Hopeton Morrison, ContributorALL OVER the world debt is a common, albeit unfortunate and misplaced corollary of Christmas. And this debt is invariably driven by debit and credit cards. Today we focus a bit on some of the basic rudiments both positive and negative of credit cards.
There are several features to a credit card. These include the interest rate, annual fee and grace period. A credit card allows the user to purchase goods and services and to obtain cash advances. On this, the bank will charge interest that can be fixed or variable. Variable rates generally move with government benchmark rates. There is also the annual fee that the card issuer charges your account on the anniversary date, although in the competitive world of plastic, some banks waive the first year's fee as an incentive to get you started with them. Nonetheless, some cards do require an additional application fee.
Some fees that you should strive to avoid are the 'over-limit-fee' which happens once you go over your spending maximum and the 'late payment fee' which speaks to the infraction itself. If you have taken cash advances from your credit card you would also be aware of a 'transaction fee' which is often a stated charge or a percentage or some combination of both.
GRACE PERIOD
Integral to these charges is the grace period which is that period allowed after the bill date to clear the bill. Grace periods generally vary between 0-30 days. Here is an example: If you were to make a purchase using a 25-day card on December 23, that purchase will show up on your bill of January 17 next year. You are then offered another 25 days from this date giving you up to February 11, 2006 to pay off without a charge. Once you fail to pay off the full balance, February's bill and all subsequent ones, will carry a finance charge until you clear the full balance.
As much as having several cards might give you a sense of affluence it is not the most prudent financial practice, as, not only are you forced to keep track of all of these cards, but you end up paying annual fees on them whether you use them all or not. In any case, with credit card debt being as expensive as it is, you are better advised to just borrow the funds through less expensive channels from the banks, credit unions, and other financial institutions. And whether or not you need more than one credit card depends really on your personal financial habits. For example, were a new provider to offer you a lower interest rate on a card, there would be no benefits to be derived if you are in the habit of paying off your full balance every month.
PRESTIGIOUS CARDS
The same would be true of those prestigious gold and
platinum cards with which institutions typically invite you to join their exclusive clubs. These carry numerous perks including travel insurance, higher credit limits, and frequent flyer miles. The key to remember here,
however, is that many of these benefits are also offered by some non-premium cards anyway.
Finally, did you know that credit card debt is the single biggest impediment to eliminating debt from your life?
Remember this: making the minimum required payment every month could end up taking you 30 years to pay off a balance whereas doubling the minimum payment required and not charging any further funds will take you out of debt in three years. Further to that, if you have outstanding credit card balances on which you are being charged 40 per cent interest for example, by paying off your balances you effectively start earning 40 per cent interest.
So then do you really need more than one credit card? Among your gifts treat yourself to a debt free Christmas this year.
Hopeton Morrison (hmorrison@stccu.com) is general manager of St. Thomas Cooperative Credit Union Ltd. and lecturer in the School of Business Administration at the University of Technology.
Looking Forward: Creating your 2006 money management calendar
Dehring, Bunting & Golding
While you may never have thought of it, your calendar of events need not only include birthday and anniversary dates. When it comes to the sorting out of your finances, planning key activities at regular intervals during the year will go a long way in helping you gain control of your money. Before you begin, identify an area where you will keep all your bills. Try and steer away from the dining table or kitchen counter. Keeping all your bills in one set place will ensure that you get a handle on always knowing what bills you have to pay and when they are due to be paid. Now get out your calendar, mark the following tasks down and be assured that you (and your finances) will start 2006 with a bang!
Every Week Examine your spending
Make note of every cent you spend. Yes, just like medicine that usually doesn't taste good, the only way that you can see how much you are spending is to track it. A simple notebook specially bought for this purpose will do.
Start Collecting Your Receipts
Here comes more medicine. To further help you get your hands around how much you spend, what better way than to keep your receipts?all of them. Put them in a safe spot and tally them to see what your total weekly expenditure was and where it went.
Create a List of Your Bills
Make a list that shows all the regular bill payments that you have to make, e.g. light, water, food, etc. This will ensure that not only do you not miss your payment date, but that you also see how much your regular monthly expenditure is for important bills (as difficult as that may be to look at).
Every Month Pay Yourself First
Yes this is possible, and the greatest savers in the world will tell you that when they receive their pay cheque, the first thing they do (even before paying bills) is that they pay themselves. Be careful here, as paying yourself doesn't mean taking it and running to the plaza for a shopping spree. Paying yourself means putting aside that money in your savings and investment accounts.
