Thursday, November 13, 2008

Credit Cards

Credit card debt is a national problem. Most Americans carry a large amount of debt courtesy of the credit card. One report from the Federal Reserve shows that Americans are overwhelmed by more than $900 BILLION worth of credit card debt. A number which is increasing at an alarming rate. Back in 2007 we had less than half as much credit card debt.

Debt Snowball Dave Ramsey style

Right now I am reading Dave Ramsey’s book, “The Total Money Makeover”, a great book for any budding frugal wannabe. An excerpt from his book states that credit card debt is the #2 most owed debt behind medical bills. He recommends you pay off this debt as quickly as possible in order to save that money or invest in money making ideas. Using the debt snowball idea, to payoff all yours debts and become debt free in time. Or as FrugalDad puts it "The main idea behind the debt snowball is paying only the minimum payments on ALL of your debts, and throwing any additional money at the smallest debt.”

Goals and dreams

Currently I am trying to pay off my debt so I can reinvest the money elsewhere, mainly in real estate such as land. I have a goal in life to own 500 acres of land. Where I live that should not be a problem as long as the economy picks up soon, otherwise I might be hoarding my money hoping and praying that we don’t go through “Great Depression 2”.

The B word….Budgets!

A good budget should be a way of life for anyone wanting to become a frugal master. For me I have a budget setup to aggressively pay off my credit card. After that, an emergency fund will be created, another Dave Ramsey idea, and 3-6 months worth of expenses. I will cut up my credit card and never go back. I know credit cards provide convenience and a safety net. But once you have savings set aside to purchase what ever you want. There really is no need for a card. The frugal way to approach life is to save for what you want and pay cash for that item. I was always raised to believe this fact, and it is true if you stop and think about it.

Back before the credit “glory days” if you will, people always saved money and bought what they wanted. It was just a way of life, why go into debt when you can save a few months and get what you want without the stress of having to pay monthly notes on it, and in turn paying twice as much or more than the original cost of the item. I read a lot of blogs on finance and most preach the same thing. Pay off debt and buy what you want with CASH. It’s a simple and easy technique, one of which we have all lost touch with.

Comments, criticism, useful knowledge?

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