Today’s the big day! We are finally closing on our new house.

We started the building process back in August of ‘09, moved into the inlaws basement and recently have been frantically trying to get a bunch of little things done so we can keep our closing date.

We locked in our rate back in November with a 45-day lock and today’s the last day!

But the house is ready, we’re ready and we’re so excited to get back to our normal routine!

Enough about us – let’s talk about some of the interesting discussions going on in the Personal Finance world this week!

This Week in Personal Finance takes a look at interesting articles, posts and news from the past week in the personal finance arena.  Give these articles a click!

• Joe Taxpayer is confused why so many Christians seem to look at all debt with such disdain and asks an interesting question, “Is Debt Anti-God?”
• Free Money Finance is a very popular and simple blog  that offers some very thought-provoking posts.  I like that.  This week he says that Those Who Give More Become Rich Faster.  I don’t think that should be our motivation to give, but he does offer a good look at the relationship between wealth and giving.
• Paul over at Fiscal Geek asks a questions we’ve all asked at some point in our lives, “Should You Save For Retirement While in Debt?”
• Kevin at Out of Your Rut asks another popular question, “Will A Million Dollars Be Enough to Retire On?”
• Free From Broke delves into the dark world of credit card reform to find some answers on how the CARD Act affects us.

R2 On The Web

My post about the 4 Questions You Should Ask Before You Buy Life Insurance was included in:

• Cavalcade of Risk from the Colorado Health Insurance Insider
• Canadian Finance Blog’s Friday Links

Times are tough!

Income is down, expenses are up and cash flow is tight.

It’s very tempting to skip out on a debt payment or a credit card bill to help free up the cash flow a bit, but are you sure you realize the impact that decision will have on your credit score?

The Spend on Life team had a great post and graphic the other day that showed how your credit score drops significantly the longer you go without making a payment – so make sure you are staying current with your bills!

In other words, Don’t Flush Your Credit Down the Drain!

SpendOnLife.com is an online resource dedicated to helping consumers achieve healthy credit.  Credit ratings are extremely important for qualifying for low interest rates on new loans and lines of credit.  

SpendOnLife.com provides you with up-to-date, accurate information and advice about credit reports and scoring.  Check ‘em out.

What Should You Do If You Can’t Pay Your Bills?

Every situation is different, but here are a few tips to help:

• Call your creditor – make them aware of your situation - many times they can work out a plan with you.
• Pay something – Even though you can’t pay the whole bill, paying anything shows the creditor you are committed to paying your debt.
• Seek help – There are some reputable places and agencies that can help you, just be careful. 
• Commit to getting out of debt – Yes it’s painful for a while, but in order to get out of this mess you have to stop spending. 

It is an epic battle, one waged since the dawn of time…well not quite that long, but the battle between credit card rewards and credit card debt is one which polarizes people the world over.

But today we end it with a duel – en guard!

The Strengths of Knight Reward

Knight Reward is often accused of being an underhanded competitor – offering the possibility of the carrot, only to beat you with his stick.

Well you can avoid being beaten and get a hold of the prized carrot if you know how to play to the strengths of credit card rewards.

How to use a credit card for the rewards:

A rewards credit card must be used with a high interest savings account fighting alongside.

Knight Rewards’ most famous battle cry is the fact that credit cards can be used throughout the month, during their interest free days, for all purchases while your salary is in a high interest savings account accruing interest, or is in an offset account linked to your home loan, offsetting the interest you will have to pay on your mortgage in the month.

To be given the chance to win, your credit card must be allowed to fight, and to combat the high annual fees which often come with rewards credit cards, you will need to be spending at least $2,000 each month on your credit card before you consider going in to battle alongside Knight Rewards, to accumulate enough points to make you eligible for rewards which will compensate you for these fees.

You must always clean your sword before returning it to its sheath.

If you fail to pay your rewards credit card balance back to zero before the end of the interest free period, even the fearless Knight Rewards won’t be able to save you – you’ll be ensconced in interest and monthly repayments which will override the value of any rewards you may earn.

However, using a credit card and paying it down to zero each month gives you a strong credit report and shows your financial responsibility.

Choose a rewards credit card which actually allows you to earn rewards.

Some rewards credit cards are drawing you into a battle you’re bound to lose with unrealistic terms, conditions and usage periods for your rewards points.

However, there are many credit cards which will offer you the chance to choose gift vouchers or fuel vouchers with the points you have built up in your spending and some gold cards will also allow you to earn two points for every one dollar you spend.

