Money – Easy come Easy go?

Oct 152008

I was talking with my brother last night about how some members of our family are spendthrifts and how we fritter away money like it is going out of fashion.

I made the comment that the family attitude towards money seemed to be ‘Easy Come Easy Go’. My brother agreed however while I was focusing on the ‘Easy Go’ part of the statement he was focusing on the ‘Easy Come’ part. He made the excellent point that while most members of the family are spendthrifts none of them are in really serious financial difficulty.

This got me thinking.

I was focusing on the ‘Easy Go’ part of the statement and thinking about all the money I have spent over the years and all the expenses and debt repayments I now have. He was focused on the ‘Easy come’ part of the statement and when I asked him to explain and he told me that he was thinking about how money seems to easily come to the members of the family who spend a lot. He used a couple of examples where money seemed to appear out of nowhere like someone getting a big unexpected bonus at work.

He was right and the more I thought about it the more I began to realize that in general the people I know who have had difficulties with money are the very people who are uptight about money. They may read about the credit crisis and get stressed, they have effectively shut down their spending and become stressed about the flow of money into their lives.

On the other hand the people I know that aren’t having difficulties with money but yet still seem to be spending are those people who have a very relaxed attitude towards money.

I’m thinking out loud here but I reckon the reason why this seems to be the case is that people who have relaxed attitude towards money seem to take more risks and follow more potentially profitable opportunities. While people who are stressed about money seem to take fewer risks and try to maintain their financial status quo.

Take the example of a new job opportunity that pays well. The person who is relaxed about money would more than likely be prepared to take the risk and go for the job. The person who is uptight about money might not even consider applying for the new role for fear that it might upset their current employer should they ever find out.

This is a very simple example but I think it illustrates the difference between those who are stressed about money and those who are relaxed about money nicely.

The difference

The key difference seems to be the attitude to risk. The person who is relaxed about money knows that there are always plenty of money making opportunities and jobs out there for the person who is willing to work hard and take a risk. The person who is stressed about money is too focused on losing what they have and the current financial problems that they face that they do not even see the opportunities. As a result they stay stuck in a kind of financial limbo that only moves at the rate of inflation.

But I’ve got bills to pay

Me too and while I kind of figured that this was the way that money seem to work it wasn’t until I sat down and thought about it that I realized that attitude has a huge part to play in any financial situation.

Say you’re in debt like me and you’ve had a bad day at work and you arrive home to find a stack of bills. The misery just keeps piling on and no matter how sunny your disposition is there is a good chance that this will get to you. Fair enough. But you have a choice as to how you can respond to the situation. You can kick and scream at the unfairness of it all or you can simple say ‘I don’t feel up to dealing with this right now so I’m taking a time out and will deal with when I feel better’.

The truth is that when you are in debt the world tends to beat on you a lot more than if you weren’t in debt. The same problems that seemed easily dealt with before can seem insurmountable when you are in debt. That is the nature of the beast unfortunately and at the risk of sounding like a broken record the only true think that you have control over is your attitude.

What can I do?

Changing your attitude towards money takes time, patience and a lot of effort. I can only relay what I have read about it because in theory if my attitude towards money was brilliant then I would not be having problems with debt. So perhaps I’m not the best person to be asking. That said I can tell you from experience of what constitutes a bad attitude towards money if that will help?

So the idea here is to notice if you have similar thoughts. If you do then it might be the case that you need to look at your attitude towards money.

Ok so here goes.

You see someone with a fancy flash car and you think – they must be criminals.

You work hard yet get passed over for promotion and a colleague gets it instead. You think – they must be sleeping with the boss.

You receive a pile of bills but you ‘forget’ to pay them thinking that you can get away with it for another month.

You get angry at the credit card companies for charging you extortionate rates yet you knew exactly what the rates were when you signed up.

You ‘forget’ family and friends birthdays.

You live for today and adopt the ‘I could be dead tomorrow’ attitude. But wake up in two days time alive and well.

You don’t know how to get your bank balance.

You don’t know how much you owe on your credit cards and loans.

You expect some ‘manna from heaven’ i.e. some good fortune to come along and solve all your money problems in one go.

You try to match your neighbor in the lawnmower stakes. Mine is bigger than yours.

You try get rich quick schemes in the hope of making money but in the end you lose all your money.

This list is by no means complete. The point I am trying to make is that each of the thoughts and actions outlined above point to a case of bad financial attitude. If you have had some of these thoughts in the past don’t worry. Attitude is something that can be changed. So why not change yours?

For more of my musings on Debt management and Personal Finance please subscribe to my RSS feed. Alternatively if you would like a free copy of my Debt management ebook “Understanding and getting out of debt” please sign up for my free newsletter.

