I Can't Save Money

They say that you know you are in trouble with your credit cards when you can not pay your balance in full for that month.

Do you use you cards for convenience or necessity? Do you only pay your minimum balance? Do you see your credit cards as a fixed expense like your mortgage and car payment, or do you only pay it like you would pay for a meal at a restaurant?

These are danger signs. Can you answer to yourself exactly how much debt you have without looking?

Would you like to be out from under that headache?

Then the experts have provided five steps to relieving that credit card debt. These steps should be taught in school, or maybe they don't teach them because it should be common sense.

1. Buy everything out right. Pay by cash or check/check card. But make sure to keep up to date with those purchases.

2. Always ask yourself, "Do I really need this purchase?" Try your best, while paying off your debt, to stay away from buying anything unnecessary. One secret is not to make any snap decisions. Wait 24 hours to make any large purchases.

3. Make a list and check it twice. That's right make a list of all of your obligations. Each month, update that list with new balances. This soon becomes almost a game, a motivational tool. In fact, I suggest using a white board posted somewhere in a prominent place in a private area of your house, and make sure to update it regularly.

4. Set aside an amount designated in your budget just for reducing your debt. Keep this amount the same or try to increase it. Don't decrease it until your debt is paid off. Then after it has been paid off, put this amount in a savings account or other investment vehicle that you can add to regularly.

Here's an example that might help: Say you have 5 cards and are paying $50 per month on each for a total of $250 per month. When you get one of these cards paid, don't just keep sending the other four the same $50 per month, send them $62.50. When the next one is paid and you only have three left, send $83.33 each. Then you finally start to realize this is possible. Also, never just pay the minimum.

5. Start your savings program. Once it's all paid off, you could possibly cut your money by up to 50% but why? You have already shown yourself that you can take on this responsibility with out missing the extra money. Think about putting that $250 a month in the bank and earning interest on it. How much would you be putting in the bank after a year?

Have you ever sat down and figured up what your mortgage really is?

Let's say for an example you have a $75,000 mortgage. I know, who can find a house for that right now, but hear me out. For the sake of example let's say your payment was $658.18. You are paying that price for 30 years. $236,944.32 is your total. That's right, in 30 years you will have given someone else almost 1/4 million dollars for a $75,000 house. And that puts your interest at $161,944.32. If you had paid cash, and had that $162,000 you could have bought 3 houses at $75,000 and had money left over! Kinda puts things in perspective huh?

So multiply your current monthly payment by the 12 months and the 30 years to see where you come out. Don't forget to subtract you buying price to see how much you are paying in interest, then divide in your house cost again to see how many houses just like yours that you could have paid cash for if you had this amount in the bank.

At this point the shell shock should be turning to anger...

But what can I do about it? You say.

Well, there are a few things. But lets get down to some definitions first.

Amortization Schedule This is usually a print out reflecting how each monthly payment affects your interest and principal. It should also reflect the remaining principal due after each payment.

Point A point, in finance, refers to 1 percent of a total amount. An example: on a $100,000 loan, one point equals $1,000 or 1%.

Prime Rate The interest rate that banks will lend money to their "best" customers.

Prepaying A Mortgage To prepay means to pay more than your contract requires that you pay. If your contract payment is $650 per month and you pay $750, then you are prepaying your mortgage. Unless there is a penalty, 100% of that prepayment should go toward your principle.

Now the we have those out of the way, because those are terms that you will likely hear when you go to acquire a loan, we can get on with a few more facts, before telling you the solutions.

The $75,000 mortgage at 30 years, will not start paying more principle than interest until your 23 year of the loan.

What about a 15 year note? You payment will only go up to $805.95, and you will have the loan paid in 15 years. The total interest paid is only $70,000 rather than the $161,000. And the total cost of the house would be $145,071.69, rather than the $236,000.

At fifteen years on the 30 year note you would still owe $61,248.42. At nine years on the 15 year, you are paying more on principle than on interest. And now after 15 years, your house is paid for, and should you put that same amount of money in to the bank, you would amass (at the 510.41 30 year payment) is $91,873.80.

I hope I'm not loosing you. This works. It really does.

Now Option #2, and this can be in conjunction with Option #1. Add, several 1 time pre-payment over the course of those 15 years,

Now I bet that title got your attention!

Again bear with me, because it does take a while, but the smart money is as the smart money does...

Let's say you have your eye on that new 2010 Camaro SS. Yeah, I know. I've seen the price tags too. The payment for that car is going to run roughly in the $550 per month range. What would happen if you set back on your haunches and drove the same car you have now for another 5 years, while putting that $550 in the bank.

At the end of five years, go pay cash for the latest model. In the meantime you have accumulated interest rather than paying it, you have the same trade in, and they can offer you a cash discount!

