find you do not have enough income to meet your debts, you will have to find alternative income sources. You can pick up a second job or start a new venture that will bring in some cash. All of the extra money earned will go towards your dream.

Here are some ways to make extra money:

Landscaping
Tutoring
Dog walking
Personal assistant
House cleaning

Allocate the Income to Existing Payments

This is the portion where you match up your extra income with existing debts. Be sure that you allocate enough money to send at least the minimum payment to each bill. You don’t want to fall deeper into debt by paying off one bill and falling behind on another. The amount of money left over after making a minimum payment on each bill is the money that you will use to reduce your debt even further. Send the extra money left over to the account with the highest amount of interest first.

If your total monthly bills are $3,000 and you make $3,500 in income then $500 should be applied to the account with the highest interest rate. Send this amount every single month until the debt is paid in full. Once this debt is paid off, apply the $500 to the debt with the next highest interest rate. This will reduce your interest payments substantially.

Follow this plan month after month and you should notice your debt levels getting smaller and smaller and eventually disappearing.

So readers, how have you battled debt in the past? What strategies have you found work well?

This post was written by staff writer Miss T.

Related posts brought to you by Yet Another Related Posts Plugin.

What the State of Your Finances Reveals About Your Personality

Guest Poster — Fri, 18 Mar 2011 11:13:00 +0000

For the most part we want to understand ourselves better, to learn why we do what we do. You may do this by compulsively reading your horoscope, learning that you’re a compulsive A Type personality so you can point out those laid back B’s at a party. However, while we may want to understand ourselves so we can be better partners, parents, friends or managers, the one area we don’t examine is our spending.

It is easy to blame compulsive spending on a consumerist society, however, our spending habits and thoughts about money actually relate deeper into ourselves, as our personalities and upbringings will dictate the way we spend, and vice versa.

For example, take a look at your relationship with money, by asking yourself the following questions:

When do you first remember your family discussing money as you were growing up?
Was money a source of tension in your house when you were growing up?
How would you ideally treat money in your household as an adult?
What are the first three things you think when you hear the word money?
What are the things you feel are vital to your financial peace of mind?
What is your definition of financial success?

When you have thought about your answers, discuss them with your partner and look at how your answers differ from theirs, and whether you both have the same financial personality.

What Your Finances Say About You

Determining your relationship with money is the only way you will be able to identify negative behaviors and take action to change them, so consider which of these financial situations describes you, and identify the behaviors which lead there.

Your finances are disorganized, you have a number of accounts, you don’t know your credit card balance or interest rate and you’re not sure you have a savings account, let alone know its balance.

Your finances have probably gotten to this state because you second guess yourself and your purchases. While impulse buying may make you feel better at the time, and relieves your frustration, if you feel bad about your purchases later, you are more likely to ignore your credit card statement when it comes, because you don’t want to be reminded of your sill spending.

Your finances are organized, you don’t have excess accounts, you are saving for an emergency and you pay off your credit card in full each month.

This sort of financial organization shows you are a frugal person at heart, because you know the value of your money and you don’t want it eaten up by interest or bank fees on multiple accounts. You have probably gotten this way by diligently tracking all of your money, for example, you’ll return to the store if you’ve been overcharged. While clipping coupons and sticking to the essentials will save you money, you can miss out on a lot of enjoyment if you live as though we’re still in the middle of the Depression.

Your finances are zero but your credit cards are easy to spot.

While a spending frenzy is good for a flailing economy, it is not good for your personal economy and if you keep living your life like there’s no tomorrow, when tomorrow comes, you will find yourself with very little. While it sounds like this personality type belongs in a child’s fable about moderation, your live for the moment attitude means you don’t have any savings, you don’t know where your money is going and you don’t have a plan for your money or your life.

You’ve got a gold card and you’re not afraid to use it.

If the numbers are wearing off of your gold card from overuse, then you are probably the type of person who likes the best. You surround yourself with the best brand names and are seen in only the hottest places in town . However, you need to be careful that as you fill your life with luxury, you don’t lose the substance, because spending big and living large can become addictive, and can quickly get out of your price range.

How to Change Your Personality and Your Finances for the Better

If your personality is flighty and your finances are following, then take some time to look at why both your personality and your finances are out of control, and find out how to regain that control:

Looking back. As much as we hate to admit it, our parents still have a significant influence on how we live our lives as adults. For example, did your parents have property investments, mutual funds or a secure savings account? When you think about your parents’ attitude towards money and investments, you can identify whether you are mimicking some of their beliefs and insecurities. To avoid being shaped by your parents’ attitudes towards money, develop your own financial attributes.
Know your motivation for wealth. Your definition of wealth and your reason for pursuing it will determine how you go about reaching your goals. Know your short and your long term goals, for example, do you want to retire early, buy a bigger house or pay for your child’s education?
Identify traumatic money moments. Often traumas from your early childhood or school years involving money can have an unconscious effect on your adult life. To deal with these issues, relive traumatic moments in an nonthreatening environment to release long held feelings about these instances. This will free mental and emotional energy, which you can then channel towards your investments.
How does your relationship with your parent affect your relationship with money? Your perspective of money and of your partner will form part of your financial personality. For example, if you are a male, who is married and supporting children you feel heavy responsibility to provide financially, which can be paralyzing. If you fear a negative response from your partner you may avoid making financial suggestions, so take the time to make sure you both have the same goals.