Know the rules of the credit card battle.

If your rewards points do expire, make sure you can easily keep track of them and cash them in for rewards before you lose them. Also make sure that the rewards you can earn are ones you actually want, and that you are given choices between charity donations or cookbooks, movie tickets or a hair straightener.

A savvy purchaser can deftly avoid interchange fees. Some rewards credit cards will attract a higher interchange fee, but most Australian retailers will advise you of this additional fee before processing the purchase – therefore, look for a credit card with a companion card which attracts lower interchange fees.

For example, take a Mastercard or Visa into battle with a companion American Express card, AmEx can earn you higher rewards, while fighting in a tag team with Mastercard or Visa to avoid high interchange fees. An informed credit card user also knows interchange fees are just one of the many costs of doing business.

He’s put up a good fight, but is it enough to allow Knight Rewards to maintain his dominance on the credit card battlefield?

The Strengths of Challenger Avoid

Challenger Avoid is a somewhat meek competitor – taking the road of least resistance in the battle and in risking nothing, he attracts no ire.

Challenger Avoid knows his weaknesses and if you’ve identified similar weaknesses then you may choose to fight alongside the stoic warrior Avoid.

Avoiding credit card battles:

The cost of not-so-innocent interchange fees is just too high.

Avoid is proud to fight the good fight on behalf of all consumers and holds strong to his belief that interchange fees which merchants are charged to accept credit cards are a cost passed onto all buyers, regardless of their payment method.

Challenger Avoid will avoid credit card use to save himself from the costs of interchange fees, while hoping the decreased use of credit cards will decrease the cost of interchange fees to businesses, and in turn customers.

The battle of the credit cards preys on the weak.

Challenger Avoid chooses not to fall victim to the seemingly enticing deals which he believes are only a clever disguise to get him deeper into debt, in turn earning the credit card companies more interest.

Challenger Avoid knows the credit card companies don’t ever want him to pay off his balance, and chooses not to spend an eternity being encouraged to spend.

Know Your Credit Card Habits

Knowing your spending habits helps you responsibly avoid bad debt. If you have faced past battles with credit card debt and lost, or you don’t want to tempt yourself to spend money which is not yours, Avoid encourages you to not show your weakness to the credit card companies.

If you don’t think you can pay off your credit card to zero each month, or only use it for essential purchases, then the best way to ensure you stay debt free is to avoid the temptation to use credit.

A doppelganger debit card can give you the same convenience as credit. If you have chosen to avoid credit card use, you don’t have to forge the ease and security of paying with plastic.

You can instead employ a decoy – a debit card which looks and acts just like a credit card, but which links to your transaction account and allows you to only spend your own money.

Debit cards offer you the security to pay for bills over the phone or make online purchases and can even offer rewards of their own – Visa Debit cards for example give you first access to concert ticket releases and discounts on audio entertainment equipment.

A worthy opponent, who has now earned himself an equal rank beside Knight Rewards, but has Knight Avoid been able to topple his historic foe?

The battle has been fought and won, with each side offering a mighty show of strength and determination for their cause, with the duel making champions of both competitors.

How About You?

The duel between Knight Rewards and Knight Avoid will go down in history, so which side will you be fighting on in the future?

Fred Schebesta write for Credit Card Finder and Savings Account Finder, where he helps people to compare savings accounts and credit cards

It’s one of life’s great conundrums: how exactly does the average credit card user stay debt free? Surely the two are mutually exclusive, and therefore the stuff of fairy tales. Yet, while most credit card users find it nigh on impossible to clear their debts, there are a handful of very organized spenders who should be lauded.

They don’t necessarily clear their cards every month; they just use them wisely and manage their money well: think frugal and sensible, as boring as it sounds. And while it is a good thing to be able to clear your credit card debt, it’s actually healthy for your credit history to have some record of debt, so potential creditors can see if you’d be a worthy client.

The debt-free credit card user’s secrets are within your grasp – and all without a pair of scissors in sight. Here’s how they do it:

1. Show Restraint
Don’t throw your money around. The average DFCCU (debt-free credit card user) has had to learn to be strict with themselves and their wallet, and it doesn’t mean they only refrain from extravagance, it means they start with saving on the small things. So, eat out less, buy more home brand items at the store and shop around for cheap gas or better still, ditch the car – it’s often a huge drain on finances. Once you’ve cut costs you’ll find you’ll have more money to pay off debts.

