Getting Off The Plastic Pills
Those who follow this blog will know that I am a big promoter of reading 10 pages of a motivational/ inspirational book each day. If I read just 10 pages of one of the classics in the field (say, Think and Grow Rich by Napoleon Hill), absorb much of what I read and put even one learning into action, by the end of a year I will have read, absorbed, and acted upon sage advice from 10-12 successful authors. **This information was absorbed and acted upon by reading Jeff Olsen's The Slight Edge. I have also read more recently that if one reads (and applies what one reads) for an hour a day in an area of great interest or passion, at the end of seven years you will be a recognized expert in your field of interest.
This morning I finished reading The Automatic Millionaire (Canadian Version) by David Bach. Bach developed a theory called "The Latté Factor"-- the idea is that each of us spends money everyday on something that we could live without, money that can go to work for us if we invest it instead. He also covers a number of other helpful points for building wealth.
I particularly resonated to his advice around paying down credit card debt.
In my (former) business I had the opportunity to speak to a number of people-- young and old-- who were often desperately looking for a way to make extra money to pay off their credit card debt. Here are some of the tips that Bach gives:
(1)Continue to pay yourself first- Every paycheque have an agreed upon percentage of your banked money automatically redirected to a high interest savings fund, RRSP, etc. When you are straddled by credit card debt, Bach suggests that you use 50% of your self-pay to pay down your debt, and invest the other 50%. Once you have paid down your credit cards, you can invest the full 100% percentage.
(2)Negotiate with the issuing agency/bank to pay lower interest on your credit card principle I didn't know that you could actually do this. Do your homework and find out what the average credit card interest rates are in your country. You can find a chart here that shows you the average Canadian rates, ranging from 10.9% to 18.59% According to Bach, you can ask your bank (and he suggests to speak directly to a 'supervisor' who can actually effect the change) if you can pay half of the average percentage. If they drag their feet, you can state that you will be obtaining another credit card with a better rate. Then do that, but make sure beforehand that the rate is not going to go from bliss over the initial six months to 20% interest in the seventh month. If you have successfully done this, could you comment below? Thanks!
(3)Get off the Plastic Pills Bach suggests that if you have escalating credit card debt, that to walk around with that credit card in your wallet is akin to an alcoholic walking around with a bottle of vodka in his briefcase. Cut up the card and look for more appropriate ways to pay for your purchases.
(4)Have a systematic way of paying off debt on multiple credit cards Bach suggests that you list all of your credit cards and the amount owing and their minimum payment requirements. Then rank them according to the least amount owing to the most owing. Now pay down the cards with the lesser amounts (in order)as quickly as you can (divide how much you owe into expedient sums, such as $4XX/month divided by $8XX owing on my Bay card means that I can pay off my Bay card in two months.) For your other cards, with higher balances, pay them using the minimum monthly payment. When you have paid off each subsequent card (and cut it up?), pay down the next card with a 'smallest balance' as you did the first. In this way, of course, you will soon not have several interest-generating debts, but only one. You will have a real sense of accomplishment. Paying off these suckers is liberating in more ways than one.
I won't give away all David Bach's great suggestions. You can see where activating even one tip can make a huge difference in the lives of those of us with credit card debt.
**Thank you to Santa Claus at Flick'r.com for the use of the lovely photo called "Between the Shadows".