Alban is a personal finance writer at Home Loan Finder, where he helps people to find the best mortgage broker.

Related posts brought to you by Yet Another Related Posts Plugin.

Get Out Of Debt – Where Should You Start?

Derek (Staff Writer) — Mon, 27 Dec 2010 11:46:33 +0000

A few years ago, the sub-prime mortgage industry flopped. Home owners were no longer able to make their monthly loan payments, and the economy took a serious turn for the worst. Many unsuspecting individuals were told that they no longer had jobs, and suddenly, many families were in trouble financially. Each and every one of us has a friend or family member that has been affected by the poor economy, and we now are afraid that it might happen to us! If you are currently uneasy because of your debt load, I can help you get out.

Too often, debt instills fear in us and causes us to take drastic action. Instead of going out to eat with our friends like we used to do, we find ourselves at Wal-Mart in the Ramon Noodle isle because we just decreased our food allowance to twenty bucks a week. This is the equivalent of exercising for four straight hours one day because you decided that you were going to get in shape. Well, since you hadn’t exercised once in the past ten years, you find yourself unable to get out of bed the next morning! Mammoth changes just don’t work!

What are the first steps that you should take?

Instead of taking such drastic action, your first step should be: Observe your everyday expenses. Be honest with yourself. If I you found out that you were spending $3,500 every month, would you really be able to pinpoint where all of the money was going? I would say you might be able to account for 60% of it, but the remaining 40% is most likely a complete mystery!

When you begin to open your eyes to your every day expenses, you’ll start to understand where the “mystery money” is going. It might be a daily coffee run, vending machine snacks, or on random retail purchases. Whatever it is, start to take note of these expenses on a piece of paper. If you are married, make sure your wife participates as well.

After about a month, gather your scraps of paper (both yours and your wife’s) and read them. If you really want to excel, put a dollar amount on each item and estimate how much money was spent for that month. With this practice, you now have an idea of what constitutes the 40%.

What tracking method is best for you?

If you commonly use credit cards and debit cards and you feel like you can control your spending, I would suggest that you become a member of Mint.com. Here, you can track all of your purchases without jumping from one credit account to another. If you feel like your credit purchases are out of hand, you may want to go on a credit card diet and use solely cash. This is what my wife and I decided to do. If we made a purchase, it was with cash. It’s easy to track (especially when it runs out!), and you never have to guess how much money you have left – it’s right there in front of you, just count it!

Finally, develop a spending plan

Now that you have an idea of where your money is going and you’ve decided how you’re going to track it, it’s time to create a spending plan (aka budget).

If you have a significant other, chances are that one of you is the nerd in the relationship (I definitely score the most points in this category). The nerd is in charge of creating the budget, mostly because the free-spirit would nearly die of boredom with all of the calculations and formulas that you’ll conjure up. Now before you go crazy and start barking thrifty orders, there’s another stipulation. Once you have developed the spending plan, your spouse must review it (and you must let her talk and express her opinion). If she has concerns and would like to loosen up a category, be willing to budge a little! At first, I was not willing to budge, but you know what happens then? Your spouse will feel constricted and they’ll blow the budget in a heartbeat. It happened to me, and it will happen to you.

Once you and your spouse agree on the spending plan, it’s time to put it into action! Make sure you consult the monthly budget a few weeks in. Calculate how much was spent and how much is left in each category. This will give you good idea of how you are doing – plus, it will give you a chance to course-correct before you blow the budget.

Observe, adjust, repeat

No matter how great you think your spending plan is, it will not be perfect in that first month. I think it took my wife and I six months before we had a good handle it! Don’t give up on it though. If you find that you keep spending too much money in one particular category, maybe you just need to expand the budget there. It happens.

Follow these steps and you should be on your way to a debt-free life! These simple actions allowed my wife and I to pay off $10,000 worth of debt last year, plus we paid cash for our $8,000 vehicle! You can do it to.

This post was written by Derek.

If you are looking for professional advice for help in your financial situation, consult with a San Diego bankruptcy lawyer.

Related posts brought to you by Yet Another Related Posts Plugin.

Best Gas Credit Cards

John S. — Sat, 25 Sep 2010 11:55:09 +0000

I am a big fan of finding the best credit cards available in order to use them to your own financial advantage. So many people misuse these services and end up in severe credit card debt. If you practice sound personal money management by budgeting your expenses and paying off the balance each month, you can generate a nice little income stream by using gift credit cards. My family typically brings in around $300 in extra income per year just by accumulating points that are redeemed for various gift cards.

