There are hundreds of good personal finance blogs on the internet. They cover all manner of topics – everything from checking accounts to investing in stocks. But one thing you won’t see is a lot of attention paid to some basic personal finance principles. These are:
1. Money, income and wealth are not the same thing. The media and politicians are especially bad about confusing income and wealth. One can have high income, but have little wealth in the bank to show for it. Personal finance is focused on wealth. Most importantly, its is about the accumulation, preservation and deployment (e.g using wealth to generate more wealth) of wealth.
2. Personal finance is about behavior as much as it is about tools. Lots of personal finance gurus will point you in the direction of websites that help you save money or on-line calculators to help you figure out how expensive your mortgage is going to be. This is all well and good, but getting your personal finance act together is mainly about lifestyle and behavior. Its about behavior which underlies values like frugality, entrepreneurialism and thrift. A great example of this might be eating at home instead of going to a restaurant, or setting up direct deposit to put 20% of your paycheck into retirement.
3. Personal finance means ongoing commitment. Personal finance is more than just sitting down and paying your bills once per month. Its about having a budget and sticking to it, researching investing opportunities and making ongoing contributions to your retirement accounts. In other words its about ongoing commitment to your own wealth and your financial well being.
Why do you need ongoing commitment? Because it takes a long time for your wealth to accumulate. For example it can take months to pay off a large amount of credit card debt, or a year or more to save up a house downpayment. In fact, some writers think the magical “tipping point” in personal finance is owning $650,000 in productive assets – and this can can take a decade to accumulate. So, you need to commit for the long haul – otherwise you won’t get anywhere.
Holding a credit card is a big responsibility. Using the credit card in the correct way can help you build a great credit profile that helps you get the things that you want and need in the future. Using the credit card incorrectly can ruin your credit, trap you in debt, and cost you thousands of dollars in interest payments before the debt is paid off.
The consequences of using your credit card incorrectly can resonate for years, making it impossible for you to continue moving forward and making your life better. In order to ensure that you will avoid the consequences of using a credit card incorrectly, you should avoid these credit card pitfalls at all costs.
Neglecting To Read All Of The Information
One of the worst credit card pitfalls to fall into is signing up for a credit card without reading all of the information that comes along with that credit card. There are some credit cards that sound like a great deal in the advertisement, but have so many fees detailed in the fine print that nearly the entire balance is gone before you get the card. There are many people that neglected to read all of the information provided and found themselves paying expensive annual fees or interest rates that were much higher than they expected.
Before you apply for a credit card, read all of the information to learn about the fees and interest rates associated with the card you are applying for. You should also read all of the information that comes with the card or that comes with each credit card statement to ensure that you know what is going on with your account.
Taking Cash Advances
Obtaining cash advances from your credit cards can be extremely expensive. While the interest rate for purchases may be between 10 percent and 20 percent, the interest rate for cash advances is often much higher and may also trigger additional fees.
Because the credit card companies can earn so much money off of allowing you to take a cash advance on your credit card, they make it as easy as possible for you by allowing you to use a PIN to take money out of an ATM or sending you convenience checks that you can write to yourself or other creditors. It is best to completely avoid taking out cash advances using your credit card, as it is one of the most expensive ways to obtain cash.
Nearly everyone could use a little more cash, especially if they have recently lost their job or has been unemployed or underemployed for a considerable amount of time. Fortunately, there are a number of methods that can be used to earn cash fast to take care of your minor financial needs. Using these methods will not be a substitute for a regular paycheck, but they may be able to help you keep your lights on, your water running, or your refrigerator stocked. Here are some of the methods I have found to be effective for obtaining a significant amount of cash quickly.
Sell Old Or Unused Items
Many people have a number of things around the house that they could sell for some quick cash. Unwanted gift items, clothing that doesn’t fit any more, home décor, and kitchen appliances can all be sold to others that need these items but do not want to pay full price for them. If you want to sell the items yourself for a price that you determine, you can hold a yard sale or list the items that you want to sell on an online marketplace like Craigslist or eBay. If you want to unload a lot of items quickly and do not mind letting someone else determine what your items are worth, you can sell them to a resale store like Plato’s Closet or New Uses.
Become A Babysitter
Many parents would much rather hire an experienced adult to babysit their child than trust the care of their little one to a teenager. With babysitting, you typically get paid on the spot for the number of hours that you have watched the children. To get started, spread the word around to friends and family members that you are willing to watch their child for whatever fee you determine, typically around $10 per hour per child. This is a great method for making money quickly because you determine the amount that you charge and the times that you are available. You can even offer a discount for multiple children, which enables you to earn more for roughly the same amount of work. If you do not know a lot of people that have children, you could join a caregiving site like SitterCity.com or Care.com to find people that need babysitters.
Donate Plasma For Cash
There are more than 500 for-profit plasma centers throughout the country that are willing to pay you for the time that you spend donating plasma. Plasma is the liquid part of the blood that carries the red and white cells that is made up of water and dissolved proteins. Because there is a wide variety of medical uses for plasma, there is also a high demand for plasma from healthy individuals. The plasma centers set their own prices so the amount that you make will depend on the area that you live in. Donors are typically paid as soon as they are done donating.
Improving your credit as much as possible is an important part of effective financial management. Your credit score has an influence on many different areas of your life, including housing, employment, and the ability to get credit in the future. Fortunately, there are a number of small tasks that you can do on a regular basis that will help you improve your credit and keep your credit score high. Here are some of the simple tasks that I use to keep my credit score high and keep from having negative information reported about me.
Track Your Financial Transactions
To keep your credit score high, you have to be on top of your finances. Overdrawing an account or not having enough money to pay your bills can have dire credit consequences. Fortunately, keeping track of your finances has become much easier with the creation of numerous software programs and smartphone apps that allow you to view your full financial picture at a glance. I particularly like Mint.com, which allows you to input information about your financial accounts and see your spending and saving trends virtually in real time.
Review And Pay Credit Card Statements Immediately
Many people make the mistake of tossing their credit card statement aside for later viewing instead of immediately opening it and paying it once it has arrived. Reviewing your credit card statement for mistakes and unauthorized purchases is very important, as the quicker these transactions are identified, the easier they are to correct. You should also pay your credit card payment as soon as you receive the statement to ensure that the payment is made before the due date. Having late or missed credit card payments on your credit report can be devastating to your credit score.
Examine Your Credit Report
It is also important to examine your credit reports regularly to see the information that companies are reporting about you. The information in your credit reports is used in the calculation of your credit score and negative credit report information can cause a considerable drop in your credit score. Free copies of your credit reports from the three main credit bureaus are available for free once per year at www.annualcreditreport.com. Any information found that is inaccurate or indicates fraud has occurred can be disputed with the credit bureau and will be removed from your credit report if its is found that you are correct about the information.