2. Get a Steady Job

Before the bottom fell out of the financial market, the world and his wife were inundated with pre-approved credit card offers, and were often granted immediate credit without ever having to prove they had the means to pay it off.  Now that the financial bubble’s burst those offers aren’t flooding letter boxes in the same way, but the people who were granted the credit are drowning in debt. So, the one and only way to get out of the mess is to have a job that pays well. And if you have a good job but you’re still finding it hard to pay off chunks of your debts, get a better one, or ask for a raise. Of course, changing spending habits would be the best route, but for some that’s harder than changing jobs!

3. Stay Strong

When the assistant behind the counter is trying to persuade you to get yet another store card that you don’t need, just say “No”. Sure you get $10 off the total cost of your bill today, but you’ll end up paying 10 times that over the next few months in exorbitant interest fees, which will probably keep building up because you only pay the minimum amount every month.

4. Have a Healthy Panic

Ignore all the advice you’ve heard to date about not panicking when you find you’re getting deeper into debt. Are they mad? A good controlled panic attack will scare even the most hardened debt junky into realizing that they can’t possibly go on spending as they are – and not on their wage. And don’t worry; even the DFCCU had to go through this stage, too. It’s like one of the five stages of grieving, but for cards.

5. Devise a Plan

Once the panic waves have subsided, take a deep breath, pull yourself together and start planning what to do next. Write down exactly how much you owe – it always looks much worse on paper, so will reiterate just how bad, or good, things are – then start calculating.  How much you allocate to each card should depend on the interest rate of each. Start paying those with the highest interest rate first. If you can, consolidate all your debt onto one low-interest card, or one with a good introductory offer near 0% for certain period. Be warned though, always check the fine print on these offers so you’re not stung with a highly-inflated interest rate once the introductory offer finishes.

6. Make Direct Debit Your Friend

Without a doubt, everyone who has ever had a credit card will have missed a payment at some point, and while this is enough to push most people into setting up a monthly direct debit, others remain serial non-payers. True, it can be a pain getting it organized and usually involves lengthy calls to your bank, but once it’s sorted it is absolutely worth it. All you have to do is make sure there is enough money in the bank every month to cover the outgoing payments. See step 2.

7. Get the Devil Behind You

Do not use your credit card in place of a debit card. It’s a sure-fire way to ensure your fragile financial stability goes into a downward spiral. Many cash-strapped people start to use their credit card once their checking account has gone over the overdraft limit because it’s the only way they can get their hands on some cash. But don’t be tempted. Unless you are very good at managing your payments by paying them off every single month, keep your credit card locked away until desperate measures are needed. And that means not using it to go out with your buddies for a few drinks because you’re too embarrassed to tell them you’re broke! Peer pressure can be shockingly persuasive.

8. Make Small Sacrifices

Not the voodoo type; some of your own.  List what you can do without and write down what you really need for the week/month, depending on how you calculate your budget. If you think you really need something and are tempted to buy it but know you shouldn’t, give yourself a 30-day cooling off period. If after then it’s still as precious to you, budget around it. It’s also a good idea to have days when you vow to spend nothing at all. Pick one day a week, stick to it, and you’d be surprised how much you can save.

9. Give it Some Time

Understanding that you’re not going to be able to become debt-free overnight is important. These things take time. As long you realize that it’s about how you use your credit card, and a budget is in place, things will get easier. And once you’ve mastered the art of debt-free credit card use you can start building those precious points that will lead to well-earned treats, without having to worry about how you’re going to pay for them.

Useful Links: 1, 2, 3, 4

If you like what you read, consider staying current with Redeeming Riches by receiving my posts FREE through email or RSS Feeds here.  Also, follow me on Twitter here.

You gotta spend money to make money!

Every hear those words before?  Typically they’re said by a business owner or a company that spends money trying to grow the business.

When it comes to personal finance and getting ahead, that phrase seems so wrong – but what I’m suggesting is you may need to spend money to save money!

For the price of your favorite grande beverage at your local coffee house you can potentially save thousands of dollars if you put this plan into place.

Drastic Action

We all get to a point sometimes with our bad habits where we just can’t seem to make a change and we need to take some drastic measures.

Jesus spoke of this in regards to fighting against lust in Matthew 5:27-30, where he says “if your eye is causing you to sin you should tear it out and throw it away.”