10 (More) Reasons You’re Not Rich

Oct 142008

I just read a great article on Yahoo.com and I thought it would be a good idea to share it with you. The article is called ‘10 (More) Reasons You’re Not Rich’ and is written by Jeffrey Strain. Basically the article goes through 10 fairly original reasons as to why you are currently not rich or still in debt as the case may be. I have covered some of the topics in some of my previous articles but some are quite original and ones that I had not thought about before.

I always like reading new and original ideas when it comes to personal finance. It keeps me motivated when it comes to my own finances. There are only so many ways that you can say ‘Spend Less than you earn’ so hearing of new ways of saving and making money is always welcome.

I hope you enjoy the article – I certainly did.

Feeling rich when you pay your bills

Oct 132008

So you mean to tell me that I should feel rich when I am paying my bills and money is leaving my bank account?

Yes that is exactly what I am saying.

For most people the thoughts of paying bills leaves them feeling decidedly poorer. I know it made me feel that way for a long time. When I first got into debt I remember cursing the bank for taking the money out of my account. I would put off paying creditors for as long as legally possible. I had a really tough time motivating myself to pay my bills.

I would dread receiving mail as I almost certainly always knew that there would be a bill or past due notice lurking among all the credit card offers. To log on to my bank account to transfer funds was a huge struggle.

Compare that with the way I react when I get a bill today.

I gather all my bills that I receive in any given week and I tackle them all on a Saturday morning. I log into my bank account and make transfers to pay the bills – the funds won’t arrive until Monday or Tuesday but I don’t mind as Saturday suits me best for doing this. As I pay each bill I mark it in big writing ‘PAID IN FULL’ and I put the date on it. If I have set up an automatic direct debit I make sure that the transaction has been made by my bank and then I mark the bill ‘PAID IN FULL’.

As I pay the bills I try to feel wealthy – not the easiest thing to do when you are neck high in debt but it can be done. I try to imagine that I have vast amounts of money and that I actually enjoy paying my bills. I try to look on paying my bills as part of the flow of money. If I send money out into circulation I know that it will eventually come back to me.

Okay I know that this kind of New Age thinking might not sit well with some of you but if you try it you will be surprised at how your imagination can create positive feelings of wealth. You don’t have to feel like a million dollars but even if you can feel say even just a little wealthier than you currently are then it will make a difference.

What’s the point?

I described this technique to a friend of mine who was in a similar financial situation to me. The response I got was ‘What’s the point Mike? I’m broke and no amount of mumbo jumbo positive thinking is going to make any difference’.

I could understand his frustration. Circumstances had been unkind to him but he wasn’t helping his situation by wallowing in self pity. The fact of the matter is that the more negative he got about his financial situation the more negative financial problems he got as a result.

I used to have a similar problem with negative self talk. It was a slow realization on my part that it was me who was causing a lot of unnecessary suffering by thinking negatively.

What changed?

Once I realized that I was causing a lot of my own suffering by having a negative attitude towards money things started to change. It occurred to me that money is neither good nor bad but rather it is a product of our feelings towards it. In other words money is what we make it in our minds.

If we create a mental image of money as something that is all powerful in our lives then I think we are giving too much of our personal power over to money. On the other hand if we do not treat money with respect then we end up losing it and in debt.

Now before I go on I want to point out that I am still on a journey of discovery here. I do not claim to know all the answers. In fact in relative terms I am only a novice to this whole ‘how much money you have is a product of your attitude’ way of thinking.

In theory it makes sense but I am still experimenting with it. I am still in debt so obviously I have not quite mastered the techniques involved. What I will say is that by paying my bills on time and without a negative attitude I have a lot less stress.

More money

The really interesting thing about paying my bills while trying to feel rich is that I do actually have more money as a result. The difference is only small but it is a positive difference. I don’t know what exactly caused the difference. I think it may have arisen from the fact that I don’t have as much of an interest charge or penalty fee from late payments. Also I think that because I have developed the habit of paying my bills at the same time every week I have become more disciplined in my spending.

Don’t question it – simply try it

Time for some field work, if you want to see if this whole positive attitude towards money works for you then I suggest that you simply try it for yourself. The next time you have a bill to pay try to pay the bill with a positive attitude and do not hold a grudge against your creditor. Simply pay the bill and try to feel rich when you do it. Wish your creditor well.

Give it time. Don’t expect a miracle. It might happen but the chances are slim so continue to indulge in positive thinking when it comes to paying your bills for at least one month. If after the month is up and you don’t notice any difference, try it for another month. Give it time.

Notice the small changes. Change won’t come all at once but rather in a series of smaller more subtle changes. You may notice that you have slightly more money in your bank account at the end of the month or that you aren’t as stressed when you get a bill.

