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FINANCIAL ARTICLES



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Women - Credit Cards
By Joan Perry

I sat down to lunch with my best friend - and asked - 'are you in debt, girlfriend?' How many credit cards do you have - and who made you think that this was a good idea for your financial well-being -- I quipped? We contemplated this question as we chose a low-fat item for lunch off the menu - something naturally good and full of nutrient qualities.

Credit cards, the Draculas of the financial world, drain assets out of our lives at an alarming rate. Put another way, a credit card is like a cheeseburger: It's full of fat (interest), clogs your arteries (debt), and makes you feel sluggish, and it adds nothing to your general health.

And like fast-food burgers which are full of additives, credit cards are slickly marketed. As soon as women entered the workforce in large numbers, banks launched massive campaigns to target these wonderful new consumers and offered credit cards-sometimes free of charge - with intentional addictive features to make it easy to spend. With plastic in hand, women took shopping to new and glorious heights. Credit card companies taught us lessons about spending, such as the notion that "if something isn't new, it isn't good." Do you want to know just how much we've been spending with our credit cards?

People who use credit cards spend up to 30% more -- reported Consumer Reports in their October 2007 issue. And, according to Consumer Federation of America, credit card debt exceeded $400 billion in 1996 and increased to $880 billion in the few short years to 2007. Some people have more racked up on their credit card balances than they earn in a year or even two years, and credit cards have been a primary factor in the alarming increase of personal bankruptcies and house foreclosures.

Girlfriend - it's time to rethink our spending habits and begin to evaluate what we buy and what we choose to do in life based on lasting values-the joy or peace we derive from a possession or an activity-and not just on the momentary thrill of spending. You will have less wrinkles on your face - and not think that you need that face lift - if you are a girl with cash in hand.

For example, instead of spending a lot of money to go vacationing, why not take out your bike and go for a long ride with a friend, your husband, or your family? Think of the stress you'll avoid: You won't have to worry about packing and rushing to an airport or driving long hours to the search for relaxation. Similarly, maybe you'd choose not to go to a stadium to watch a football game and have to deal with traffic, crowds, and possibly bad weather-to say nothing of exorbitant prices for tickets, food, drinks, parking, and souvenirs-when you can watch the same game in the comfort of your home with a bunch of friends. These are choices that you can make in every day life. In short, forget what credit card companies-and a million consumer-oriented television commercials-have taught you. Vote to simplify your life and make "fun" and "inexpensive" virtues, and avoid "costly" and "stressful."

And consider this: While credit card companies were encouraging us to spend, how many women were saving or investing? Not too many. Women today are earning more than they've ever earned, and some are catching up with men. But women buy more than men and save half as much. When they do save, it's usually for major purchases: a vacation, a home-remodeling job, jewelry, or a child's education. In the meantime, they take the plastic and slide into debt - and the frightening prospect of becoming a 'bag lady' later in life..

The worst credit cards are the high-interest bankcards, such as MasterCard and Visa. Unless you pay off the balance each month, you're stuck with excessive interest as well as the principal from your charges. And now some credit cards charge you a fee if you pay off your balance each month! Many banks are now offering lower interest rates for their MasterCards and Visas and are encouraging cardholders to consolidate charges from old cards onto a new one. This can help as long as you take two crucial steps: (1) Never again use the higher-rate card, and (2) make a commitment not to run up a large balance on the lower rate card.

But that seldom works for credit card junkies. Here's what happens: You leave home with a virgin card-no charges. You feel invincible, full of power. With card in hand, you can go anywhere in the world and buy anything you want (within your limit if you have one). After all, that's what all the glamour ads on television tell you. The only problem is, you start to lose track of what you've been racking up because a credit card is like play money. All of a sudden, you're in debt and all your other financial responsibilities take a tumble as well as you try to deflate the credit card balloon. Soon you think it's hopeless, that you'll never emerge from credit card hell, and investing is the last thing on your mind. That's often how it goes.

I suggest not using bankcards unless you pay in full each month. Instead, use American Express or Diners Club (now a MasterCard) -a card whose balance you must pay in full with each statement-and pay with cash as much as possible. It is a myth that you need a credit card. When yours is full, you can go for months without using one, and by paying cash, you can more easily keep track of your spending. And, yes, it's possible to avoid credit cards altogether. You can rent a car and stay in the best hotels by paying cash-you'll just be required to put down a hefty deposit, which will be returned to you when you pay your bill.

The twenty-first-century thing to do, though, is to use a debit card. A debit card looks and feels like a credit card, and companies like Citibank and your local bank are issuing them. You can rent a car, stay in a hotel, eat in your favorite restaurant, buy airline tickets, shop in any store. But with the debit card, you can spend only as much money as you have in the bank because the cost of your purchase is immediately deducted from your checking account. With a debit card, you won't be paying off credit card bills-you'll be spending your own money. You'll also have a better sense of reality about your financial life because what you spend is yours and not plastic "play money." Just remember, though, that while you're out shopping, the money you're spending from your account also has to be used to meet other obligations, such as rent or mortgage, transportation, utilities, and whatnot. You can't falsely assume you have a credit line, because you don't. What you have is a checking balance. Use your debit card to spend within, not beyond, your means, as so many people fail to do with credit cards.

Used the right way, a debit card can lead you down the path of "spend less than you earn and invest the difference"-the first jewel of financial success. Plus, you may also find extra cash in your pocket because you won't be paying those exorbitant interest charges of 20 percent plus that come with credit cards. If you don't like to carry around large sums of cash, and if you don't have a debit card, sign up for one.

But if you stick with credit cards, I suggest that you not wait until you've paid off your card debts before you begin investing, girlfriend. Why? Because it's easy to stay stuck in the cycle of never being able to pay off your credit cards, and so you put off investing forever. Besides, for many women, it doesn't "feel good" to pay off credit cards-it's an obligation, not a joy. But it does feel good to invest, because you know you're building your future, and that's sweet. My wish is for you to have the psychic reward of seeing your savings and brokerage account balances grow each month as soon as possible.

I think that once you've experienced this, you'll be hooked for life to your own nutritional financial well-being - and want to pass up the empty calories. We felt light and nourished as we got up from lunch and went on our way to enjoy the day - and we acknowledge that we wanted money to feel this vital in our lives too.

Joan Perry
President/CEO of Take Charge Financial!
Joan's Blog and http://www.takechargefinancial.com

Joan Perry has developed her expertise over twenty-five years, beginning as an Investment Banker working on Wall Street and continuing as a Money Manager and Owner of a Securities Brokerage Firm. As President of Take Charge Financial!™, Joan initially founded one of the first female-owned Municipal Investment Banking firms in the United States known as Perry Investments Inc. in 1985, which then began retail and brokerage services to individuals in the mid-90s. She has in-depth trading and market experience from managing institutional and retail investment dollars in the securities markets, and throughout her career has managed billions of dollars in the bond, stock and options markets. Joan combined her personal and professional background in her book A GIRL NEEDS CASH© published by Random House in 2000 - a story of money in women's lives and the transition to taking charge of it. She received her MBA from Vanderbilt Owen Graduate School of Management and undergraduate degree from Denison University. She was the founding President of the Los Gatos Morning Rotary Club and currently the Co-Chair of the Los Gatos, CA 'Jazz on the Plazz' Summer Concert Series.

Share your comments and questions with us at Joan's Blog -- and see us on the web at http://www.takechargefinancial.com

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