Jesus wasn’t literally saying we should gouge our eyes out if we are lusting for we’d all be walking around blind if that were the case.

What he was powerfully illustrating is that you need to take drastic action against destructive, sinful behaviors in your life before they ultimately destroy you.

Relating to Your Money

If we apply Jesus’ principle to our money then we need to take drastic measures to correct any destructive behaviors we have with our finances.

If you’ve gotten yourself into debt, there’s a pretty good chance you have abused credit cards.  It’s amazing that a little plastic card could lead to so much damage.

If that’s you – it may be time to take some drastic action.

The Best $3.99 You’ll Ever Spend

Most of you already have one of these in your house so you may not even need to shell out the four bucks – however, even if you do, maybe just going to the store and buying a new pair will help motivate you to perhaps embark on a brand new journey.

It will be quite simply the best $3.99 you’ll ever spend.

Run to Walgreen’s or your local drugstore; or even shop online and buy a new pair of scissors.

This set here should easily get the job done.

Come back home and have a little Cutting the Cards Party! Gather your cards and one by one start cutting away!

Think about how much money you can save by simply stopping the use of credit cards.

Not only will you save money by not racking up any more debt, but you will also save big time money on interest.

The potential savings could add up to thousands of dollars over the course of your life span.

Now, don’t get me wrong.  You may want to keep one since it’s difficult in today’s environment to get away with using only cash, but my point is that if you’ve had difficulty with credit cards in the past it’s time for a change!

With credit playing “hard to get” during this most recent economic downturn and lenders raising their standards for doling out cash, it’s more important than ever to boost your odds of getting a loan with a good credit score.  Here are five tips to help improve your score and give you a greater chance of getting that cash you may need.

A. Annual Check Up

Getting an idea of what your credit score is has become so much easier now with government legislation that gives everyone the right to request one free credit report each year.  I highly suggest visiting annualcreditreport.com to request your free copy.  Knowing where you are will help determine your next steps.

B. Be Punctual

This is so simple, yet it’s amazing that many folks think being a couple weeks late on their payment is no big deal as long as they are paying something.  According to CNN Money, ”someone with an average credit rating of 707 can raise their score by as much as 20 points by paying all their bills on time for one month.” 

C. Clean Up Errors and Old Information

Check you report carefully to see if there is any outstanding information that shouldn’t be showing up.  Perhaps an old doctor bill or credit card still shows a balance.  You’ll want to check for accurate credit limits from your card issuers as well.  These things can typically be taken care of with a phone call to one or more of the reporting agencies. 

Experian – 888-397-3742
TransUnion – 800-916-8800
Equifax – 800-685-1111

D. Don’t Close Old Accounts

This may seem counterintuitive, but closing old accounts will actually hurt your score.  This is because the reporting agencies want to see a nice long history of using credit.  According to Fool.com, “lenders take a hard look at the ratio between the balances on your revolving accounts and your total available credit. If you do have debt, try to keep it to less than 30% of your available credit.”  If you start closing your accounts, your debt-to-available-credit ratio goes up and impedes your score.

E. Eliminate Debt

As mentioned, lenders typically like to see a debt ratio of 30% or less.  No debt would be ideal!  Get serious about improving your credit score by getting serious about eliminating debt, especially paying down those credit cards.  Managing your debt responsibly will help boost your score tremendously.

Breakdown of How Credit Scores Are Calculated:

Improving your credit score won’t happen over night, but with simple discipline and some practical steps you can start seeing improvement in a very short time.

Your debt may be costing you more than you realize especially if you are making these 5 mistakes.  Paying off your debt is a battle you can win by bypassing these blunders:

1. Not paying the bill in full each month

This is where it all begins.  You buy something you can’t afford and think to yourself, “I get paid in two weeks, I’ll just put it on the credit card and as soon as I get the bill I will pay it off” and then something else comes up.  Your brakes go out, your washer quits working  or you find some other trinket you want to buy and you put that on your credit card too.  At the end of the of the month you receive a hefty bill and only pay what you can and wind up leaving a balance on the card that accrues interest at insane amounts. Creating a budget will go a long way in helping to avoid this problem.

2. Only paying the minimum payment

If you are paying only minimum payments on your debt, your credit card companies love you and you should be getting Christmas cards from them each year.  Paying the minimum payment will basically ensure that it will take a lifetime to pay off your debt.  You must pay more than the minimum if you want to get anywhere with your bills.