For more of my musings on Debt management and Personal Finance please subscribe to my RSS feed. Alternatively if you would like a free copy of my Debt management ebook “Understanding and getting out of debt” please sign up for my free newsletter.

Frugalistas – Frugality goes mainstream

Jul 102008

I knew it wouldn’t be long before it happened. For the fashion conscious among you the credit crunch is starting to show a silver lining already.

It appears that being frugal is becoming very fashionable. The credit crunch and how to be frugal are now the latest hot topics at dinner parties. I have to admit that I am impressed by the fashion industry’s ability to take advantage of what most other businesses would regard as a crisis.

Fashion companies, instead of sitting there moaning about how their sales have collapsed are embracing the whole credit crunch with gusto. At the same time they are capitalizing on people’s concerns about the environment too. The articles in the links below go into great detail as to how big business is cashing in on new economic and environmental trends.

The cynic in me thinks its just good business sense for the fashion industry. Another part of me thinks that anything that makes frugality more socially acceptable is fine by me.

Have a read of the articles below and make up your own mind. There are some great tips on saving money and some unique ideas on how to make it fun. As they say – frugality is the new black. J

The Frugalistas: Meet the women who can show you how to beat the credit crunch in style.

Penny Pinching Looks Great

Proud to be prudent: Meet the new army of frugalistas

Stoozing – Use your credit cards for profit

Jul 082008

No I didn’t believe the headline either. Not at first anyway. That was until I was introduced to the wonderful world of stoozing. Now at this point I will let Wikipedia offer you a definition of stoozing.

“Stoozing, derived from the verb stooz, is a slang term used to describe the act of borrowing money at an interest rate of 0%, a rate typically offered by credit card companies as an incentive for new customers. The money is then placed in a high interest bank account to make a profit from the interest earned. The borrower (or “stoozer”) then pays the money back before the 0% period ends. It is important to note that the borrower does not typically have a real debt to service, but instead uses the money loaned to them to earn interest.”

So how you make money is that you borrow as much money as you can from credit card companies that are offering introductory offers of 0% and then you place all this money on deposit at a higher rate of interest say for example 5%. Then at the end of the introductory 0% period you take your money out of your deposit account and repay your credit card company. In effect you have made 5% interest on the borrowed money.

There are a number of things to take into consideration before you engage in a stoozing campaign.

How much can you borrow?

How long does the 0% interest rate last?

What are the balance transfer fees?

What rate of tax will be applied to the interest that you earn?

What deposit rate will you get? You need to have a high yield instant access deposit account in order to make your stoozing effective.A couple of other things that need to be considered include.

You will need to continue to make the minimum monthly payment on your credit cards.Stoozing works best if you have little or no debts as your existing debts would be better served if you transferred them to the 0% card and focussed on paying them off.

There will be a lot of administration and form filling involved so if you are not comfortable with this then may be stoozing is not for you.

There are a couple of excellent websites that cover the topic of stoozing in a lot more detail than I could hope to so I will direct you to them. One is focused on the UK market and the other is focused on the US market. I suggest you look at both sites as the principles of stoozing are the same and the only differences are the types of cards and interest/tax rates that apply.

Stoozing.com

Moneyeconomics.com


Remember this is a potential way of earning a small but not insignificant extra bit of cash. So while it may not be for you I recommend that you take the time to learn about it because it gives a useful insight into how you can be creative with your credit cards.

Competitions – a fun way out of debt? Follow up.

Jul 072008

For those of you who thought I was losing my marbles when I suggested in a post that Competitions could be a fun way out of debt – take a look at the following article. It offers plenty of hope to those of us in debt and are looking for alternative ways to get out of it. Meet Britain’s luckiest woman.

Cash flow calendar – a lifebuoy in a sea of debt

Jun 022008

Cash is the life blood of any organization or so my college lecturer said many moons ago. He would also follow up the comment with something like this “many a profitable organization went under due to the lack of cash”. To be honest I never really understood what he was on about. I simply just took it to be some business philosophy that was great in theory but in the real world things didn’t work that way.

It was only when I got into the ‘real world’ that I finally understood what my lecturer was on about. The thing was that I didn’t need to have my own company to learn the full lesson. When I first started to receive income from a job I came to fully understand what the statement “cash flow is the blood of any organization” really meant. You see if you think about it you are in effect an “organization” or at least you operate along very similar lines. You receive income (from a job/property etc.) you have expenses (food, mortgage, phone etc.) that allow you to go about your daily business and at the end of the month you either have money left over or not (profit or loss). Just like any organization if you are constantly making a loss (i.e. your expenses are greater than your income) then you will eventually go bankrupt.

