Once upon a time, not so long ago the adage “Cash is King” was the mantra of business. Credit Cards were virtually unheard of and most credit was done by “Letters of Credit”, or “Revolving Credit”. Of course in the 1960's and 1970's Credit Cards started to take off and were at first a sort of a luxury for the rich and upper crust.
Credit cards are no more a luxury, they are a necessity. Let's face it, the whole “New Economy” depends upon them. So, you would imagine that people are going for credit cards without abandon.. In fact, a lot of people possess more than one credit card. So, the credit card industry keeps growing by leaps and bounds. In fact I am sure most of you receive at least 3 solicitations a week from different banks (let alone the idiotic commercials on TV, radio and in magazines).
Credit Cards a great tool if one knows how to use them properly and is careful in their use. However, too many people do not take care, as they don't really pay attention to what they are doing (usually because Mommy and Daddy took care of the bill when they were younger), so the credit card industry and credit card holders are posed with a big problem called ‘Credit Card Debt’. In order to understand ‘credit card debt’, we need to understand the work flow associated with the use of credit cards as such.
Credit cards, as the name suggests, are cards on which you can get credit i.e. make borrowings (your credit card debt). Your credit card is a representative of the credit account that you hold with the credit card supplier. Whatever payments you make using your credit card are actually your borrowings that contribute towards your credit card debt. Your total credit card debt is the total amount you owe credit card supplier. Normally, if one uses them properly, one settles their credit card debt on a monthly basis. Of course sometimes emergencies arise and one has to go further into debt than planned. This is fine as long as you budget and don't overdue it.
So, you receive a monthly statement or your credit card bill which shows your total credit card debt. Ideally you should pay off your credit card debt by the payment due date, failing which you will incur late fees and interest charges. However, you have the option of making a partial (minimum) payment too, in which case you don’t incur late fee but just the interest charges on your credit card debt. If you don’t pay off your credit card debt in full, the interest charges then get added to the debt. Of course this is how Credit Card Companies and Banks make money off Credit Cards (and why they advertise their use so you would have to pay them interest).
If you don't pay off the balance every month, your credit card debt keeps on increasing, more so because the interest rates on credit card debt are generally higher than the interest rates on other kind of loans/borrowings. Further, the interest charges add on to your credit card debt each month to form the new balance or the new credit card debt amount. If you continue making partial payments (or no payments) the interest charges are calculated afresh on the new credit card debt. So you end up paying interest on the last month’s interest too and so on and so forth until one finds themselves in the deep spiral of endless debt.
Thus your credit card debt accumulates rapidly and soon you find that what was once a relatively small credit card debt has ballooned into a big amount which you find almost impossible to pay. Moreover, if you don’t still control your spending habits, your credit card debt rises even faster. This is how the vicious circle of credit card debt works.
So remember to keep a budget and track your purchases so you don't overspend and everything will be fine and you can keep yourself out of debt and enjoy your life.
Mahalo.
******************************************************************
Need to learn how to get and stay out of debt and live debt free?
Tips and techniques outlined in our ebook “Debt Free Living”.
For more information:
http://www.renspubhouse.com/debtfree/debtfree.html
******************************************************************
Showing posts with label Debt. Show all posts
Showing posts with label Debt. Show all posts
Sunday, February 3, 2008
Friday, January 4, 2008
Another Election Year Another Recession
The Business press are all agog over the fact that we might be heading for a Recession in the economy. Well DUH! If they bother to pay attention to their own records they will see that after every Multi-Term Presidency we tend to have recessions. It is part of the Business Cycle, and yes that is probably why it is called a “Cycle” rather than a line.
Lets face it it happened in 2000-01, 1992-93, 1975-76 and so forth and back all the way to the beginning of the country. It is an historical fact that one can look up for themselves (if they weren't so lazy). How does this happen? Why does this happen?
The main cause of this, if anyone really pays attention, is that the current President cannot run for another term, being limited to two four year terms by the Constitution, and the business community and investors start getting jittery over who will take over running the country. The whole economic philosophy can change depending upon who wins the election (that is why when a sitting VP that has a similar philosophy to the outgoing President gets elected, the cycle is delayed until they themselves leave office).
If there is a change of party then of course the whole economic scenarios change (albeit rather small) and therefore different types of investments are needed to survive in the different environments. Of course it also depends upon the personality and policies of the new President, as some Republicans act like Democrats and vice-versa.
Of course who is running Congress can have a major effect, and usually if the same party runs Congress as the White House, we are guaranteed to have a Recession, that is why Mid-term Elections usually see a change in Congressional make up.
This is good for the country as we depend upon the Checks and Balances between the different branches for our own well being and civil liberties. Regardless of what the immature sour-grapes , namby-pamby naysayers (on the left and right) are whining and crying about, no opposition politician has been assassinated, jailed, or otherwise in the last 8 years, so our basic liberties are still intact.
