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lagilmanI've been meaning to talk about this for a while, but haven't had the chance to put thoughts in order. I'm still not sure they're actually ordered, but this may be as good as it gets.
If credit cards, or the handling thereof, is triggery for you, you might want to skip the rest of this post.
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I was decidedly pleased, at the "finance for writers" panel at the Nebulas, to discover that we could toss the entire "how to handle credit cards" section out the window, as nobody there was carrying debt on their cards.
Admittedly, it was a self-selecting group -- professional writers who were willing to bypass time by the pool to sit in a seminar on finance were likely to have already learned the basics. And yes, credit cards [the uses and abuses thereof] are very basic.
But the basics need to be revisited, every now and again.
Despite what we're often told [by credit card companies/banks], a credit card is not for "buying things on layaway/hope I have money someday." It is for buying things you can afford but
a) want to track the purchases via your statement
b) will be reimbursed for at a later date, by a 3rd party
c) don't want to pay for right then [either by cash, debit card or check] but will pay for in full several weeks from now, in one lump sum of "stuff I bought this month."
d) buying things that you may want to have buyer protection on, above and beyond any warranty on the product
Or e) all of the above*.
For those of you who need a refresher course, I have it right in front of me. The new laws require more transparency in fees and etc, so right on the front of your statement is the hard cold facts: what you're actually paying, if you only pay the minimum.
Of my $572 credit card bill from Amex, if I pay the minimum amount due, it will take me five years to pay off the balance on this statement.
Five years to pay off $572. And I would do it by paying an estimated total of $833, after finance charges.
If I pay $20 (as opposed to the $15 minimum) I would pay it off in "only" three years, at an estimated total of $737. The credit card company refers to this as a "savings" of $96.
I say that if I pay it all off now, I pay only $572, the exact cost of the goods received, and "save" myself all finance charges, period.
$572 vs $833. What could you do with $261? Wouldn't you rather keep it than give it to the credit card company in 'payment' for delaying your payments?
Now, the fact is that we don't always have the cash for things we need. I've had to juggle end-of-month payments a few times myself, when costs overran income by a few weeks. That's why freelancers (and salaryfolk) should have a slush fund. But if you find yourself in that position more than two months in a row, it's time to take a cold hard look at what you're buying -- and why.
This bill was average for me (my convention travel & business-related whatnot goes on another card that occasionally makes me wince). So what did I buy? A new down blanket. My monthly gym membership. Flowers. A few grocery and Costco runs. A lunch out. A new windowsill perch for Pandora. Oh, and my quarterly webmaster invoice. I spent too much on Costco last month, but odds are I won't go again for a few months, so it evens out. The blanket was a one-time expense. The website costs are a work expense and therefore a tax deduction. I didn't spend much on groceries this past month, because I was traveling a lot. It will come out on the other card, in terms of hotels and restaurants. I won't eat out much at all in June, to compensate.
The trick is twofold: awareness, and control. Be aware of where your money goes, and be able to control what you're spending. If you're having trouble with one or the other, there are ways to get help, from professional credit counselors to, well, cutting up your credit cards and only ever paying cash. But the latter only keeps you out of trouble; it doesn't address the underlying problem....
The other thing I find useful is online banking. I know some folk are worried about the security of same, but I've found that -- so long as I remember to only ever work via a firewalled, encrypted connection (ie. not when I'm piggybacking on an open line!) it's as safe as any transaction, and the convenience of being able to do my banking 24/7 is priceless. Being able to schedule payments is equally so: a bill comes in, I schedule the payment, I note the payment so I don't forget the money is coming out, and then I file the bill. Done. No chance of forgetting to pay, or forgetting to mail the check. And being able to stamp "paid" on a bill is quite satisfying.
Online banking also allows me to keep an eye on my balance -- and if I start to run low, note it immediately, rather than getting a call from the bank that ooops, something didn't clear in time and I got hit with a charge. (I still occasionally get dinged, but the last time I ran close, I saw it, called the bank and gave them a heads-up that money would be hitting the account that afternoon, and even though the money got paid out before the money came in [by about half a day] they waived the overdraft fees. Yes, really. They waived the fees.)
*or, as we discussed in the session, for the Times of Emergency when you need that plane ticket, that ER treatment, that New Interview Suit and haircut, etc. I have one card I keep solely for such emergencies, so I know I always have available credit.
DISCLAIMER: I am not a certified financial anything. I'm speaking from my own hard-won experiences and that of others as-told-to-me, and giving advice from that. Consult your own Trained Professional for specifics to your situation.
