When Is Shopping A Weakness?
Self help article
by Jim Larranaga

Prosperity and financial wellbeing self help article:

(ARA) - America's 78 million credit cardholders carried an average balance of $7,564 last year. The cost in interest and fees amounted to more than $1,000 for the typical budget. If you just said, "Budget - what budget?," you know what I mean. Truth is, most of us go on spending sprees from time to time.

But, when power-shopping creates the illusion of success, even as debts spiral out of control, it has become a weakness. Some obvious signs that spending is out of control include making minimum payments on your credit cards, late fees, bounced checks, lack of a budget and loss of sleep over money worries. Debt counselors say there is no easy way out of this fix. The answer for most families is belt-tightening. Is there an area in which you might need to adjust your finances by a notch or two?

Adjusting Finances:

1. Consolidate credit cards. You might want to pay off the cards with the highest interest rate first. If you have a card with a low teaser rate try to eliminate that balance before the low rate expires. Consolidate your credit card debt on the one with the best rate. Make more than the minimum payment each month. Just paying the minimum on a credit-card bill can result in it taking you 20 years or longer to pay off your current balance. You could end up paying five times as much as the price tag amount.

2. Refinance your home mortgage. Refinancing may entail some costs such as origination fees and points so the savings on monthly interest charges must be great enough for you to recoup your upfront costs during the period you expect to live in the home.

3. Track expenses. Use your checkbook, credit card or debit card so you have a receipt. And, limit your use of ATM machines because there is no easy way of tracing how the cash withdrawals are spent.

4. Create a budget. After tracking expenses for several months, categorize your spending, taking special note of two categories: necessities (e.g., utility bills) and discretionary expenses such as cable TV, cell phones, babysitters, restaurants and health clubs.

5. Arrange for automatic bill paying. Pay monthly bills (such as your mortgage) with automatic bank transfers to make sure you don't spend the money elsewhere and incur late fees. See if your local utility has a budget saver plan that lets you pay the same amount each month.

6. Curtail discretionary spending. Ask yourself if you really need a gazillion cable TV channels, and whether that health club membership has you on a financial treadmill. Take the phone number for pizza delivery off the speed dial function on your telephone. Buy private label brands. Clip and use store coupons, which can easily save you $300 a year in tax-free money.

7. Pay less for necessities. For example, you might lower your insurance bill by combining all your policies with one agent and by increasing your deductible. Check out some of the new low-cost long distance phone rates. Buy clothing that can be machine-washed instead of dry-cleaned.

8. Pay down your debts with any windfalls such as a tax refund, bonus or over-time pay.

9. Make saving a habit. Once you pay off a loan, continue setting aside the amount of your payment each month. Consider arranging for automatic transfer of the funds to your savings account. You might be surprised at how fast the savings add up. For example, just saving a dollar in pocket change every day can add up to $35,458 at 4% interest in 40 years.

10. Compare your spending to that of others.

Budgeting Guidelines:

Of course, spending varies by income and region of the country (e.g., housing is more expensive on both coasts). But in all cases the total should not exceed 100% of your income. So if your expenses are high in one area, they should be lower in another area. Using the figures below as a general guideline, take note of where your spending might need adjustment.

(Average household spending) Statistical Abstract of U.S., 1999 Spending Range

• Food/alcohol = 13.5%
• Housing = 29.6%
• Apparel = 4.8%
• Transportation = 17.0%
• Healthcare = 4.9%
• Entertainment = 4.6%
• Personal care = 1.1%
• Reading = .5%
• Education = 1.3%
• Tobacco/misc. = 3.0%
• Cash contributions = 2.6%
• Insurance/pensions = 8.4%
• Taxes = 8.7%

Five Reasons to Check Your Credit Report Regularly

In much the same way that a resume displays your work experience to a prospective employer, a credit report provides prospective creditors (and in some cases employers and insurers too) with a detailed picture of your credit history. And like a resume, your credit report can influence whether you will receive what you are applying for.

Ideally, your credit report is an accurate, up-to-date reflection of your credit history. However, since we don't live in an ideal world, there are many reasons that your credit report could contain inaccuracies that might prevent you from receiving the credit you deserve. The good news is you can take action to keep your report accurate. Here are the top five reasons why you should make a practice of regularly reviewing your credit report:

Inaccuracies & Mixed Credit Files: Many inaccuracies on a credit report can be the result of simple human error, and are therefore are not difficult to dispute. Of course, if you don't order your credit report, you might never know about it. Whether the inaccuracies relate to payments not credited, late payments, or data mixed in from the credit file of someone else with a name similar to yours, you will want to contact the credit bureau to dispute inaccurate information promptly.

Tracking Payments:

One of the most important elements of credit is a demonstrated history of on time payments. Once you send the check though, anything can happen - a delay in the payment being received can kick you over to a 30-day delinquency. If you call your creditor and explain the situation, they might adjust the information. Of course, if you don't read your credit report, you won't necessarily know which payments are being received and reported properly.

Identify Theft:

This issue alone is reason to order your credit report immediately. Identity theft is an insidious crime, involving a thief who assumes your name to open new accounts, divert your card statements to another address, and run up all sorts of bad debt without you ever knowing about it until collectors come calling. Over time, identity theft could jeopardize your ability to obtain further credit. The best way to catch a thief who is using your name is by getting a copy of your credit report, which will show you if there are accounts listed you know you haven't opened. For example, if a thief has intercepted a pre-approved credit card offer in your name and sent it in with a change of address, your credit report will include the account.

Inquiries:

If you're shopping around for a loan or more credit, you should know that when creditors check your credit, it places an inquiry on your credit report. Inquiries can add up, which is often interpreted as a negative by creditors. For this reason, too many inquiries can actually make getting credit more difficult. Moreover, if you didn't authorize someone to look at your credit report and they did, they may have broken the law.

Credit Fraud – Unauthorized Charges:

Credit fraud involves the theft of your credit card or account number to make unauthorized charges to your account. Though consumers are protected financially from this abuse, other creditors may take note of all this activity and decide to raise your interest rates or refuse to grant you a loan. Ordering your credit report will help you catch new activity on accounts that you haven't been using, or may have closed.

When it comes to managing your credit worthiness, your credit report is your best resource. Ordering your credit report gives you the opportunity to manage your credit wisely today, while planning your credit strategy for achieving future goals - a credit-savvy move every consumer should make!

By Jim Larranaga, Executive Vice President of Priority Publications, a Minneapolis-based publisher of financial newsletters.

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