JessiccaAre you addicted to debt?
January 20th 2007 06:48
I ran into this pretty interesting article I bump into when I did my regular email checking. Since there are so many people kept lured to the credit cards advertisements and promotions. Those who seemed to realise that he / she is unable to clear the debts should read this out.
Article extracted from MSN Money UK
by Emma-Lou Montgomery
Want it, can't afford it, but still buy it? Exciting, or what? Here are the tell-tale signs that going into the red is giving you an unhealthy buzz.
If you recognise yourself in any of these scenarios it's time to kick your addiction.
Tell-tale sign number 1
You have (at least) three 0% interest rate credit cards that are all maxed out. And you love to brag about it too.
You see yourself as a 'pioneer' of 0% interest credit cards and you've been a faithful follower from the word go. You know all the latest deals, which cards give you 12 months interest free, how much the various balance transfer fees are, and so on.
The problem is, you've moved your balances, and increased them so many times you're now thousands of pounds in debt on each one and have absolutely no means of paying them off.
The positive solution:
Your ability to keep an eye on the latest interest rates and time your transfers so you always keep the 0% deal going is an extremely valuable skill. You've got a real talent, which used in the right way will help you make the most of your money. Start by channelling your energies into clearing those debts.
Tell-tale sign number 2
Instead of paying outright for anything you always take the credit option.
You say, why pay cold, hard cash for something when you can get a 'nothing-to-pay-for-six-months and then two years interest-free credit' deal? And you're right to an extent. Just make sure you do pay the sum in full by the end of the interest-free period though, because these deals only benefit the retailer and finance company when the exorbitant interest rate kicks in once the 0% deal has finished.
The positive solution:
You take the credit deal and put the cash you've set aside for the purchase into a high interest savings account. That way your money earns you even more. You'll be able to clear your debt outright at the end of the term and still have cash left over to show for it. That's smart borrowing.
Tell-tale sign number 3
"About £12,000 or £21,000 – I'm not sure." You have no idea how much debt you're in.
Your uncertain grasp of the real financial picture is dangerous. If you have the ability to add and subtract zeros on a whim you're going to find yourself in really hot water when it comes to having to finally face the music and pay off your debts. For example, if you borrow £100 at a rate of 6.9% over 18 months you'd end up paying a total of £175.60 in repayments and interest. Bump your borrowing up to £1,000 and the same deal would cost you a total of £1,756.11.
The positive solution:
Once you've got your finances under control, and it's time to start setting a little something aside for the future, you should have no problem siphoning off a little each month. Set up a standing order and put just £10, £25 or even £50 a month into a mini cash ISA and you'll be on your way to effortless saving.
Tell-tale sign number 4
You say there's nothing you can't afford. And you seriously believe that. It's just a matter of working your figures properly and you'll be able to have whatever you want.
When you talk about 'working your figures properly' you mean borrowing. But borrowing more and more is a sure-fire way to sink deeper into debt. Before long you could find yourself with nowhere to turn but to voluntary bankruptcy - which is not an advisable option.
The positive solution:
Your ambitions should help spur you on when it comes to getting what you want. Use that desire to get what you want in a positive way. Instead of having what you can't really afford and getting yourself into financial trouble, channel your desires into positive action and save for what you want. If you really want something, then yes, you can have it. Maybe not right now, but wouldn't it be more rewarding to have exactly what you want with neither guilt nor financial penalties attached?
Tell-tale sign number 5
You can't resist any credit card and personal loan offer that lands on your doormat.
They offer it, you take it. The problem here though is temptation. Because you've got another few thousand on your credit card balance you feel you can spend it. But you shouldn't, unless you can afford to.
The positive solution:
The fact that you are offered credit left, right and centre means you can pick and choose. But only take up the ones that really benefit you. For example, say you're offered a chance to switch your personal loan to a better rate, you'd be foolish not to go for it. Just beware of costly early redemption penalties. And don't go spending like you've just won the lottery afterwards.
Tell-tale sign number 6
You say "Of course I'm in debt. EVERYONE is!" and just love competing with your mates about the size of your overdraft/credit card balance / mortgage.
Need I say more?
The positive solution:
Your competitive streak can be put to better use. Instead of bragging about the size of your debts, wouldn't it be better to be able to brag about the car, or whatever you want, that you bought yourself – with no debt attached?
You need to flip your thinking on its head. Start looking at how much you have, not how much you don't have. It's actually not cool at all to be in debt. It is cool to be able to say "of course I'm not in debt, everyone else might be, but not me". And mean it.
Tell-tale sign number 7
You actually believe you'll win the lottery – one day.
