Personal Money Management

Why Personal Money Management Is Important

In order to understand why personal money management is so important consider the following questions.

  1. Do you ever worry about money?

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  2. Does it ever seem like your money just disappears and you have no idea where it all went?
  3. Are you now on your own (or soon will be) and you have no idea how money really works?
  4. If you’re married, do you and your spouse ever have tense conversations (or flat-out argue) about money?
  5. Would you like to know how much money you can safely spend before your next paycheck and still be okay financially?
  6. Do you have hopes and dreams that are bigger than your bank account and you wonder if you will ever be able to achieve them?
  7. Do you have a tendency to spend money on things that you can’t afford?
  8. Despite big plans, do you always have trouble coming up extra money to save or invest?  Would you like to know what it will take to make that happen?
  9. Does it seem like you never make any headway paying off your debts (or worse, they continue to grow)?
  10. Have you ever felt overwhelmed by the thought of what it would take to get your finances organized?
  11. Does it seem like you’re never getting ahead despite the passage of time and all of your hard work?
  12. Do you sometimes feel tossed about as external events crash upon you, feeling that they are in control of your financial destiny rather than you?

If the answer to any of these questions is “yes” then I would suggest that personal money management is very important to you.  Then you’ve come to the right website.  Keep reading!

Related Articles and Information on Personal Money Management

If you have not already done so, reading the following articles will enhance your understanding of the concepts presented in this one.

How Do Credit Cards Work

How Do Credit Cards Work?

A Credit Card is a Means to Borrow Money

How do credit cards work?  When you boil it all down a credit card is simply a convenient means to borrow money.  In other words, when you use a credit card to pay for something it’s not really you that’s paying for it; the credit card issuer (the bank or financial institution that issued you the credit card) is paying for it.  That means when you use a credit card to make a make a purchase the seller is happy, because they get their money.  However, the transaction isn’t over as far as you’re concerned because now you owe the credit card issuer.  In summary, when you use a credit card you’re borrowing money from the credit card issuer pay for things, and then you’re obligated to pay off your credit card balance.

Payment Options

When answering “How do credit cards work?” keep in mind your credit card issuer obsesses over how much money you owe them.  Without fail every month they’ll send you a statement listing each of your charges as well as any unpaid balance that carried over from the previous month, and then they’ll then offer you payment options.  On the high end you can opt to settle all of your outstanding charges by paying your credit card balance in full.  On the low end you can make the “minimum payment,” the lowest amount the credit card issuer will accept without penalizing you according to the terms of your credit agreement.  Finally, if you can’t pay off your credit card in full but you can make more than the minimum payment then you are free to do so.

Some credit cards will charge you interest starting from the time you make a purchase (I’m not a big fan of these credit cards).  Fortunately, however, most credit cards won’t charge you interest (or “finance charges”) on your purchases as long as you pay your monthly balance in full and on time and you don’t have any carryover charges from the previous month.  Said another way, credit card charges are generally interest free as long as you pay your balance in full and on time. Related Article: Improve Your Credit In 5 Easy Steps.

Credit Limits

How Do Credit Cards Work Credit LimitYour credit limit is the maximum amount of debt that you can charge to your credit card.  For example, if you have a credit limit of $5,000 then you can either make a one-time purchase of $5,000 or you can make a combination of smaller purchases equal to the same amount.  You’re said to have “maxed out” a credit card when you reach your credit limit, meaning that you can no longer make any purchases with it until you’ve paid down your balance.  In other words, if you charge $5,000 one month and then pay your balance down to $4,000 then you charge another $1,000 until you reached your $5,000 credit limit.

Sometimes your credit limit is automatically set by the credit card issuer.  For example, they might say, “Here’s a credit card and, based on your salary, credit history, etc., you can charge up to $5,000.”  Alternatively, you can ask for a certain credit limit when you apply for your credit card (or you can ask for the credit limit to be increased for a card you already have).  Either way, you should not make purchases that would exceed your credit limit.

What happens if you do exceed your credit limit?  First of all, you may not be allowed to in the first place.  Remember, whenever you buy something with a credit card it’s run through a payment processor (or it will be verified online if you’re making an Internet purchase).  Thus if you attempt to exceed your credit limit your purchase may be denied.  However, if you do happen to make charges that exceed your credit limit then your credit card issuer will likely charge you penalties for doing so.

Cash Advances

In a typical credit card transaction you’re paying for things, but you never actually take possession of any cash.  For example, if you use a credit card to buy a computer for $1,000 you never take physical possession of the $1,000; that money is paid directly by the credit card issuer to the computer vendor.  However, in addition to using a credit card to charge purchases, you can use it to get a cash advance.  This can be accomplished in one of three ways.How Do Credit Cards Work Cash Advance

  1. You can use your credit card to get cash from an ATM (contact your credit card company if you don’t know your card’s PIN).
  2. If your credit card was issued by a nearby bank you then you can go to one of their branches in person and get cash directly from a bank teller who will charge it to your credit card.
  3. Finally, you can get a cash advance from your bank in the form of a cashier’s check (but again, it has to be the bank that issued the credit card).

Benefits – How Do Credit Cards Work With Cash Advances?

The benefits of the first two options are obvious; you can use your credit card to actually get cash.  But why would you want to use your credit card to get a cashier’s check?  To illustrate, my wife and I once had a car suddenly die on us.  After some searching I found a used car that we had enough money set aside to pay for.  The problem was that I couldn’t access the money immediately because it was in an investment account, and if I didn’t move quickly I was afraid we might lose the opportunity to buy the car.  To solve the problem I went to the bank and got a cashier’s check and charged it against our credit card.  I then used the cashier’s check to pay for the car.  Finally, after the money from our investments became available a few days later I used it to immediately pay off our credit card.  Thus, by using a credit card to obtain a cashier’s check we were able to move quickly on purchasing the car we wanted (which ironically turned out to be a terrible car…but that’s another story).