Recently, we added a gas credit card to our portfolio of passive income streams. This was the Discover Open Road card that earns 5% cash back on gas purchases up to $100 per month. That means if you spend a little over $100 on gas per month using the card, you can earn around $60 per year just for making purchases on gas. Not a bad return on a recurring expense!

Once you earn your rewards from this card, Discover gives you several options to redeem your cash back. These options include the following possibilities to redeem your cash back rewards.

Credit Account – One option available is to transfer your cash rewards back to your account as a credit, thus reducing your next months bill.
Electronic Deposit – Another option is to setup an electronic transfer that would apply your rewards to a savings or checking account.
Donate to Charity – There are also several charities that you can donate your cash rewards to which is really a nice option to have if you would like to send money to a good cause.
Gift Cards – Finally, they offer cardholders the ability to purchase a wide range of gift cards for even further savings. Obviously this is my favorite option!

If you decide to choose the gift card option for your redemption, then you can increase your savings and stretch your money further. I absolutely love when these opportunities become available to me! For example, if you enjoy renting movies, you can purchase a $40 Hollywood Video gift card for only $20 or purchase a $30 Blockbuster gift card for $20! That is a really nice opportunity to stretch your money further and make it work for you. Even one of my favorite places to shop has a gift card available. You can purchase a $45 gift card from CVS for $40. While it is not as good of savings as the video store gift cards, it is still a nice deal. Using the CVS gift card along with shopping the great deals can really make your money go a long way!

What types of cash back cards do you use?

Related posts brought to you by Yet Another Related Posts Plugin.

Citi Cards – Thank You!

John S. — Sat, 11 Sep 2010 13:44:01 +0000

photo credit: shawn.l Most people view credit card companies as evil and greedy organizations that take advantage of hard working and decent Americans. The majority of the time, I would agree with this view. However, I would also say that even though credit card companies prey on the innocent and take advantage of people at every chance they can, there can be a bright side.

Call it being tired or too stressed about the financial markets, but I forgot to pay my last month’s credit card bill! I have been a Citi Rewards member since 2004. During that time I have never been late on a monthly payment and have always paid the balance off each month. My family uses the card so that we can earn rewards points through the ThankYou Network. We have averaged around ~$300 per year in passive income, just by charging a lot of our expenses to our card. In fact, any payment on a bill that I can make that accepts credit goes onto our Citi card or our new Discover Open Road card. The only time I wouldn’t use one of the cards is if there is any additional fee charged from using credit.

As I mentioned above, I was late for the very first time on last month’s Citi credit card payment. I completely forgot about the payment actually. I have all of our bills setup on auto-pay through either our credit cards or through our checking account. The three exceptions to this are the two credit cards and our monthly water bill (our municipality charges an extra fee to use any type of auto-pay). In an attempt to be somewhat green, I have also elected most of our billing statements to come via email instead of in the mail. So I typically rely on receiving an email to pay off these three manual payments. Unfortunately, I received the monthly billing notice email from Citi, but took no action on it.

Last Sunday as we were out finishing up our weekend errands, my wife got a call on her cell phone from Citi. It was a customer service representative asking if everything was ok with us financially? The rep was calling because we were six days late on our payment and they wanted to make sure nothing was wrong. Of course my wife (who handles none of our finances) immediately panicked thinking someone stole our money or identity. The lady on the phone asked us to check our records when we got home to verify if we made our payment or not. Of course, I thought about it for a minute and then realized that I didn’t make the payment! My heart sunk and I immediately felt shame as I pride myself for on time payments and sound personal money management. The rep informed us once we verify the payment status that if we called back within the next day, they would wave all late fees ($39.95) and finance charges as we have been great customers with excellent credit.

Of course we verified that the payment was not made and I called them back and took care of the situation. On a side note, the lady told me that they would also wave some fee called the one time check payment fee, or something like that. So in the end we paid off our balance without any extra charges. After it was all over, I sat down in amazement wondering why a credit card company would go out of their way to initiate a call with us on a payment that was six days late and offer to wave any extra fees if we took immediate action. I didn’t think credit card companies worked like this. I always figured that they disliked customers like us who always paid their balance off each month while earning rewards points and profiting from them. Maybe it is a trickle down effect from the financial meltdown? Maybe these companies actually value customers with good credit who pay their bills. I don’t know but I wanted to say – ThankYou Citi!

Avoid late fees through auto-pay – I didn’t realize it, but I asked the Citi representative why they didn’t have auto-pay and she said they actually do. They are sending me the packet to fill out so I can mail it back to them. This should help prevent any future late fees!

For those of you who read my blog regularly, you know that I view credit cards as an opportunity to make money from these companies instead of losing my hard earned income from them. Credit cards can be used to earn points and rewards on purchases made as a form of passive income. In addition, you can sometimes find promotional 0% cards that can allow you to put your money to work for you somewhere else.

Related posts brought to you by Yet Another Related Posts Plugin.