If you're convinced that one day your numbers will come up, and you're spending like they already have, you're heading for a fall. Sure, you MIGHT win the lottery, but the chances are you won't. So it's better to get real.
The positive solution:
Your desire for all the good things in life should spur you on to get them – through your own efforts, not luck.
It might not be a lottery windfall, but regular savings pay off in the end. To find out how long it will take you to say, double your money, use the "Rule of 72". You simply divide 72 by the rate of interest you're earning and you get a very rough idea as to how long it will take to double your money. If nothing else, it shows you how important every quarter of a point is when it comes to interest rates. So watch what you're paying, as well as what you're earning.
And remember, in this life, you don't usually get something for nothing – unless you do win the lottery. Just don't bank on it. As I saw written on a wall recently, "Luck is the idol of the idle".
Article extracted from MSN Money UK
by Emma-Lou Montgomery
Want it, can't afford it, but still buy it? Exciting, or what? Here are the tell-tale signs that going into the red is giving you an unhealthy buzz.
Tell-tale sign number 1
You have (at least) three 0% interest rate credit cards that are all maxed out. And you love to brag about it too.
You see yourself as a 'pioneer' of 0% interest credit cards and you've been a faithful follower from the word go. You know all the latest deals, which cards give you 12 months interest free, how much the various balance transfer fees are, and so on.
The problem is, you've moved your balances, and increased them so many times you're now thousands of pounds in debt on each one and have absolutely no means of paying them off.
The positive solution:
Your ability to keep an eye on the latest interest rates and time your transfers so you always keep the 0% deal going is an extremely valuable skill. You've got a real talent, which used in the right way will help you make the most of your money. Start by channelling your energies into clearing those debts.
Tell-tale sign number 2
Instead of paying outright for anything you always take the credit option.
You say, why pay cold, hard cash for something when you can get a 'nothing-to-pay-for-six-months and then two years interest-free credit' deal? And you're right to an extent. Just make sure you do pay the sum in full by the end of the interest-free period though, because these deals only benefit the retailer and finance company when the exorbitant interest rate kicks in once the 0% deal has finished.
The positive solution:
You take the credit deal and put the cash you've set aside for the purchase into a high interest savings account. That way your money earns you even more. You'll be able to clear your debt outright at the end of the term and still have cash left over to show for it. That's smart borrowing.
Tell-tale sign number 3
"About £12,000 or £21,000 – I'm not sure." You have no idea how much debt you're in.
Your uncertain grasp of the real financial picture is dangerous. If you have the ability to add and subtract zeros on a whim you're going to find yourself in really hot water when it comes to having to finally face the music and pay off your debts. For example, if you borrow £100 at a rate of 6.9% over 18 months you'd end up paying a total of £175.60 in repayments and interest. Bump your borrowing up to £1,000 and the same deal would cost you a total of £1,756.11.
The positive solution:
Once you've got your finances under control, and it's time to start setting a little something aside for the future, you should have no problem siphoning off a little each month. Set up a standing order and put just £10, £25 or even £50 a month into a mini cash ISA and you'll be on your way to effortless saving.
Tell-tale sign number 4
You say there's nothing you can't afford. And you seriously believe that. It's just a matter of working your figures properly and you'll be able to have whatever you want.
When you talk about 'working your figures properly' you mean borrowing. But borrowing more and more is a sure-fire way to sink deeper into debt. Before long you could find yourself with nowhere to turn but to voluntary bankruptcy - which is not an advisable option.
The positive solution:
Your ambitions should help spur you on when it comes to getting what you want. Use that desire to get what you want in a positive way. Instead of having what you can't really afford and getting yourself into financial trouble, channel your desires into positive action and save for what you want. If you really want something, then yes, you can have it. Maybe not right now, but wouldn't it be more rewarding to have exactly what you want with neither guilt nor financial penalties attached?
Tell-tale sign number 5
You can't resist any credit card and personal loan offer that lands on your doormat.
They offer it, you take it. The problem here though is temptation. Because you've got another few thousand on your credit card balance you feel you can spend it. But you shouldn't, unless you can afford to.
The positive solution:
The fact that you are offered credit left, right and centre means you can pick and choose. But only take up the ones that really benefit you. For example, say you're offered a chance to switch your personal loan to a better rate, you'd be foolish not to go for it. Just beware of costly early redemption penalties. And don't go spending like you've just won the lottery afterwards.
Tell-tale sign number 6
You say "Of course I'm in debt. EVERYONE is!" and just love competing with your mates about the size of your overdraft/credit card balance / mortgage.
Need I say more?
