Readers Are Spellbound & Perplexed…
Dear GWBW — This is hard and embarrassing for me to admit, so be gentle with me. I haven’t been good with money EVER. Why don’t they teach these things in school? Now I’m noticing that all my credit cards are showing me how many months and years it would take to pay off my debt if I paid the minimums. Is it ok to pay the minimums if I now know when it will be paid off? I guess I’m not really sure what that information means to my wallet? — Minimum Minnie
Dear Minimum Minnie,
Excellent and timely (holiday season) question, brave chica. Our society, while hailing you-can-doism, doesn’t take the time to teach the basics of personal finance. Additionally in listening to their stories, many women especially seem to me to have Old Skool and dysfunctional relationships with money. How we handle our selves, is how we handle money, and shows up in our credit scores. In life, we all have our strengths and weaknesses, but it doesn’t follow that you would be self-disciplined (or even moderately paying attention) in one area of responsibility in your life without being similarly so around your money, too. Respect your self/your money and it will respect you in return.
As for understanding what the pay down information on your statements mean, I suggest you might want to find a credit organization, either an official business or a local bank or church that offers basic consumer credit courses for free. [In the broadest strokes, the lower the monthly payment you make on a purchase, the longer it takes to pay off and you will ultimately be paying more in interest than the principal cost of the item. It does not behoove you to pay the minimum, generally — but building up a safety cushion of savings is supremely important, simultaneously (and in all economic climates, ladies!). Also, educated yourself about annual percentage of rate (APR) and the differences between nominal APR, and effective APR, so please understand what interest rates you are actually paying.] Understanding how your money works is tied directly and bindingly to understanding how you work your life. I’m down with money maven Suze Orman’s basic and general views on women and their money . I don’t sell her books or recommend her products except in the most personal ways of appreciating how she communicates basic life ideas and ties them to basic money fundamentals.
The steps to learn about how to pay your bills and save/invest, are not rocket science. The more challenging part is realizing and grasping that it’s all about your attitude in and about how you live your life that really counts to adding up your monetary wealth.
Own your self,
Dear Minimum Minnie,
Congratulations on taking the first step—admitting that you don’t know. Too often—especially with money—we pretend we know because it seems like we should. But sweeping the issue under the rug in this case can be very, very costly.
First off, let’s do some really simple math. Let’s say you have a credit card at 17.5%. If you borrow $100, you have promised to pay $117.50 in return. If you owe $1000, you have a signed contract that says you will pay $175 beyond original loan. At a $10,000 debt, you will pay an additional one thousand seven hundred and fifty dollars. That, however is only if you pay the entire amount of the debt off at once, immediately within the first month. Otherwise you are paying 17.5% on the total amount you owe every month. Paying the minimum means you will pay thousands over your original balance . So that $200 blouse will have cost $2000 by the time it’s paid for. Now, is it really worth $2000?
Nothing in this life is free and this money you are giving away to support your credit card company could be in your savings account. As Dave Ramsey, the Total Money Makeover author says, “Winning at money is 80 percent behavior and 20% head knowledge.”
Decide to educate yourself. Listen, you can take steps to understand how to budget and how to get out of debt on your own or wait until your finances are so tight your sanity and your bank accounts are on the rocks. Trust me, as I speak from personal experience, it is never too late to get real with your money situation. Know how much you have in the bank, how much you can afford in “discretionary” fund. Developing spending behaviors that limit debt is actually one of the most self-affirming actions you can take. My sense of self-esteem shot through the roof when I decided to take the road less traveled.
I was the youngest child in my family — a happy surprise, I like to think. Because I was so much younger than my siblings and my parents were older when I was born, my family opted for the” just do it for her” rather than teaching route. This later developed into my own questioning whether I was even capable, since even as I got older everyone else assumed I needed someone else to do it for me, pay it for me, take care of me. Fast forward to getting a divorce with two children in tow and listening to my family worry about how I will survive.
Did I do everything right? Hell no. But I learned after quite a bit of denial and finding myself in the corner shorting Peter to keep Paul from turning off my lights. You can make a number of decisions, including Consumer Credit Counseling, but it all comes down to making the decision to over-throw the consumer addiction. Live on less. Maybe you don’t need to spend $150 on cable every month. Perhaps you can get by on $75 worth of channels.
Aren’t you ready to build wealth instead of debt? Get information from the experts. Read David Bach’s Automatic Millionaire. The little cuts invested well can add up to millions. Take the first steps for yourself. You’ll build you sense of your personal capability. You’ll know you have power over your life. And you are powerful. Just decide to own it.
Happy wealth building,
Juicy Relationship Coaching for Leaders and Individuals.
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