Financial Savvyness, Taking Control

Eighteen is the age when you start feeling more like an adult. It’s legal to vote, you’re able to enter more nightclubs and you start taking on more responsibility. Many people start college; move out of their parent’s home to dorm or live with roommates. Some can say that life sort of begins at 18.

Along with the freedom, and more responsibility comes this right of passage in to adult hood, called bills. Creditors started sending me applications for cards when I was still in high school. I was already 18 and in my senior year of school. Unfortunately no one ever taught me about credit cards, bills and debt.

I had a few cards when college started, and I just kept buying things. I thought it was fun to have the freedom to spend money, without asking for permission and more importantly without the funds actually having to be there in my bank account. I had a job, but I was working retail, and only made $500 a month.

My credit card debt became $1400 in just three months. I couldn’t afford the minimum balances, and my debt kept rising. I would pay a little here and there, but the interest rates were through the roof. I had to consolidate for 18 months to get out of debt, but that is not the best choice for everyone, and not all situations call for a consolidation.

So being eighteen not only gives you the freedom to spend, but it also can start you on the path to debt and a poor credit score, which will follow you when you’re trying to make important purchases as you get older. When you’re young, all you want to do is hang out with your friends, go shopping, partying and whatnot, but all of that costs money. Money that you might not have, while credit cards are giving you a false sense of having cash in your pocket.

Therefore, it is imperative that you start off your spending habits properly. And if you already are in debt, I have some tips for getting your bills under control; things that I have done in the past and other tips that will definitely help you. Here are some ways you can take control of your debt:

1. Control your spending habit — As mothers, we buy for our children. As wives, we buy for our husbands and as young women, we buy for ourselves. In this world of constant consumerism, it’s hard to avoid shopping. There are four malls less than two miles from my house. How can I avoid shopping? Trust me it’s hard.

Learning to control the need to shop will help you keep more money in your pocket, and keep those balances down. By assessing your spending habits, you can control your money more effectively. A good way to do this is by taking your monthly income versus your have-to bills.

An example of a have-to bill is your rent, or car note or electric bills … these are the bills that no matter what, you “have to” pay them each month. Once you figure out this amount, then whatever is left over you can spend freely.

It’s nice to be able to have money in between pay periods; this shows your control over spending money frivolously. It is also wise to take a percentage of your income and put it in a savings account. The money will then be there for a rainy day or to spend on something more valuable, than shopping every single week. However, if you have already created credit card debts, then you’re not free to spend your money wherever you like, you have bills to pay honey.

2. Try avoiding plastic — Most people say credit cards are only for an emergency, but 9 times out of 10, this is not the case. Try to avoid having to use your card; it’s simple, if you don’t have cash, then don’t buy it. Not carrying your cards lessens the chance of fraud and will keep you from using it. I know it is hard to leave your credit cards at home, but if you have more than one, there is no need to carry all of them. I suggest carrying the one, with the lowest available credit. If you travel a long distance to work or if you’re going on vacation, then yes, bring your cards with you, but if you’re only going to school, or back and forth to work, then a credit card is not necessary.

No matter what you decide to do, if you know your available credit on your cards, you will more than likely use it. Innocently using your card on purchases racks up interest and can double up what you spent, so choose wisely.

3. Know those interest rates — When first establishing credit you will most likely receive higher interest rates, because you don’t have previous credit history. Somewhere between 22 and 29 percent on your monthly charges will be included with your minimum payments. Some of the most popular credit card companies have the highest rates. When you begin making your payments, the minimum balance due only covers those interest rates. It is always recommended to pay more than the minimum balance due. But don’t be fooled, a lot of creditors will take that extra money and apply it to more interest payments. Your balance will never go down that way.

I suggest mailing two payments. For example if your minimum due is $12 and the interest is $10 and you want to pay $40, you should send two checks. One for the minimum and another one for the extra payment. However, if you write “principal balance only” in the notes of the check, the creditor must apply that extra money to the balance, and cannot apply it to extra fees and interest rates.

4. Set up a reasonable payment plan and stick to it. You’ve managed to max out all of your credit cards, and none of the balances seem to be going down, now what? There are a few things that you can do.

A. Consolidation — Search for a reputable consolidation company, preferably a nonprofit one. Many consolidation companies charge a huge fee in order to help you manage your finances, but a nonprofit one will take a smaller amount and refund it to you later. The consolidation company will call your creditors, negotiate a lower interest rate, they can even get it down to 9 percent in some cases.

A lower interest rate will help pay down some of those high balances. Payment plans will be set up and depending on the amount of your debt; you can have everything paid off in two or three years. Trust me, this will be a lot sooner than if you tried to pay them on your own with the high interest rates.

A big problem with the consolidation is that it reflects negatively on your credit report for a while, even after everything is paid off. It shows that you can’t handle paying your bills on your own, which leads me to your other option.

B. Analyze your balances; take a look at the least amount to the highest to see what could possibly be paid off sooner. For example, my lowest balance is $148 and my highest one is $1000. I can easily pay off the one for $148, and poof, it’s gone. I no longer have to worry about it. Then go to the next one. If you focus on tackling the smaller bills/balances first, it will motivate you to tackle the bigger ones. It will also give you peace of mind, leaving extra money in your pocket every month and it will improve your credit score. Now some people’s smallest balances could be $1000, and if you had that lying around to pay, you wouldn’t be in this mess to begin with. So, here is my final suggestion.

C. Set up a goal for yourself, let’s say six months; it’s sooner than two years. Take all of your balances, one by one, and divide them by 6. So, $1000/6 becomes $166 a month. This is more than your minimum payment and can almost guarantee the balance to be paid in the next six months.

If those payments are too much, change it to eight months, but at least you can set up a time frame for seeing a light at the end of the debt tunnel. Now to include your interest rates, take away one month in your division, but still take 6 months to pay it, and your interest charges will be taken in to more consideration. For example, that $1000/5 is now $200 a month, and if you pay that in 6 months your interest charges will ensure the balance completely paid.

All and all, pay attention to your monthly bills. It will help you figure out your spending habits, your interest rates and your payment options. The most important thing is for you to make your payments on time and every month to keep your credit score in good standing.

Jillian Ballard is a blogger with a fresh perspective. She writes about everything from love & relationships to fashion. Contact her at http://jbisjuststartin.blogspot.com/