The positive solution:
Your competitive streak can be put to better use. Instead of bragging about the size of your debts, wouldn't it be better to be able to brag about the car, or whatever you want, that you bought yourself – with no debt attached?
You need to flip your thinking on its head. Start looking at how much you have, not how much you don't have. It's actually not cool at all to be in debt. It is cool to be able to say "of course I'm not in debt, everyone else might be, but not me". And mean it.
Tell-tale sign number 7
You actually believe you'll win the lottery – one day.
If you're convinced that one day your numbers will come up, and you're spending like they already have, you're heading for a fall. Sure, you MIGHT win the lottery, but the chances are you won't. So it's better to get real.
The positive solution:
Your desire for all the good things in life should spur you on to get them – through your own efforts, not luck.
It might not be a lottery windfall, but regular savings pay off in the end. To find out how long it will take you to say, double your money, use the "Rule of 72". You simply divide 72 by the rate of interest you're earning and you get a very rough idea as to how long it will take to double your money. If nothing else, it shows you how important every quarter of a point is when it comes to interest rates. So watch what you're paying, as well as what you're earning.
And remember, in this life, you don't usually get something for nothing – unless you do win the lottery. Just don't bank on it. As I saw written on a wall recently, "Luck is the idol of the idle".
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Comment by katyzzz
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Fortunately I am not, there' s a lot of info for people there. Hope they find it helpful
katyzzz
Comment by Jessicca
Learning Something Everyday
Malaysia Found
Honestly, I am kind of almost like them. The only thing is I still use my credit card to pump patrol for my car and then I reserves the exact amount aside so that I won't over spend.
Yet the debt I have in me is still there, and quite a lot too.. but I look forward to struggle for another 2 months as the debts will gradualy be less and less and I can start saving again.
Thank you so much for stopping by and supporting my post. ^_^
Have a blessed weekend
Jessicca
Comment by Bhumika
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Comment by Candice
That's a great article. Thanks for posting it.
It's scary to think how out of control credit card debit is getting. My hubby and I fell into the 'interest free' trap once when we bought a fridge when we first married. It's so easy to think you'll have the money to pay it off but when you don't - well, it becomes a very expensive fridge. We vowed then never to do interest free again!
Comment by Mrs M
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Mrs M
Comment by Lilla
From The Home Front
Enviro Warrior
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Esoteric Bookshop
I'm relieved to say that I am not an addict... phew!
I do use a credit card to manage the household budget, but that's becuase it can be run without interest each month by not spending more than I earn. I keep it beucase it offers unlimited transactions. A debit card only has four and is too much agro as four transactions is not enough per month to run a household.
National Credit Debt is part of the problem of over consumerism sickness that people suffer from. Credit cards did nothing but increase waste. Bring back the Lay-by system, I say!
Keep up the good work J.
Have an inspirational day
Lilla
Comment by Manjula
awesome article....I am always trying to figure out how to live happily frugally .
Your article reminded me again of how quite a few people don't seem to acknowledge the fact that money doesn't appear magically - they just hope that if they don't think about it their debt will dissapear one day
Glad I am not an addict but in this age of being bombarded with store cards, credit cards and interest free loans, it is a daily challenge to keep away from temptation
Great work
Manjula
Comment by Jessicca
Learning Something Everyday
Malaysia Found
I am so thankful to see everyone's coments here, as they all meant a lot to me. ^_^
I am glad that you guys find this article useful. Unfortunately, I was once quite an addict but I still manage to clear it off. Like Candice said, I too was tricked by the interest free thing. But it was good back then when I tried to reserve cash for emergency while paying 0% for my notebook. That was 3 years ago, thank god.
Last year I was once again tricked into starting my own side business when it was stated of "all you need is the first $200" and the subsequent consequences was shadowed off. I admit I wasn't very good in business. Now I am paying off my debts and pray that after all this, I can finally start saving again.
Yet I still use my credit card to do my groceries, only to vow myself that every cent / dollar swiped I set it aside so that I will not over spend myself. I don't take cash to shopping as it is dangerous to carry too much cash around. I am just glad that I'm sane enough not to overspend. ^_^
Lilla, here the debit cards are limited to three times only, after that we are charged a dollar extra in every swipe so it isn't a good idea do use debit card to do groceries. I think it's pretty good for 4 times a month because busy city people only do their groceries once a week.. LOL
Bhumika, honestly I am quite sure that every major city around the world are suffering this problem, that's why the banks are making big money over the interests.
Thank you once again for dropping by! You all have made my Monday shine brightly over the cloudy skies of Malaysia.
Jessicca