The simple accounting principles at play here apply equally well to your financial situation as they do to the financial situation of any large corporation. Money in and Money out.

When you think of cash you tend to think of the hard physical green stuff – right? Well in this situation I want you to expand your definition. From now on when you see the word ‘Cash’ mentioned in this article I want you to think of it as not only the physical notes but also as any access that you have to credit. So if you had $500 in notes, $3000 in the bank and $4500 available credit on your credit card then to me your total cash available is $8000 ($500+$3000+$4500) Confusing eh? But it is important. By thinking of your cash available in terms of both physical cash, cash in the bank and credit remaining you open up the flow of that “life blood” into your financial life. This is what will make all the difference.

For many people in debt and who struggle financially the problem isn’t so much lack of income. A lot of the time the problems seem to stem from the inability to manage the timings of their incomes and expenses. Here is a simple example. Let’s say that I get paid $3000 at the end of the month and let’s say that my average monthly expenses are $3200. Now imagine that the day after I get paid all my expenses for the month are taken from my account. So now I have negative cash of $200 ($3000-$3200). Now imagine that my car breaks down and I need to pay $500 to get it repaired. This $500 has to come from somewhere and if I don’t have credit available I will be walking to work for the rest of the month.

The point that I am trying to make is that in order to keep our heads above water we need to smooth out our outgoings and have a little in reserve to meet the unexpected expenses. Many organizations can manage to stay afloat for a long time while they continue to make losses. The same can apply to you. If you are struggling financially and find that at the end of the month you do not have enough to pay your bills then your need to look at your cash flow calendar.

Cash flow calendar

In simple terms a cash flow calendar is a calendar that highlights when your income and expenses fall due. In any given month you may have things like birthdays and weddings that you may need to budget for. On top of that a cash flow calendar allows you to identify any potential times of the year or month when you are likely to have a shortfall and this will allow you to make contingency plans.

A cash flow calendar can and should be used as the foundation of any budget. In order for any budget to be effective you need to know when your expenses fall due. The thing is most people’s budgets simply go on a month by month basis, their budgets never actual take into consideration the very important issue of timing.

The big thing about being in debt is the constant worry about having the funds to pay bills when they fall due. Some bills will get priority as they are taken via standing order from your bank account. Other bills are more discretionary in that it is up to you to go and pay them. It is these discretionary bills that can cause the most mental stress. The reason is that mentally we have prepared ourselves for the standing orders coming out of our account. We know each month like clockwork that the bills will be paid. However with the discretionary bills we have to build ourselves up to pay them and more often than not we end up putting them on the long finger.

From a cash flow point of view it is these discretionary bills that throw a spanner in the works of our finances. The great thing is that if you have a cash flow calendar you can look at it and see what else is due to go out that month. If there is enough slack in your current funds then you can pay the discretionary bill. For example any bills that tend to be bi-monthly i.e. they come every too months, can catch us unawares. How often have you scratched your head thinking ‘didn’t I just pay this bill last month?’ If you have a cash flow calendar and were expecting this bill then you can build it into the budget for that month.

Building a cash flow calendar

Building a cash flow calendar is really simple. Depending on type of person you are you can use a spreadsheet or an actual calendar that you would hang up on your wall. I tend to use both! I use a calendar that I hang up on my wall so that I am constantly reminded of upcoming bills and expenses and I also use a spreadsheet because it is easy to calculate totals and edit amounts. I recommend that you do both as I have found from experience that using both is very effective.

All your income and expenses need to go on to the calendar. It needs to be a reflection of the flow of cash into and out of your financial life. The calendar will help you create a mental picture of your financial situation at any one time and will help eliminate the stress of unexpected bills. When you receive and unexpected bill you can go to your calendar and see how much room to manoeuvre for the rest of the month and how much you can afford to spend. This will empower you and will give you key insights to your spending habit.

It will take a bit of trial and error to get the calendar accurately reflecting your cash flows. When you look over old cash flow calendars you will be surprised at how off you can be. Don’t worry this is natural and comes from the tendency to over estimate income and underestimate expenses.

Cash flow calendars should be used in conjunction with your budgets and not instead of them. Think of cash flow calendars as a tool that gives you a quick up to date idea of your financial situation. As the months and year go by you will see that this will lead to better financial decisions.

As with the rest of the tools in your financial armoury this needs to be used regularly to be effective. Cash flow calendars are highly effective for such a small and simple idea. The benefits to you can be enormous and the cost miniscule. Remember with cash flow calendars you only get out what you put in so makes sure that what you put in is quality.