Talk to Your Spouse
Gone are the days when it was only one partner that knew about the financial goings-on of the household. What if something serious happens to that spouse? A brief monthly conversation that gives an update of where money was invested and how it was spent will ensure that both parties are fully informed in case of any unforeseen circumstances.
Every Quarter Assess your Goals
Use this time every quarter to look at the goals that you have set for yourself (with dollar amounts already attached to them), and see where you are in achieving them. This regular check-up will help give you a better picture on how much further you need to go to achieve your goals.
Sort your receipts
Having gathered your receipts, sorting them shows you where your money is being spent. For instance if there are way too many receipts for 'John's Burger Café', you may need to look at finding ways to eliminate spending so much money there, this will enable you to put more of it aside for saving and investing.
Twice a year review your investment accounts
Begin taking an active approach towards your investing activities. Look at your account balances and see how much you have earned and how much closer you are to achieving your financial targets.
Having marked your calendars, go for it. Integrating a consistent set of activities into your regular routine may prove to be a bit unusual at first, after all, how many of us are in the habit of taking such active interest in the planning and monitoring of personal finances. Be assured, however, that at the end of 2006 you will be on top of your game.
To further discuss investing and the many options we have available, contact DB&G at info@mydbg.com or toll free at 1-888-CALL DBG.
Disclaimer: All information contained in this article has been obtained from sources that DB&G believes to be accurate and reliable. All opinions and estimates constitute the Author's judgement as of the date of the article.
TURNING YOUR CHRISTMAS BONUS INTO WEALTH
NCB CAPITAL MARKETS
You look forward to it every year and plan meticulously. By the time it comes you have already have spent it. Before long, it seems to have disappeared and your promise yourself to do better next year - spend less, invest more.
But how do you prevent your profit share or Christmas bonus from vanishing like vapour? How do you turn it into wealth?
For years, there have been many opinions on how to become wealthy. Some have proven themselves and many have disappeared into the abyss of failure. One of the best ways to create wealth is to identify someone who has created wealth, learn how they did it and apply the same formula.
One person who demonstrates that you can greatly increase your wealth is The Richest Man in Babylon. His story is chronicled in the book of the same title by George S. Clason. The Richest Man in Babylon provides proven insights into creating, growing and preserving your wealth.
CREATING YOUR WEALTH
Start building your wealth by abiding by the principle that "A part of all you earn is yours to keep". Put aside at least 10% of your earnings towards investing. This means adjusting to living on 90% of your income. While this may seem difficult at first, you will find that by learning to control your expenses you will be able to make the adjustment.
Control you expenses by implementing a budget. Write down all you earn and all you spend. A budget helps you to differentiate necessary expenditures from indulgences. This way you are able to easily identify the areas where you may curb your expenditures.
GROWING YOUR WEALTH
Your money should always be working for you. Seek and invest in instruments that provide attractive rate of returns. Look for those that pay compounded interest which simply means that when your principal earns interest, this money is reinvested to earn more interest. Buy into the stocks of excellent companies with strong financials and prospects for solid growth and profits.
Consider instruments such as real estate. Start by acquiring your own home and invest in making it as comfortable and valuable as possible. Where feasible increase your ability to earn by investing in properties that bring you income through rental or resale.
Where possible, improve your skills and explore other ways to increase your income. This may simply mean making yourself eligible for promotions in your company or starting your business.
PRESERVING YOUR WEALTH
Many of us can relate stories of persons who have lost their wealth. Perhaps the most fundamental tenet to being wealthy is preserving your riches. Guard your treasures from loss by evaluating all possible investments carefully to ensure the protection of your principal. Sustainable wealth is not achieved through get rich-quick schemes, but by carefully evaluated investing over an extended period. Seek the advice of qualified Wealth Advisor in this instance. Your Wealth Advisor has the expertise to knowledgeably guide you on these matters.
Of course, in your quest for wealth, you should make provision for future income that provides for you and your family in your retirement years. Invest in instruments that would be able to provide you with a stream of income in those days that you are unable to actively earn. Consider bonds that provide predictable income streams and properties that supply income from rent.
These lessons are used by wealthy persons across the world. You will however notice that these are lessons that most be applied continuously over a sustained period of time. Remember the race is not for the quick but those who can endure.
Tiffany Gordon-Johnson is Assistant Marketing Manager at NCB Capital Markets, contact her at 1-888-4WEALTH or info@ncbcapitalmarkets.com
NCB Capital Markets Limited through its representative(s) has provided information to you on various financial products and services and investment opportunities for information and educational purposes only.
