10 missteps that will plunge you into debt
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It is that time again when we look at the old year
and say that we will do more, better, smarter things next year;
that the sins of the past will forever be buried and having learned
many painful lessons, we shall become new men and women.
Ha! Fat chance.
In a life that seems to get more
complicated rather than less; harder rather than easier and more
competitive as we get less so, I want to offer some basic and simple
tips that might help you exit 2006 with a bit more in your pockets
than when you entered.
So with a tip of my hat to
Florenz Ziegfeld, here are my follies for 2006.
Folly No. 1: Paying the minimum only. The
government has already told you that smoking is bad, well this year
it said minimum payments on credit cards are bad, too. New regulations
will increase your minimum payments. This is to force people to
pay off their debt in a 'reasonable' period of time. Even with the
new guidelines, paying only the minimum can take up to 10 years
to pay off.
Folly No. 2: Using credit to extend your income.
One of the reasons that clichés are used
so often is that they are actually true. When your mother told you
to "live within your means," she gave you sound financial
advice. If you are using credit for basic living expenses like groceries,
look down; you may have one foot on a banana peel.
Folly No. 3: Charging with no plan to pay off
the balance. Did you know that the caveat "stop
it or you'll go blind" referred to using credit without a plan
to pay the debt back? To practice safe credit, have a plan to pay
your balances in full within 90 days.
Folly No. 4: Believing defaulting on unsecured
debt isn't that big a deal. Unsecured debt is
not secured by your car or home, but the creditor does have ways
to legally collect the debt. You can be taken to court and have
your wages attached. It can be harder to get a job, promotion or
insurance. And at a minimum you will be hounded day and night until
you pay or drop dead. One collector told me that there is some evidence
that St. Peter buys dearly departed defaults and adds the balance
on to your admission fee at the pearly gates.
Folly No. 5: Paying late and getting hit
with high fees. The average late fee is
now around $32, and many card issuers charge $39 for late payments.
They also have a special default rate of 30-percent plus. The two
together can make your minimum payment huge. If you are paying late
because you are unorganized, get organized. If you pay late because
you can't afford the payment, get help.
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