Great finances are, I think, a combination of determination, optimism and fear. You have to own the choice to get debt-free and on top of things, and be optimistic about the success that will come with that.
You also have to have (well, I do at least) a reasonable level of fear or appreciation of the consequences that are attached to a financially irresponsible life.
Here’s my contribution to the last element of financial security; some of life’s scary credit stories.
Story #1: The Co-Signed
The oldest credit card horror story in the book. So your boyfriend’s brother needs someone to co-sign a loan. He seems nice; he just wants to get educated/ a car/ a ticket to Delhi so he can connect with his spiritual side. Or maybe it’s your Mum, or a friend. Whoever it is, whatever the story, don’t do it. That may sound callous, especially when people might need your assistance.
But there’s only way this can end, and that’s badly. Too many people act out of the goodness of their hearts, and end up saddled with a loan they did nothing to earn. How to avoid it? Don’t take the risk, no friendship is strong enough to withstand those kind of issues.
Story #2: The Snowballer
You have your credit card under control. Maybe you’ve cut it up. Maybe you’ve put it in a block of ice. All is hunky, dory and dandy. And then something goes wrong. You lose your job, an unexpected repayment comes up, Christmas arrives. Whatever it is, you don’t have the money for it. So you advance cash off your credit card, and then the avalanche begins.
Cash advances are the Demon King of credit cards. You pay for them the second you advance it, and it makes the interest on the card enormous and very hard to control. How to avoid it? Have an emergency fund for these occasions. Build it up simultaneously to paying off your credit card, so that if disaster strikes, you don’t have to enter debt again to survive.
Story #3: The Chip Away
Somehow, your debt is huge. Clothes, medical expenses, Wallabies tickets- whatever. However it happened, you’ve got bad credit card problems. And so you chip away, and you chip away and yet it goes nowhere. How common a tale can you get? Avoiding this one can be done in two ways. The first way is to never get a credit card and never get into that kind of debt. The second way is to pay above the minimum repayments on your debt. It’s not just important, it’s essential. You’ll never clear it otherwise. However you have to do it, pay above the minimum.
Story #4: Paying Your Dues
So you’re finally tackling your credit card debt. You have your payments lined up and you’re keeping your spending under control. And then, all of a sudden, you start getting late fees. Impossible, you say. Sadly no, there seems to be several instances online of credit card companies changing the due dates on credit card repayments so every one misses them and has to pay late fees.
Simple, effective and so unethical it makes me hop. How can you avoid it? It’s near-impossible to prepare against, but if it happens to you, contest, contest, contest the charges because that kind of behaviour ain’t on.