The sooner you realize that any credit card debt is too much the better off you will be.  Most folks have to learn this the hard way.  Once you have acknowledged that you need to rid yourself of credit cards, start with these steps to get rid of them for good.

I have 8 credit cards.  Where do I start?

I have found that paying off the lowest balance card first makes the most sense.  You may have heard of something called the “Debt snowball.”  This was mentioned in one of Dave Ramsey’s books.  The idea is simple.  Start with the lowest balance first.  Apply the most you can to that card while making only the minimums on all the others.  This helps in many ways.  First, it helps you realize you ARE making progress.  Once one card is paid off you can see for yourself that you have accomplished something.  The bill stops coming and its one less thing to worry about.

Once the first card is paid off, take the money you were using to pay the first card with in addition to the money you were using for the minimum payment on the next lowest balance card.  Do this until all cards are paid off.  You will be shocked at how fast this can get things rolling.

But wait!  Some of my cards have much higher interest rates on them.  While you raise a excellent concern, people need constant motivation to stick to the plan at hand.  Unless all of your cards have similar balances, stick to paying off the smallest balances first.  If your cards have similar balances, then it would of course make sense to pay off the higher interest rate credit cards first.

And last but not least, once you are done paying off all these balances, cut up the cards and never use them again.  You can no longer use the excuse they are for emergencies.  If you have setup an emergency fund, you won’t need them.  Plain and simple.  Don’t fall back into the debt trap once your out.

This book was a real eye opener for me.  It describes the perception and the reality of millionaires and how they got their millionaire status.  The truth is, the average millionaire is not driving a $100,000 sports car, or even a new car for that matter.  The folks driving the $100,0000 sports cars are usually just as worse off financially as the person making $8/hour if not worse.  They make more they spend more.  The doctors and lawyers may be book smart, but according to the author, they are decades behind on financial literacy.

Check it out, this is a good, inexpensive read!  Enjoy!

Link to purchase book – Used copies starting at only $.50

I hear a case of living beyond your means just about daily.  The entitlement factor in this country is unreal.  You need to get realistic and buckle down your finances.

Unfortunately, most people in our society have been brought up to live beyond their means.  We are surrounded by images and videos of people living extra large lifestyles that are simply out of reason for most.  Growing up with the constant barrage of the rich and famous, has created a society that not only thinks they need this lifestyle, but think they are entitled to it.

When growing up, most teenagers spend their parents money.  Unless they are working, they are likely spending their money on frivolous things like fancy clothes and electronics.  According to statistics, only about 42% of high schoolers find paid employment.  According to the statistics, less than 50% of teens are working, so their parents are funding their popularity contest.  They are simply keeping up with the teenage Jones’s.

Unfortunately, this upbringing sets the teenagers up for failure later in life.  They are taught that at no matter what expense, they must appear to be keeping up.  This is proven by their average credit card debt of over $5,000 for age groups 25-34 year olds.  Had they been taught the value of the dollar at a younger age, perhaps the frivolous spending would have stopped.

The worst part of this ridiculous spending spree is, that age is not a factor.  The statistics are similar for just about all ages.  Many books state the same.  The more you make, the more you simply spend.  Doctors, lawyers, and the like are all chasing their tails with the fast food burger flippers just on a different scale.  If you earn $20,000 per year, maybe you spend $10,000 on keeping up with the Jones items.  If you’re making $100,000 per year, your simply spending $50,000 on most expensive Jones items.

I don’t know the Jones’.

Many people have the ability to carry the perception of being well off for long periods of time.  However, eventually, the jokes on them.  The charade is over and all that is left is the consequences of leading this type of lifestyle.  The result is usually a lifetime of debt.  I like to refer to this as chasing your tail.  You can chase it all you want, but your never going to catch it.

What you need to realize is, you need to stop buying items you don’t need on credit.  If you don’t have the cash, DON’T BUY IT.  Its that simple.  You need to learn to sacrifice for the better long term goals.  Take a serious look at your spending. Tell yourself, you don’t know the Jones’.

Here are a couple of quick tips

1.  Learn to budget and search for bargains.  If you can’t pay cash, don’t buy it.
2.  Do not give children credit cards.  They do not have the financial foundation to handle them.
3.  If you have credit card debt, call your provider to negotiate a lower rate.
4.  Pay off small balances first, then tackle the larger ones.  Remember, always pay at least the minimum though.
5.  Once you’re out of debt, don’t go chasing your tail again, stay out of debt!

I can’t begin to tell you how much you can save by buying store brand or “value” brand groceries.  I never had really bothered to consider store or value brand items until I started to have the drive to save.  Now, I find myself constantly looking for value alternatives.  Between the grocery stores, and super stores, you can find almost any food or household item available in a value brand.  I have picked up many of these items to find virtually NO difference in taste or quality 95% of the time.  On the occasion, you will get a bad apple out of the bunch but overwhelmingly you will realize that this stuff is the same.  There have been articles online and news stories on TV about how many of the value branded items are actually manufactured by the name brand counterparts.