Debt Magic – Clear your mind first

May 192008

Everywhere you look its coming at you. Like a plague from biblical times the debt tsunami is washing over the land and not sparing anyone. Switch on the TV you get talk of the credit crunch and job losses. Read the newspapers and you get scary statistics of foreclosures. Turn on the radio and all you hear are talk shows with someone telling their tale of debt woes. At work it seems that it is all anyone ever talks about “How am I going to afford this month’s mortgage payment”.

There almost seems to be a collective acceptance that we are all doomed and that somehow if just join hands together that the debt Tsunami will wash over us and we will all be spared. Yes there is strength in numbers but at the same time do you want to be dragged under by the weight of everyone else?

As they say a problem shared is a problem halved and I agree up to a point. When people start trying to halve that problem over and over again it just becomes toxic. You see it doesn’t take much to create a panic. When you have a few friends where all they talk about is their financial situation then it is going to have an adverse impact on the way you think about your financial situation. Misery loves company so to speak.

So where is this all leading I hear you ask? Simply put if you really want to solve your financial problems then you need to detoxify your mind of all the negative self talk and negative financial propaganda. You need to realize that the media are screaming negative headlines only to sell papers. They are not worried if they ruin your day. They just want you to buy their paper and if that means using scare tactics to do it then so be it.

Freeing up mental capacity

Think about the mental capacity that you will free up if you can clear the negative financial news from your mind. Ok you have your own debt situation to be worried about but why are you bothered to be worried about the financial situation of people you don’t even know. It’s terrible when someone loses their house without a doubt but why are you worrying about it? You could be next? Well you will be if you don’t stop focusing on everyone else’s debt worries and start focusing on your own.

Stop listening to the media and to everyone else. Deep down you know what you have to do to get out of debt. You may not know the exact steps but what you do know is that you need to change. You are only hindering your progress by listening to reports of financial chaos in the media. Trying to reduce your debt while listening to and reading about financial trouble is like a person on a diet trying to lose weight while working in a bakery. You may laugh but you are making life so much more difficult for yourself. You are cluttering your mind and making yourself stressed.

To free your mind of the excess financial stimulation you simply need to turn off your TV, Radio and close that newspaper. Why not include the internet in that list? Well the great thing about the internet is that you chose what you want to see and read. If you don’t want to read horror stories about debt then you just don’t look them up. You have a choice. With TV, radio and newspapers you are not given much of a choice. Either sit there and listen to the news or turn if off. The choice is yours.

When someone at work tries to corner you and moan about their debt situation don’t listen. Be polite but make your excuses and don’t listen. Don’t talk about your situation to anyone only your closest friends and family and be careful that you are not overloading them with your problems. Yes the mental release is nice but you have to be wary of doing too much talking and not taking enough action. I urge you to cut the negative stimulation about debt and financial problems out of your life.

Do it for one week and see how you feel about your debt.

You will be surprised at the difference it makes. You will gain so much mental clarity about your own financial situation that it is well worth the effort. No longer will you have other people’s debt stories floating around your head and causing you stress. You will be able to tackle your own debt problems with greater efficiency.

I’m not saying to bury your head in the sand. This is the worst thing you can do when it comes to your debt problems. What I am saying is that you aren’t doing yourself any favors by reading about other people’s debt woes. You get more of what you focus on and if you are focus on debt and debt related misery then I’m sorry but that is what you are going to get more of. You need to stop focusing on the negative feelings that surround debt you need to stop wallowing in your martyr status. When the music stops and you are the only one left standing you won’t feel too clever and your martyr status won’t account for much. Harsh but true.

Where to now? Try cutting negative debt influences out of your life for one week – seven days. That’s not too much to ask is it? You won’t be sorry and the feelings of relief will make you want it to continue it. Then once you have done this you will be able to revaluate the steps you need to take to get out of debt in a different light. You will be approaching your debt problems from a place of power and not from a place of fear. Those negative lingering voices will have been significantly reduced and this will allow you to take empowering action on your debt situation.

Generate a Second Income? – You can't be serious?

May 132008

You have a job and you have a lot of debt. There is only so much budgeting and belt tightening that you can do. Your focus has now shifted from reducing outgoings to increasing incomings i.e. you want to generate a second income. You can take all the second income and ring fence it so that it goes directly against your debts. You will have your debt problem solved in no time. Unfortunately the reality is a lot different.

To gain an appreciation of how realistic you need to be in order to generate a second income there are a number of key factors that you need to consider. Generating a second income is not as easy and as straightforward as some people would have you believe.

The options

Here is a quick list of ideas off the top of my head and in no particular order that could generate a second income for you. Take a moment to think about each and how they would fit in with your current lifestyle.