3. Not paying attention to due dates

This is easy to do because we are busy people, but making a late payment even if it is only by a few days can rack up ridiculous charges that only compound your debt.  Those annoying charges can also have an impact on your credit report.  Being vigilant about paying your debt and paying it on time is key.

4. Not paying attention to the interest paid

If more people understood how much interest they are paying to their card companies each month in interest alone, perhaps they would make a greater effort in getting these debts paid off.  Matt Jabs at DebtFreeAdventure.com takes a revealing look at his own interest payments for the month and shows how interest destroys your ability to build wealth.

5. Not negotiating with the card companies

It puzzles me that more people don’t call their card companies to negotiate with them.  You can negotiate things like interest rates, late payment fees or even payment plans.  If nothing else, it doesn’t hurt to give them a call and find out what they can do for you.  Bob Lotich at ChristianPF.com tells about his experience in  negotiating with credit card companies. 

Getting out of debt isn’t easy, but don’t make it harder on yourself by making simple mistakes that can easily be avoided. 

According to creditcards.com, the average American household credit card debt is surveyed to be at $8,329. Even if you are not one of the average ones you probably know the devastating affects debt can have on you and your family.

If you are burdened by credit card debt and are serious about breaking free from the bondage that credit cards can put you under, then let me offer some practical steps to begin your journey.

1. Pray

Prayer is an essential component for any aspect of our lives. If you are in over your head in credit card debt, might I suggest humbling yourself and spending some quiet time alone with God to be honest with him about where you are at financially. He’s not going to be shocked by the news and He offers wisdom to those who ask for it (James 1:5).

2. Take Inventory

Gather each credit card statement and write down the name of the card, the balance, interest rate, minimum payment due and the amount you are currently paying toward that debt. I would also suggest you write down the toll free number of the card company as this will come in handy later.

Taking inventory also means you look carefully at each card companies offers (i.e. balance transfer rates, 0% offers etc.) This will be important in step four.

If you are married this should be done with your spouse. You would be amazed at how many couples I come across that do not know that the other one has credit card debt or are unaware at how bad the problem is. Typically one spouse is more of a spender than the other and so it can be quite a shock at first, but paying off debt is a team sport and must be fought together.

3. Stop Over-Spending

This sounds pretty basic, but if you are in credit card debt you have been spending more than you earn. You must be tenacious in reducing expenses and stopping your use of credit cards in order to fight this battle. Christian Personal Finance has a great post on where and how to cut expenses.

4. Negotiate With the Card Company

I am amazed at how often this is overlooked. Many companies are willing to work with you if you approach them and let them know that you are wanting to pay off your debt, especially in this economy, where many people are not paying their bills or even filing for bankruptcy.

I suggest calling your card company and be honest with them. I would ask for a manager right away or an account closing specialist so that you get straight to the decision maker that can help you. Let them know you want to pay down the debt and you’d like to know if they can reduce the interest rate for you. Find out if they have any special balance transfer rates and that you may be willing to consolidate some of the debt to them if they can give you a decent offer. Also let them know that you are willing to transfer their balance to another company if they cannot work with you. Here is a helpful post about negotiating with credit card companies.

5. Consolidate

If possible, take advantage of special balance transfers offers. This only works if you stop your over-spending. You don’t want to consolidate your debt and then rack up another couple thousand dollars on the card you just transferred. You don’t want to get into the habit of doing this either because it can have some negative impacts on your credit score, however, if you consolidate some of the debt to a much lower interest rate then more of your payment will go towards paying off the principal.

6. Snowball the Debt

Some people believe you should pay off your highest interst card first. I tend to disagree. I think snowballing your debt is more of a confidence builder and can start the momentum towards getting you out of debt. According to Dave Ramsey the best way to knock out debt is to get some quick wins under your belt.

” The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20% head knowledge and 80% behavior. You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.”

The first step in snowballing your debt is to pay minimum payments on all your credit cards except the one with the lowest balance. You pay as much as you can on that amount until that debt is gone and then you take whatever that payment was and apply that towards the next smallest balance. Each time you pay off a debt, apply that payment to the next smallest card and before you know it you will have created some great momentum and will see the progression at a more rapid pace.

Final Thoughts

Getting out of credit card debt is not easy and it won’t happen over night. It will take discipline, sacrifice and patience, but the results will be worthwhile. Find some friends to keep you accountable and do your best to keep plugging away. You’ll be glad you did.