Your Money Questions Answered
When it comes to budgeting, debt problems or just about anything to do with managing money, the basic questions people ask me are often of similar nature. In order to provide answers to your common money management problems, I have included some typical questions and answers of the most common.
"My husband and I are going through a tough time trying to get out of debt. Currently. we are $15,000.00 in credit card debt. We have never missed a minimum balance payment, our credit history is great! We are just tired of living pay check to pay check! I was hoping for some advice on debt management to getting our 2 credit cards paid off as quick as possible for us to buy a house. Please let me know what your advice is! We are open to any and all suggestions and we want to be educated to learn how to better manage our money and to make our current situation better. All we want is to get out of this credit card debt! The cards have been cut up so we have made that step!! Hope to hear from you and I look forward to learning all I can from you and your books!!"
Thank you so much for your response. As for your situation, I suggest the following recommendations for managing your debt: First, Prepare a home budget based on the 40%-30%-20%-10% money rule. However, whenever we need to pay off our debts, we need to increase our Fixed Costs. This is because Fixed Costs are our regular, consistent payments which are composed of basic lifestyle requirements (such as rent, insurances, etc) and debt. To reduce debt quickly, we need to make adjustments to our Variable (essential costs such as food and clothing that you have some control over) and Discretionary Costs (non-essential and luxury items). You will need to decrease these costs according to your spending requirements. Even though you may want to hasten paying off your debts, I still strongly recommend that you always put a little aside for savings. I always tell my clients to continually put away a minimum of 10% for the future. Remember, if you always have some permanent savings you will never have any money problems in the future and will always feel secure, regardless of what happens. Please, please, remember to save.
"How can we get a credit card company to lower it's interest rate?"
It all has to do with basic economics and market forces. That is, supply & demand, and competition in the market place.
Unfortunately, the use of credit cards has become so deeply imbedded in our western society, the banks and institutions have got the upper hand. The demand is greater than the supply. Unfortunately, over the past 20 years or so, it has become more and more difficult to live without a credit card. So, do what I do - only get one credit card with a maximum limit of $1,000 and pay the balance off every month. The rest of the time you live off cash. You will always have more control over your finances, gradually become better at managing your cash outflows, and will ultimately assist in helping your country's economy improve.
Credit cards have been the bane of the 20th-21st century and progressively destroying the economies of our western world. Yes, we can blame the taxes, government policies, etc, etc. - but the truth is (from basic economics) if the overall population is not saving and investing but getting deeper and deeper into very expensive debt (via credit cards), our economies will all gradually decline.
The other answer to your question - is to shop around until you find an institution with lower rates - or better still, pay off your balance at the end of every month and therefore not incur any interest.
"I am about to receive around $150,000 in an out of court settlement. I plan to pay off approximately $30,000 in bills and debts. We also want to buy a small home. We rent now. $75,000 (cost of home). We have an 11 and 8 year old and we would like to put what's left away for college. We hear people say there are lots of places we can put our money so it makes more money. Can you give us any suggestions? Thanks in advance"
As an accountant my expertise is in providing money management advice, not financial planning advice. I can however make the following recommendations:
I believe that paying off your debts is a great idea. Also, it is important not to incur future debts if possible. Watch your credit cards. It is natural that people want things often before they are able to pay for them and therefore start to incur debts. My philosophy is: if you can't afford to pay for it now, you can't afford to have it.
I hope this helps and I wish you all the best for your financial future.
Copyright © Ann M Marosy 2008. Ann Marosy is an accountant, consultant, and former university lecturer. She was formally the Financial Controller of the Fortune 500 Company, Jardine Matheson, and Finalist of SA Executive Woman of the Year. Ann is the author and creator of 'The Money Program: How to Manage the 6 Stages of Wealth'.
The terms: Fixed, Variable and Discretionary costs are terms that businesses use to categorize their outgoings and expenses but can be easily translated to personal finances. Ann uses these terms and the 40%-30%-20%-10% money rule for budgeting, as a basis for the Money Program that she designed to help people run their family budgets in the same way that successful businesses do - with the same successful results.
For more details about 'The Money Program', Ann's complete list of books, and free reading and advice, please visit: http://www.moneta.com.au