1. Get a part time job.

2. Rent out a room in your house.

3. Buy a rental property and rent it out.

4. Trade shares online.

5. Build a website and sell a product.

6. Start trading on eBay

7. Start selling a Mutli-Level Marketing (MLM) product.

8. If you have a trade or skill start doing them on your own account in your spare time.

There are dozens of ways of generating a second income. I just wanted to throw these ones out there to get you thinking.

All fired up yet?

When I look at the list above I say to myself that I could do any one of the items on the list. A nice warm feeling fills up inside of me as I think about how I am going to pay off my debt in double quick time. Oh this is going to be great!.

Then reality hits me square on the chin.

If you have ever tried to generate a second income you will know exactly how difficult it is. Each method of generating a second income has its own drawbacks and limitations. In theory they all seem so simple yet the only person who seems to be making any money is the person who is selling the latest ‘Get rich in your spare time’ course.

Over the next few articles I’m going to be examining what are the best and most effective ways of generating a second income. Is it really possible from a long term perspective to generate a second income? Why it can be hard to generate a second income and finally what are the key factors you need to consider before you can generate a second income effectively.

Where is my money? Clarity is the key

May 122008

Picture the scene. It’s the end of the month and you’re about to get paid, before you do you check your bank balance and you realize that you didn’t spend as much as you did last month and that you have $600 left in your account. You smile. Tomorrow you will get paid. In the following week your mortgage, your phone bill, your electricity bill and your retirement savings will all leave your account. The following day a large sum of money will leave your account and be transferred to your savings account. After all you are saving for a new entertainment system. It’s your reward for all the hard work you have been putting in. That leaves you with plenty to live on for the month.

Ok – back to reality. The existing scene probably goes a little more like this. It’s coming to the end of the month. You’re about to get paid. You go to check your bank balance and it is in overdraft and you are touching your overdraft limit – not much room to move. You cringe. Tomorrow you will get paid which will just about cover your overdraft. The following day your mortgage will come out putting you straight back into an overdraft position. You will delay paying your phone and electricity bill until as long as possible. You’re not trying to scam anyone but you just don’t have the spare cash. You have stopped making payments to your retirement fund – sorry I can’t afford them. Savings you ask – what are savings?

There is a vast gulf between the two scenarios outlined above. When you picture the first scene you can almost feel the mental clarity of the situation. Everything is taken care of and there is enough money to pay all the bills. There is almost a sense of joy as the reward of the entertainment system is on offer. You look forward to the future because you know it will be prosperous.

When you picture the second scene your thoughts become muddled and the level of stress you feel increases. You begin to feel anxious. That dreaded look at your bank balance. The sinking feeling you get when you know that in order to make ends meet that you will have to draw down cash on your credit card. You dread the future because you can see no end in sight and you feel like you are trying to plug a hole in the dam with you finger. The future looks bleak.

These two scenarios are on opposite ends of the same spectrum. The question you have to ask yourself is whereabouts on this spectrum does your existing financial situation put you. Are you a stress free financial wiz? Then fantastic – well done!

If on the other hand you are like the vast majority of us and your feelings about your financial situation vary from bad to very bad then take comfort in the fact that you are not alone.

Don’t use the fact that you are in a similar situation to most people as justification for inaction. Fine if you make the conscious choice that you are happy to continue existing like this then no problem that is your choice. But if you want to change it and have been putting it off by using the rationalisation that we are all in this together and that you are afforded some sort of camaraderie then I ask you to question your decision. That to me smacks of peer pressure of the most insidious kind.

Get real about the choices that are available to you. At any moment in time you can simple say to yourself ‘No more’. You can cut that credit card up and downsize your car.

You need to be clear about why you are doing these things. You need to realise that you want to move from a place of pain and stress to a place of action and direction. By action and direction I mean that you are using your pain and stress to propel yourself to take action in the right direction and that direction should always be towards bettering your financial situation.

Accounting for where every cent goes is the first and probably the most important action you can take. If you are already in debt then this type of thing will be hard at first but realise that in a bizarre way it can be fun and after a while it becomes very empowering. The satisfaction you get from knowing that you are gaining control – however slowly – over your finances can be compelling. You need to realise that there are small things you can do that that will have a big impact on your financial situation. The great thing is that the majority of these things won’t cost you a cent as it’s a case of cutting out instead of adding more.

To fire your engines and get you moving in the right direction I want you to go back to the two scenarios outlined above in the first two paragraphs. I want you to really visualize them. Make them real in your mind. Now which scenario do you want to make real? If you want the first scenario to be your future then keep focusing on it. Use this scenario as a baseline for the financial future you would like. Every time you begin to think about your current financial situation change the focus of your thoughts by thinking about how you want your financial situation to be and how you are taking small actions to achieve it. Always reaffirm your dedication to achieving the financial situation that you want. It may take six months or it may take six years the point is that you need to always keep yourself moving in the right direction.

