Are You Stealing From Yourself

                                                   

Are you a thief? If you are in debt and have no savings or retirement you are a thief and are stealing from yourself.  According to a new report by the Consumer Federation of America and the Certified Financial Planner Board of Standards, 38% of Americans are living paycheck to paycheck.  One out of every 7 Americans has 10 credit cards.  According to the Federal Reserve Bank of New York, more Americans owe money on student loans than on credit cards. 

The Consumer Financial Protection Bureau (CFPB) estimates that 30 million Americans have debt with collection agencies. 43% of Americans spend more than they earn.   According to a new University of Michigan report 1 out of 5 families owes more on credit cards, medical bills, student loans and other unsecured debt than they have in savings. 

Many Americans have no emergency fund and little or no retirement savings. According to EBRI's 2012 Retirement Confidence Survey 60% of employees state that the value of their savings and investments is less than $25,000.  Due to the recession and its after-effects many Americans were unemployed for long periods of time and exhausted their savings and retirement accounts and racked up mounds of debt.  

Each time you swipe your credit card interest is accruing on the credit card balance.  If you don’t pay the balance off at the end of the month your credit card balance will continue to grow.  Paying for an item with a credit card on average costs 110% more than the original cost of the item.  Owing credit card debt makes the credit card companies rich and makes you poor.

Many Americans are so focused on paying down debt they forget about saving money.  No matter how much debt you owe you should also contribute to a savings account. Invest in yourself by contributing to a savings account.  You should have enough in an emergency savings account that covers your total monthly expenses and bills for 9-12 months.  You should put yourself first and follow the “Pay Yourself First” principle by putting money aside towards a savings account even if it is $1 a week then pay everyone else.   

If you are living paycheck to paycheck find a way to reduce your spending such as bring your lunch to work, skip the Starbucks and bring your own coffee from home, shop at discount grocery stores and discount stores such as Aldi’s, Save-a-Lot, Wal-Mart, Target, Bottom Dollar Food, Grocery Outlet and buy store brands, use coupons. You may prefer to buy meat, dairy products and fruits and vegetables at a local farmers market or a regular grocery store. 

Buying items you cannot afford it simply stealing from yourself.  Buying a car that costs more than your annual salary, owning a home that is upside down, owing student loans with a balance of $50,000 or more is not practical and causes extreme financial hardship.  If you make sacrifices earlier in life and do research to find the best offer for a loan or credit card, contribute regularly to a savings account and educate yourself about interest rates, credit card and personal finance you will be in a better financial position.  You will have to make hard sacrifices to get yourself out of debt.  Here are 13 ways to stop stealing from your yourself.

1. Pay in full. Pay balance in full each month to avoid paying finance charges.
2. Pay bi-monthly. Pay half of the balance with 1^st paycheck of the month then pay the remaining balance with 2^nd paycheck of the month.
3. Pay weekly. Pay the minimum monthly payment the 1st week after you get the bill, and then each week pay as much as you can toward the monthly balance. Repeat this every month.
4. Pay extra. Pay as much as you can when you get the bill, and then pay more towards the bill when you get extra money.
5. Automate. Set up automatic payments from your checking account the day you receive your paycheck or the day after you receive your paycheck to pay down debt.
6. Use unexpected income. Use your income tax refund, economic stimulus check, bonus check or sell new or used items on eBay.
7. Negotiate. Negotiate for a lower interest rate, get fees waived or request a settlement to help reduce the balance owed to make it easier to pay down debt.
8. Create a budget.  Balance your checkbook and create a budget to identify what you owe, what you earn and what you spend to find areas where you can reduce spending. Pay no more than 35% of your total monthly income towards housing, pay no more than 15% towards transportation, pay no more than 10% towards debt excluding mortgage, pay 10% towards savings and pay no more than 25% towards remaining expenses to create a balanced budget.
9. Live Below Your Means.  Buy needs vs. wants; buy only the things you need, delay the things you want until you have the money to purchase the item.
10. Pay with cash. Use credit cards for emergencies only and purchase items with cash.
11. Purchases. Avoid making bad decisions such as buying rent-to-own furniture or buying a big screen television and other items that have no value. 
12. Pay on time. Avoid paying late fees whenever possible. If you know you will pay a bill late contact the company to setup payment arrangements.
13. Keep balances low. Keep credit card balances at 20% or less of the credit limit. 

Basketball and Debt

The NBA Finals was action packed with wins from the Spurs, Thunder, Lakers, Clippers on the west and the 76ers, Heat, Pacers and Celtics on the east.  Then it was the Celtics, Thunder, Spurs and the Heat, then the Thunder and the Heat.  Now everyone will be watching the NBA finals to see who wins between the Thunder and the Heat. With all this excitement about the NBA Finals, consumers should use that same excitement to improve their finances and get out of debt.  

Some consumers even go into debt watching basketball: ordering cable sports packages, have game parties, go to sports bars to eat, drink and watch the games all day, buying tickets to live games, and buying sports memorabilia.  All of these costs can add up and cause you to spend more than you earn. 

The goal of basketball is getting the ball to go securely in the net to score points. The goal of getting out of debt is to pay off the debt and increase your credit score.   If you are obsessed with watching basketball you may be obsessed other things.  If spending more than you earn is one of them, here are 6 ways to help you get out of debt and increase your credit score. 

1. Don’t hit an air ball – Many people file bankruptcy multiple times as an easy way to get out of debt.  You should only file bankruptcy as a last resort.  Filing for bankruptcy greatly lowers your credit score and remains on your credit report for 7-10 years.
2. Ball control – Manage your finances by reducing expenses and reducing debt. Taking control of your finances is key to developing good spending habits and reducing the change of having a financial crisis. The total amount of debt you owe contributes to 35% of your credit score.
3. Shoot for a basket – Set financial goals as part of your budget. Develop an action plan to achieve each goal.  Creating a budget helps you live below your means, reducing your spending and reduces your chances of going into debt.  Your total monthly debt excluding mortgage and car loan should be no more than 10% of your total monthly gross income.    
4. Don’t try to achieve a bury – A credit score or FICO score ranges from 300-850. Only a small percentage of Americans, less than 5% achieve a score in the 800’s.  Focus on paying down debt, paying your bills on time and getting current on any late accounts. These actions will help increase your credit score.  Don’t focus on getting a perfect credit score, focus on getting the best credit score you can. 
5. Don’t stay cold – Many consumers have tried different methods on their own to get out of debt.  If you are unable to improve your situation on your own, don’t stay cold – get professional help from a credit counselor, financial coach or financial planner. 
6. Avoid disqualification – You can lose your job or get disqualified from a job by having bad credit.  Bad credit can also prevent you from getting approved for a loan or line or credit.