So what can we do if we know trouble is coming? Well prepare for it and survive the stormy seas.
Well the most important thing to do is to make out and stick to a budget.
See what you can live without as far as unnecessary items are concerned. Put something away for emergencies and planned big expenses (vacations, graduations, weddings, etc). Make sure all bills are as up to date as you can make them and pay off all that you can. This way you don't have debt hanging over your head and you can have a bit more financial freedom.
Maybe a change in your shopping habits can help as well. Buy some of the store brands when doing your grocery shopping. They are not as much of a fall-off as you think, and the quality is the same (in fact due to the government inspections etc. they have to maintain a certain level of quality before they can be put on shelves). Another thing would be eating less Red Meat and more fruits, vegetables and poultry. Not only will you cut down on your grocery bills, but also be healthier for it to boot. Talk about a Win-Win situation!
Now I know what it is like to be a “victim” of “downsizing”, rightsizing” or what ever the moronic newsreaders are using as a euphemism for a layoffs, so I know how traumatic it can be. Especially when the business folds or the office you are working in closes up. It is harsh and somewhat degrading to go through and collect unemployment for a while. But take the time to learn new skills, or at least brush off the rust of old ones you haven't used in a while. Most of all do not despair nor panic. If you were smart and prepared you will come out all right. If not, then pull yourself up by the proverbial bootstraps and get moving, vowing to never be unprepared again.
A recession is coming but it doesn't have to be a catastrophe if you are prepared for it and act in an intelligent manner. Take control of your finances and they won't control you.
Mahalo.
******************************************************************
Need to learn how to get and stay out of debt and live debt free?
Tips and techniques outlined in our ebook “Debt Free Living”.
For more information:
http://www.renspubhouse.com/debtfree/debtfree.html
******************************************************************
Lets face it it happened in 2000-01, 1992-93, 1975-76 and so forth and back all the way to the beginning of the country. It is an historical fact that one can look up for themselves (if they weren't so lazy). How does this happen? Why does this happen?
The main cause of this, if anyone really pays attention, is that the current President cannot run for another term, being limited to two four year terms by the Constitution, and the business community and investors start getting jittery over who will take over running the country. The whole economic philosophy can change depending upon who wins the election (that is why when a sitting VP that has a similar philosophy to the outgoing President gets elected, the cycle is delayed until they themselves leave office).
If there is a change of party then of course the whole economic scenarios change (albeit rather small) and therefore different types of investments are needed to survive in the different environments. Of course it also depends upon the personality and policies of the new President, as some Republicans act like Democrats and vice-versa.
Of course who is running Congress can have a major effect, and usually if the same party runs Congress as the White House, we are guaranteed to have a Recession, that is why Mid-term Elections usually see a change in Congressional make up.
This is good for the country as we depend upon the Checks and Balances between the different branches for our own well being and civil liberties. Regardless of what the immature sour-grapes , namby-pamby naysayers (on the left and right) are whining and crying about, no opposition politician has been assassinated, jailed, or otherwise in the last 8 years, so our basic liberties are still intact.
So what can we do if we know trouble is coming? Well prepare for it and survive the stormy seas.
Well the most important thing to do is to make out and stick to a budget.
See what you can live without as far as unnecessary items are concerned. Put something away for emergencies and planned big expenses (vacations, graduations, weddings, etc). Make sure all bills are as up to date as you can make them and pay off all that you can. This way you don't have debt hanging over your head and you can have a bit more financial freedom.
Maybe a change in your shopping habits can help as well. Buy some of the store brands when doing your grocery shopping. They are not as much of a fall-off as you think, and the quality is the same (in fact due to the government inspections etc. they have to maintain a certain level of quality before they can be put on shelves). Another thing would be eating less Red Meat and more fruits, vegetables and poultry. Not only will you cut down on your grocery bills, but also be healthier for it to boot. Talk about a Win-Win situation!
Now I know what it is like to be a “victim” of “downsizing”, rightsizing” or what ever the moronic newsreaders are using as a euphemism for a layoffs, so I know how traumatic it can be. Especially when the business folds or the office you are working in closes up. It is harsh and somewhat degrading to go through and collect unemployment for a while. But take the time to learn new skills, or at least brush off the rust of old ones you haven't used in a while. Most of all do not despair nor panic. If you were smart and prepared you will come out all right. If not, then pull yourself up by the proverbial bootstraps and get moving, vowing to never be unprepared again.
A recession is coming but it doesn't have to be a catastrophe if you are prepared for it and act in an intelligent manner. Take control of your finances and they won't control you.
Mahalo.
******************************************************************
Need to learn how to get and stay out of debt and live debt free?
Tips and techniques outlined in our ebook “Debt Free Living”.
For more information:
http://www.renspubhouse.com/debtfree/debtfree.html
******************************************************************
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