Fast ways to eliminate credit card debt

May 082008

So it has suddenly dawn on you that you have a lot of credit card debt and you are looking for a fast way to eliminate it? Well the good news is that you can eliminate your credit card debt a lot quicker than you think but the bad news is that it involves a lot of hard work.

I have put together a list of ways that should help you eliminate your credit card debt fast. The thing you need to be aware of is that in order for this to happen for you, you will need to be committed. The great thing is that because these ideas will help you pay off your credit card debt fast then you won’t have to be committed for long.

The list is made up of simple yet highly effective ideas to help you. How you work it is entirely up to you. You can choose one idea and focus on it or you can use a combination of ideas. The key thing is that whatever one you choose you must take action on it and see it through. There is no point paying lip service to this. YOU need to take action otherwise you are wasting your time.

Remember the focus here is on speedy debt elimination. How fast you eliminate your credit card debt is a direct result of how much action you take. At the same time you do not want to take on any excessive tasks that make you end up feeling miserable. Focus on having fun and the end result.

1. Buy time for yourself by transferring your credit card balances to cards with lower introductory rates. There are a multitude of balance transfer deals out there. Find one that suits you. Do your homework and make sure to check the terms and conditions for any penalties. This will involve some paper work but it will help slow the rate at which your credit card debt is increasing while at the same time allowing you to concentrate on eliminating that debt.

2. Extreme budgeting for one month (or as long as you can stand it). This is taking budgeting to the next level. What this involves is for you to stop buying absolutely everything apart from the bare necessities – food and transport. So this means no lattes in the mornings, no lottery tickets, no cable TV, no new clothes, no dinners out, no movies, bring your lunch to work, shop at discount food stores etc. I think you get the idea. At the end of the month you need to calculate how much you saved and then transfer this amount off your credit card. Now I’m not advocating this lifestyle long term but you would be surprised at the progress that you would make in a month or two of it. You could simply become a monk for a month? I did say it was extreme.

3. Downsize your car. If it is possible for you to get a smaller and more economical car then do it. Any money that you save on lease payments and fuel can be put towards eliminating your debt. I did say fast not easy.

4. If you have a mortgage look around for a better mortgage deal. In some cases you can significantly reduce your monthly repayment. It depends on each case. Again do you homework and check the small print. The amount of deals on offer is probably smaller since the credit crunch started.

5. Get a second job. Okay if you are considering this then you need to think about logistics and how you will manage your time. If you resolved to put all of the income from your second job towards your credit card debt then it won’t be long before you eliminate it.

6. Do you have any existing savings? If you do then it probably makes sense to use these savings to help pay off your credit card debt. The reasoning is simple. If you are paying a rate of 16% on your credit card debt and only receiving 3% (if you are lucky) on your savings then it makes financial sense to pay off your debt because your are incurring interest on your debt at a much faster rate than you are incurring interest on your savings.

Imagine the scenario where you have transferred your credit card balances to a lower introductory rate, downsized your car, took on a second job all the while following an extreme budget. How long do you think it would be before you had your credit card debt paid off? What could you do with an additional $500 per month? $1000 per month?

When you look at it from the point of view of the additional income you can make/save then it becomes obvious that it is path worth following. Now as I said before you don’t have to use all of the ideas on the list, even if you implement just one of these ideas correctly then you will be well on your way to eliminating your credit card debt.

It requires discipline and dedication to eliminate your credit card debt. It’s not easy but with the right amount of focus it can be done.

Dealing with banks and financial institutions – one of life’s great mysteries

Apr 212008

Countless times I’ve hung up in frustration when I’ve called my bank. The automated voice on the end of the phone simply doesn’t seem to understand the urgency. ‘Your call is important to us’ – Yeah well obviously not that important because otherwise you would have answered the phone!!! Argh! Why do I waste my time? At one stage my attitude was let them call me when there was a problem. The thing is if your bank is calling you, you know you have a big problem.

If you do insist on calling the bank once the call gets answered you invariably get talking to someone who doesn’t like their job and has very little interest in your situation. Now some may find this a bit harsh but this has been my general experience. If you are already stressed about your financial situation the last thing you want is someone dealing with you in a cold and detached manner? Unfortunately that is almost exactly what you always get.

If you have a financial problem you want suggestions and solutions to it. You don’t want to talk to some one who sounds like a robot reading from a rehearsed script.