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Annual Fees

How do credit cards work with annual fees?  Well, some credit cards charge an annual fee and some don’t.  If that’s the case then why would you ever get a credit card that has an annual fee?  Generally you wouldn’t.  However, some credit cards provide special benefits and incentives, and if the value of those benefits and incentives exceed the cost of the annual fee then it’s worth considering.

What’s In It For The Credit Card Issuer?

How do credit cards work for the credit card issuer?  To have a balanced understanding of credit cards it’s important to know what’s in all of this for the credit card issuer.  Well, if you carry a balance on your credit card then it’s pretty obvious: they’re going to make a financial return of 18%-22% on the money they loaned to you.  Ouch!  But what if you pay your balance in full and on time every month and you never owe any interest?  Does that seem too good to be true?  Are you ripping off your credit card issuer, or is it just that they’re lulling you to sleep, waiting to hit you with some hidden fee or penalty?

Well rest easy, because your credit card issuer is making money when you use your credit card whether you carry a balance or not.  How?  For every purchase you make the merchant has to pay about 1%-3% in credit card fees (and sometimes even more on top of that).  As a result, as long as you use your credit card responsibly and pay your balance in full and on time then both you and your credit card issuer are getting something out of the deal: you get a safe, convenient means to borrow money in the short term and they get steady fees from merchants when you make purchases.  It’s when you carry a balance that things get out of whack, because then you’ll pay exceptionally high interest rates, and if you fall behind then a whole train of penalties and interest will follow as well.

How To Manage Debt Effectively

In the current it seems that a lot people are still sinking into debt, even though the loan companies have become very strict on who they lend money to. This article was intended to give you tips on how to manage debt effectively.

We know most people who find themselves in debt will struggle initially to get a handle on things and could end up even deeper in debt if they are not careful. However, there are several ways in which to get debt help to tackle your debt problem.

Top 5 – How To Manage Debt

How to manage debt effectively

Priorities Your Monthly Expenses

No doubt you may have monthly expenses, which you could certainly get rid of. For example get rid of any club/gym memberships, which are not totally necessary. And talking of luxuries you should also eliminate on your takeaways each week. Over the course of a month the cost can really add up.

Get A few Quotes

Next time you go to renew your car insurance, home and content insurance etc then it pays to shop around for the lowest price deal. You can save $100’s by getting quotes online when it comes to renewal time.

Pay more each month

If you already own a number of credit and/or store cards you should always pay more each month. A lot of people tend to pay back just the minimum amount and it could take years to finally wipe the debt. By paying a little extra it could shave off a few years of repayments.

Use 0% Balance Transfer Cards

How To Manage DebtIf your credit rating is good and you also have lots of cards it makes sense to move your debts to cards which give you 0% for extended periods. Lots of companies give out 0% on balance transfers from other cards and they do this for anywhere up to 6-12 months. This can save you lots of interest payments each month and should be a high priority in helping to manage or reduce debts. Check out to find out cards you will qualify for.

Secured Debt Consolidation loans

Lots of loan companies offer this type of loan. The principle is very easy in that you pool all your debts from credit cards etc into one big loan. This then leaves you with one manageable loan, which you pay back each month. Consolidation loans are very popular but are only useful if you also cut up the credit cards that got you into the debt mess initially. The loans are typically secured on your home so the interest rates are very competitive, and certainly less than a standard credit card. As you can see by consolidating your debts it can save you a lot of money each month.

How To Manage Debt? What’s next?

The above are just 5 ways on how to manage debt. By applying all or even a few of the debt management tips will leave you with a much lower debt exposure month on month. All you need to do now is apply the advice given and start clearing your debts from today. Look at Improve Your Credit In 5 Easy Steps

Help With Debt Problems

Using a Plan To Help With Debt Problems

Getting help with debt problems is the first step on the road to becoming debt free. Regardless of your financial situation you can get out of debt if you are prepared to take the necessary and in some cases painfull steps required. For many people being in debt is a way of life and most people would struggle to make ends meet without their credit cards or in-store charge accounts. Mortgages and car payments are among some of the debts people consider necessary. However, planning for the future may require help with debt problems in the form of a debt reduction plan to have needless debt eliminated or greatly reduced to help through retirement. Additionally, as a family grows their spending increases until it reaches a peak and as the family begins to shrink with children leaving the nest, some of the spending habits do not shrink proportionately.

A good debt reduction plan can help bring spending back into alignment with the family size. For example, cell phones are one of the expenses that can be reduced as children leave the house and strike out on their own. They have had an extra line charged to you, but once gone have their own service and you may still be paying for a line not in use.

Credit Card Debt Problems

Get Help With Debt Problems When credit card bills come due, the minimum payment is typically low enough for people to afford, while allowing them to maintain a high balance. The company makes its income from the interest charged and with many cards the interest rate is so high that by making minimum payments, it can take years to pay off, even if no additional charges are made.

For a debt reduction plan to work, making higher than minimum payments will pay the balance down much faster. For those with little or no experience with budgets, there are many service organizations that can help with debt problems, often for no charge to help put together a debt reduction plan. Others, for minimal fees will also contact creditors and negotiate lower interest or settlements to reduce the overall amount of the debt to help make your debt reduction plan a reality. Understand, when card companies agree to lower accept lower balances the cards will need to returned and the card will be unusable. You will find many resources to help with debt problems on this site. Have a look around to find one that best suits you situation.