In most major grocery stores, the price tags on the shelves display the cost per ounce of food.  Compare the name brand to the value brand.  This is the easiest way to save and there is no confusion even if the package sizes are different since it is measured in ounces of actual product.

Expand your horizons and save!

I am confident that we can agree that simply put, you must spend less than you make to build wealth.  Whether rich, poor, or somewhere in between, if you often spend more than you make, you will never accumulate wealth.  Although this concept may be equally as important as some of the things listed below, it is not the number one reason people fail to build wealth over their lifetimes.

Reason No. 9:  Procrastination

Many people fail to invest in their own financial future until it’s too late.  While you are young, you have a excellent opportunity and a definite advantage over the older folks because you have time.  The reasons behind not starting young vary quite a bit and are wide ranging.  Also, age seems to have an effect on why you fail to save.  While young, people in their twenties are just entering the workforce and tend to indulge themselves with the hottest trends, electronics, cars, etc.  Once you hit your thirties, maybe a young family is preventing you from putting away as much money as you would like.  At this point you may be living check to check and this is where debt problems stem.  Forties hit and you may have children in college or unforeseen medical expenses.  By the time you hit your late fifties, it is already probably too late.  Compound interest no longer has time to grow as much as it would have had you saved earlier.

Reason No. 8: Lack of Discipline

Most people find it difficult to save because they constantly buy, and very seldom, save.  It is much easier to say yes to your impulses.  Those who are able to say no, are going to have a much easier time building wealth.  Most are lead by advertising and the ease of being able to swipe a credit card.  The “I don’t need to pay for it now” ideas kick in.  Worry about it now, not later.  Until you find the power to say no, you will never get ahead.  Stop trying to keep up with the Jones’.

Reason No. 7:  Inadequate Protection Against Unexpected Expenses

Life unfortunately throws a lot of curve balls at us throughout the years.  May it be a water heater, car repair, or medical expense, these can all put a damper on your financial well being, and quickly.  Implement an emergency fund to cover these unexpected expenses so you don’t fall back on using credit.

Reason No. 6:  Poor Debt Management – Borrowing too Much

Lack of patience can cause you to turn to credit to get what you want NOW.  Again, learning to say no now, will save you tons of money in interest payments as well as buying items you may not have really wanted to begin with.  When using credit, unless you can afford to pay the item off in full at the end of the month, the item can end up costing much more than the original sticker price.

Reason No. 5:  Failing to Adjust How You Live

When people are used to a certain lifestyle or are used to spending, it is very hard to break the trend.  Try to find a way to break the routine. Otherwise, you will never change, and never seek the financial freedom you were looking for.  Don’t be afraid to try something new.

Reason No. 4:  Lack of Foresight

Winners have the ability to look beyond the immediate and into the future.  Although some may see your visions as dreams, don’t forget you need to have a vision to make your dreams come true.  You are not going to win the lottery.  Set a goal and create a path to help you get there.  Look into the future, find what you want, and plan how you will get there.

Reason No. 3:  Using Time Poorly

You’ve heard it a million times, time is money.  You have a choice to spend your time on watching TV all day or taking a look at how you will finance your future.  No one is going to knock on your door and give you the magic formula needed to plan for yourself.  Once time has been wasted, it’s gone.  Use it to your advantage.  Plan what you desire.

Reason No. 2:  Failure to Plan

My old man said it best, if you fail to plan, you plan to fail.  It couldn’t hold more true.  If you don’t plan what you want, you have essentially removed all hope of ever getting where you want to be.  According to polls, only 5% of people plan and only 2$ have their plans written down. Planning and writing your goals down can be a great motivator.  Everyday when you get up and look at your goals, you are setting the mindset that the reward is later and you can and will stick to the plan.  If you don’t have a plan or goals, how can you succeed?

Reason No. 1:  Lack of Knowledge

This should actually read lack of willingness to gain knowledge.  Most people give up after reading one thing they don’t quite understand.  Make an effort to read more about financial literacy.  This subject can be found in countless books and online websites.  The knowledge is there for the taking.  It is up to YOU to take in and process it.  This will help you find what is best for you.  No one, including financial advisors, have a better picture of your financial future than you.  Turn off the tube and read a book.

Stop living paycheck to paycheck.
Stop blaming your financial problems on anyone and everything besides you.
You are the only one that can control your future.
Find motivation to plan the rest of your life and stop living like a sucker!

Lets take a look at how I think the average Joe’s budget should look like.  Budgets are only useful if you have enough discipline to stick with them.  You will hear me repeat the following constantly throughout my blogging.  99% of success is taking action.  Hold yourself accountable for sticking to your plans.  The old saying goes, if you fail to plan, you plan to fail.