The reality of working in a call center for a bank

Many moons ago as a student I spent sometime working as a credit card salesperson for a large financial institution. The pay was poor and the conditions cramped and the work was awful. My job was to ring people and ask them if they wanted to buy additional insurance as part of their credit card package. It was cold calling at its worst and a very tough job at that. To be honest I didn’t last long. I could handle the rejection but I simply couldn’t handle the repetitiveness of reading from the same script over and over again. I almost always invariable ended up going off script and talking about things like football. As a result I would get reprimanded for not making enough calls per hour and not sticking to the script.

I did find it a very useful experience though. I gained a valuable insight into the workings of a financial institution’s call center and the things that customers who call looking for help can do to improve their chances of a successful call.

Okay so here are my top ten pieces of advice when it comes to dealing with financial institutions over the phone.

1. Mentally prepare yourself. What this means is have a clear idea in your mind of what to expect from the call and exactly what you want from the call. Don’t expect the person on the end of the phone to be your friend. Don’t expect a miracle solution to your problems. Do have a clear idea of what you deem to be a successful outcome to the call.

2. Have your paperwork, facts and figures prepared and to hand when you make the call. There is nothing more frustrating to someone working in a call center than someone who does not know their account details or who has to fumble about for the details of the payment they are querying.

3. If your call is answered by a person whose first language is not English then please be patient. More and more large banks and financial institutions are outsourcing their call centres to places like India and Poland to take advantage of the lower wage cost. The thing is these people are usually highly educated and often people are too quick to label them as stupid simply because English isn’t their first language. The best strategy is to be patient, speak slowly and clearly and treat them with respect. Remember an angry person in anyone’s language is still an angry person.

4. Take the full name of the person you’re dealing with. If you’re happy with them and have further queries you will want to call them back. This might seem obvious but how often have you rang the bank back only to forget the name of person or worse still you remember their first name as ‘Jane’ and then you are told that there is 8 women called ‘Jane’ working in the place. You have to realise that these call centers are huge with hundreds of employees working side by side. The staff turnover is usually quite high so the chances of you finding Jane again are slim if you do not know her second name. So the key is to get the full name of the person you are dealing with.

5. Related to number 4. If you are unhappy with the person you are dealing with simply call the bank again at a different time and explain your situation to someone different. Repeat this process until you are happy with the customer service rep that you are dealing with. Try to vary the times that you call. So if you called at 10am in the morning call back later in the evening. Hopefully this way the shift will have changed in the call center and you will have avoided the chance of getting the same person on the phone. If you do happen to get the same person on the phone simply hang up.

6. Keep calm. Dealing with financial problems can be emotionally draining. For a lot of people dealing with the bank can be an intimidating experience. It is easy to get frustrated and upset when you are kept on hold for 20 minutes only to be told that you are in the wrong. Keep calm. It will only make your interaction with the bank more awkward if you get the reputation for being a difficult customer.

7. Be persistent – resolve yourself to the fact that when dealing with your bank you are most likely in for the long haul. If you are having financial problems and need the co operation of your bank to help you solve those problems then your are going to have to be persistent. The pace of progression will be slow and you will meet with a lot of frustration but the key thing for you to be is persistent. You have to remember that you are dealing with a faceless monolith of an organisation that cares very little for you or your problems regardless of what they might say. The only solution to their inertia is the overwhelming persistence that you will bring to bear on them.

8. Anything that is agreed between you and the customer service rep. during the call have agreed in writing if possible. Ideally it would be great if you could get an email confirmation of everything that you agreed with the customer service rep. This will help avoid any confusion as to what needs to be done and who needs to do it. At the end of every call simply call back the facts to the customer service rep. Say something like this “okay, I just want to confirm what we just discussed. I need to do XY and Z and you are going to do AB and C…is that correct?” This will help clarify the situation.

9. Complete the tasks that you agreed to do with the Customer Service Rep. This shows that you mean business and that you are determined to solve the problem. If possible mark any documents that you send to the bank for the attention of the customer service rep. This should help speed up the process.

10. Patience my friend is a virtue or so the slogan of the banks and financial institutions that I’ve had to deal with should read. To understand why the process of dealing with the banks takes so long you have to try to imagine the size of the bank. Generally there are thousands of people working for the bank. There are hundreds of departments. With in these departments there are dozens of teams. Each team deals with something slightly different than the others. As a result when you have a query with the bank it has to be filtered through multiple layers of the organisation to find an answer then the answer has to be filtered back through the same layers to you. Generally the banks are well set up to cope with these queries but as you can imagine the sheer size and scale of the organisation can result in delays in getting a response to you.

Some banks and financial institutions are better than others when it comes to dealing with customer queries. What we as customers need to realise is that we have to prepare for our interactions with the banks. The more prepared we can be in terms of documents, facts and figures and more importantly attitude the more easy it will be for us to get what we want from them.

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