If credit cards, or the handling thereof, is triggery for you, you might want to skip the rest of this post.
-------------------------------------------------------------
I was decidedly pleased, at the "finance for writers" panel at the Nebulas, to discover that we could toss the entire "how to handle credit cards" section out the window, as nobody there was carrying debt on their cards.
Admittedly, it was a self-selecting group -- professional writers who were willing to bypass time by the pool to sit in a seminar on finance were likely to have already learned the basics. And yes, credit cards [the uses and abuses thereof] are very basic.
But the basics need to be revisited, every now and again.
Despite what we're often told [by credit card companies/banks], a credit card is not for "buying things on layaway/hope I have money someday." It is for buying things you can afford but
a) want to track the purchases via your statement
b) will be reimbursed for at a later date, by a 3rd party
c) don't want to pay for right then [either by cash, debit card or check] but will pay for in full several weeks from now, in one lump sum of "stuff I bought this month."
d) buying things that you may want to have buyer protection on, above and beyond any warranty on the product
Or e) all of the above*.
For those of you who need a refresher course, I have it right in front of me. The new laws require more transparency in fees and etc, so right on the front of your statement is the hard cold facts: what you're actually paying, if you only pay the minimum.
Of my $572 credit card bill from Amex, if I pay the minimum amount due, it will take me five years to pay off the balance on this statement.
Five years to pay off $572. And I would do it by paying an estimated total of $833, after finance charges.
If I pay $20 (as opposed to the $15 minimum) I would pay it off in "only" three years, at an estimated total of $737. The credit card company refers to this as a "savings" of $96.
I say that if I pay it all off now, I pay only $572, the exact cost of the goods received, and "save" myself all finance charges, period.
$572 vs $833. What could you do with $261? Wouldn't you rather keep it than give it to the credit card company in 'payment' for delaying your payments?
Now, the fact is that we don't always have the cash for things we need. I've had to juggle end-of-month payments a few times myself, when costs overran income by a few weeks. That's why freelancers (and salaryfolk) should have a slush fund. But if you find yourself in that position more than two months in a row, it's time to take a cold hard look at what you're buying -- and why.
This bill was average for me (my convention travel & business-related whatnot goes on another card that occasionally makes me wince). So what did I buy? A new down blanket. My monthly gym membership. Flowers. A few grocery and Costco runs. A lunch out. A new windowsill perch for Pandora. Oh, and my quarterly webmaster invoice. I spent too much on Costco last month, but odds are I won't go again for a few months, so it evens out. The blanket was a one-time expense. The website costs are a work expense and therefore a tax deduction. I didn't spend much on groceries this past month, because I was traveling a lot. It will come out on the other card, in terms of hotels and restaurants. I won't eat out much at all in June, to compensate.
The trick is twofold: awareness, and control. Be aware of where your money goes, and be able to control what you're spending. If you're having trouble with one or the other, there are ways to get help, from professional credit counselors to, well, cutting up your credit cards and only ever paying cash. But the latter only keeps you out of trouble; it doesn't address the underlying problem....
The other thing I find useful is online banking. I know some folk are worried about the security of same, but I've found that -- so long as I remember to only ever work via a firewalled, encrypted connection (ie. not when I'm piggybacking on an open line!) it's as safe as any transaction, and the convenience of being able to do my banking 24/7 is priceless. Being able to schedule payments is equally so: a bill comes in, I schedule the payment, I note the payment so I don't forget the money is coming out, and then I file the bill. Done. No chance of forgetting to pay, or forgetting to mail the check. And being able to stamp "paid" on a bill is quite satisfying.
Online banking also allows me to keep an eye on my balance -- and if I start to run low, note it immediately, rather than getting a call from the bank that ooops, something didn't clear in time and I got hit with a charge. (I still occasionally get dinged, but the last time I ran close, I saw it, called the bank and gave them a heads-up that money would be hitting the account that afternoon, and even though the money got paid out before the money came in [by about half a day] they waived the overdraft fees. Yes, really. They waived the fees.)
*or, as we discussed in the session, for the Times of Emergency when you need that plane ticket, that ER treatment, that New Interview Suit and haircut, etc. I have one card I keep solely for such emergencies, so I know I always have available credit.
DISCLAIMER: I am not a certified financial anything. I'm speaking from my own hard-won experiences and that of others as-told-to-me, and giving advice from that. Consult your own Trained Professional for specifics to your situation.
