I have been trying to understand what is the most important priority for people today financially.
Everyone seems to want more money, and more fabulous things. They want to be able to get whatever they want, whenever they want it. Often, they are willing to do whatever it takes to get them! Our society is geared toward sales and marketing to keep the economy moving along. More money in sales represents more available jobs and a higher standard of living for most people... At least that is what we are all told.
Most people are very hesitant to address their personal financial situation. Yes, they may have problems. Yes, they may need more and more money. But they don't seem to be motivated to take a good hard look at how to fix their existing problems.
People seem to be looking for quick and easy solutions. Getting control over credit cards can take years of sweat and hard work!
One quick solution of course, is to make more money. That is not so easy for most people. Some of us are lucky to see a 2-3% salary raise. And what happens when the money well dries up, or the boss stops giving pay increases? No one wants to know. Maybe no one believes that will ever happen, and maybe it won't!!
Another quick solution is to borrow money. The massive debt machine... Credit is easy to get these days. But what is the long term result of debt? Well, that's tomorrow. No need to worry about that today! This is America. A country built on accumulating wealth, and possessions. I wonder how many people got rich, without paying attention to their personal finances? Not many I would imagine...
Let's see, at last check I can get a 1.5% interest rate on my bank savings account! And, I get .25% on my interest checking account!! Not exactly enough to get rich... So there doesn't seem to be much there to motivate anyone to save money in their bank account. I can understand that perfectly!! Why put money in the bank and only get pennies back in interest each month. It seems kind of pointless...
The BIG payback, is in reducing credit card and loan expenses. According to recent data on Bankrate.com, the standard fixed rate for credit cards is currently (March 2007) at 13.44 percent and the variable is 14.56 percent. However, according to a separate article on MSN.com, banks are increasingly pouncing on cardholders with any kind of chink in their credit report with penalty rates of as much as 35%!
Card issuers can raise rates if any of the following occurs. The number that follows each item, is the percentage of banks using the trigger.
- Credit score gets worse: 90.48%
- Paying mortgage, car loan or other creditor late: 85.71%
- Going over credit limit: 57.14%
- Bouncing a payment check: 52.38%
- Too much debt: 42.86%
- Too much available credit: 33.33%
- Getting a new credit card: 33.33%
- Inquiring about a car loan or mortgage: 23.81%
Simply inquiring about a car loan can result in increased interest rates? Amazing...
Bank accounts don't pay you percentages like those to hold your cash. Stock investments don't return high percentages like those in investment returns. What this means is that the single biggest thing you can do to improve your financial situation, is to reduce the cost of loan payments. In other words, pay them OFF!!
If you follow that simple rule, you can save up to 35% in expenses each month. If you value money, then why would you NOT take action to reduce this unnecessary expense?
BJC has a tool that can help analyze your monthly expenses, and can certainly help in prioritizing your debt payments. It's simple, and it's free. Try it out at the link below
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