Every payday, every dollar I have coming, is budgeted before the cash even hits my account.  I have found it much easier to pay bills, etc. when all (well, lets be realistic, most) expense are budgeted for.  Here is a sample budget (Which is actually mine to the dollar) to get the juices flowing on what items should be planned for.  Almost all expense fall into this category.  Seriously, when is the last time you didn’t get an electric bill?  So why isn’t it in your budget?  Ask yourself the same question for all categories listed below.

All dollar amounts are per pay period (Every two weeks).

Mortgage – $500
Car Payment – $180
Insurance – $100
Savings – $253
Cell Phone – $53
Comcast Cable/Internet – $29
Electric/Gas – $100
Grocery – $100
Trash Service – $15
Car Maintenance – $25
Home Maintenance – $45
Vacation Fund – $25
Water/Sewer – $30
Clothing – $35
Gifts – $50
Long term entertainment purchases – $40
529 Plan – $13

Cash withdrawn every pay period for other expenses/fun $400.  This includes gas expenses for driving to work, etc.

Most of these are pretty self explanatory.  However, some are not.  I’m an eletronics junky.  I like computers and giant TVs so I have budgeted a small amount of my total pay to the “Long term entertainment” account.  The 529 plan is a educational savings plan for if and when I have kids and they opt to go to college.  Yes, you read that right, I save for college expenses for non-existent children.

You may be looking at these numbers thinking “This is impossible.  I don’t have that kind of money.”  I didn’t always have this money either.  The truth is, if you are living within your means, you should be able to budget for any of these things.  If you are stretched to the max between rent and groceries, you may need to consider getting a smaller place or looking for ways to increase cash flow.  We’ll get to that later.

Think your situation is impossible?  Shoot me an email with your example.  I will create a budget for you and post for all to see.

Well, guess what?  I’m not.  I read an article the other day detailing how banks are “evil.”  If I hear the word evil again, I’m going to drive my car off a bridge.  Society kills me.  There is no personal accountability anymore.  Everything is someone elses fault.  I don’t buy it.

It sounds like people have completely forgotten that banks are a business.  The teller behind the counter, gets paid.  I know, this must be shocking news to you.  It turns out that the bank has to make money to pay this person.  Another shocker, I know.  So why it that when you found out they charged miscellaneous fees, they are the most evil people in the world?  100% of these fees can be avoided, if you are accountable for YOUR actions.

The article basically goes through and calls out the banks for their high fees on overdrafts.  At the end of the article, there is a section where users can post their responses, very similar to this blog.  I was in hysteria after reading the comments.

One reader comments “These outrageously high bank overdraft fees are just another example of the financial system profiting from the unfortunate.”  I find this completely ridiculous.  Here’s an idea, stop writing bad checks.  The argument the fees are too high is completely irrelevant.  I don’t care if the fees are $.02 or $500 per transaction.  At the end of the day, if you had enough accountability for your finances, guess what, the fees would have never been incurred anyways.

Ways to avoid overdraft fees:

1.  Keep a check register
2.  Keep an extra couple hundred dollars in your account.  If you don’t have a couple hundred dollars extra, get a budget.
3.  Don’t even use a bank.
4.  Use cash or a prepaid debit card.  No one is forcing you to bank.  If you don’t have enough accountability for your OWN finances, stop using banks.
5.  Be accountable for your own actions.

Another reader comments about how banks constantly screw him over by processing debits before credits.  Again, this shouldn’t matter.  If you had control of your finances, this would not be an issue.  Many of the readers write of the constant barrage of overdraft fees.  You know what this shows me, not that the fees are insane, but that you have been “screwed” time and time again but have learned absolutely nothing for the “crazy” fees.  So not only do you leave yourself susceptible to the banks “evil” practices, you know so much about how they work to “screw the little guy” you have actually learned the ins and outs of how the bank works yet have not taken an even fundamental step to correct this wrong doing that is being thrown upon you.

Get real people.  You can point the finger all you want but at the end of the day, if the finger isn’t pointing right back at yourself, you’re never going to change.  Its up to you and NO ONE else to fix this.  Your money mistakes and problems are no ones fault buy your own.  The bank didn’t open the account without you asking.  In fact, you probably had to get in your car, drive there, fill out an application, and make a deposit.  The credit card company didn’t send you a credit card without you signing up.  Sure, they advertise, but YOU took action to do this to yourself.  If I ate fast food 3 times a day, 7 days a week, and got pissed off that I weighed 400 pounds, I sure the hell wouldn’t be saying the fast food chains are evil.  They post the nutrition facts in the restaurant stating the burger has 800 calories.  If you’re too lazy to read that, its no ones fault but your own.  Its just as easy to stop over drafting as it is to stop eating double cheese burgers and uber grande size fries everyday.

Cliff notes of the article:  Overdraft fees didn’t break you, you broke yourself.