Do that again... and again... and again. By the time you have purchased your fourth brand new car, you will have saved enough interest, not to mention the cash discounts, and the four to five year old trade in each time, to buy a fifth car, with the same amount of money you would have still been paying for the fourth had you just made a monthly payment to a finance company.

Did that get any juices flowing?

That fifth car could be the 18 year old's graduation present, it could be a new bass boat. A good used airplane for that pilots license you've always wanted. Pontoon boat? In ground swimming pool for the future grandkids? Over half of the construction costs for that huge den your going to need when your kids get married and you need to have a place to have big christmas' parties at.

Lots of ideas. The sky is the limit, and it was money that you almost paid a bank instead....

Myth 1: Money Brings Happiness
To quote Benjamin Franklin: "Money never made a happy man yet, nor will it. There is nothing in its nature to produce happiness. The more a man has the more he wants. Instead of filling a vacuum, it makes one. It satisfies one want, it doubles another."

Money can buy circumstantial happiness, like: Buying a child an ice cream, or going out for a dinner at a nice restaurant, or spennding the day at an amusement park; these can all bring a good feeling of fulfillment to our lives. But, these things won't continue to keep you happy forever and someday you will run out of money to blow on these things.

If money really brings true happiness, then why are the wealthy typically so unhappy with life, and why are those that seemingly have so little, usually the one's with a smile on their face and a song in their heart.

Myth 2: Money Brings Security
Here the advice of Proverbs 23:4 - 5 rings true: "Do not weary yourself to gain wealth, Cease from your consideration of it. When you set your eyes on it, it is gone. For wealth certainly make itself wings, Like an eagle that flies toward the heavens."

Our money doesn't say "In Dollar We Trust, " every denomination of coin and currency is stamped with "In God We Trust." That didn't happen by mistake.

There is nothing wrong with having investments, owning stocks, owning property. But, we have no assurance that our money or financial institutions will be safe tomorrow.

Just like on October 19, 1987, or Black Monday as it is still called in our history books, the Dow fell 500 points in one day. The reports say that $500 billion dollars vanished. Lost, never to be recovered.

Myth 3: The Bible is just a history book and has nothing to say about finances
Absolutely not true! It has a lot to say about possessions. Jesus himself said more about finances than about heaven and hell combined.

Some examples? Ok, here you go:

Bribes - Exodus 23:8
Contentment - Philippians 4:11-12
Coveting - Exodus 20:17
Debt - Proverbs 22:7
Financial Setbacks - Job 1:1-2:10
Fraud - Leviticus 19:11
Greed - Luke 12:15
Giving - 2 Corinthians 8 - 9
Poverty - Matthew 26:11
Riches - 1 Timothy 6:7-19
Taxes - Mark 12:13-17
Tithing - Malachi 3:9-10
Wealth - Deuteronomy 8:11-19

Myth 4 - Money is the root of all evil

So, if we were going to start today, what would I do first?

Good question:

1. Get Out Of Credit Card Debt
First and foremost, remove the highest interest paid out from your bills, which is most likely to be your credit cards. After they are paid, you can still use them, but make sure you can pay the balance due at the end of the month.

2. Get Out Of Automotive Debt
As you've seen it is possible to make a huge difference in your bills by making sure that you pay cash for that new car. Don't forget to still make that car payment but, put it in your savings or money market account instead.

3. Begin A Mortgage Prepayment Program
Get that prepayment schedule in the works and the sooner the better. Get into a talk with your mortgage company about prepaying.

Once you've accomplished this, relax and enjoy the advantages of living debt free!

Advantage One
You can pay for the kids educational expenses! Wouldn't it be nice if your kids didn't have $60,000 tied to their diploma or degree?

Advantage Two
You can meet your retirement needs! Make sure your home is paid for before you retire! Mortages are hard enough without trying to make payments on a fixed income...

Advantage Three
You are prepared for a financial collapse! What if the US does go bankrupt? If all of the companies that carry your bills have to be bailed out by the government then what do you think your financial situation is going to look like, especially when you have to start paying the taxes to cover the money that your bill collectors just borrowed from the government so that they wouldn't go bankrupt and loose your house and car to someone else...

And here's an important note: If you don't own your house outright, the mortgage company does. They can sell your contract at anytime and the new contract owner can change it, with out you hardly even knowing it happened.

Advantage Four
You will have less financial stress. Of course this one should be a no brainer, but think about it: Aren't most of the martial squabbles these days (including the one's that cause a divorce) because of financial strain?

Advantage Five
You will be able to seize financial opportunities before they pass you by! Think about that 1963 Corvette Stingray that you passed up for $2500 twenty years ago. Could you afford it now? Especially since they are going for 100 times that much? Or that rent house you could have picked up for $85,000 when even on today's market it is worth $130,000. Or maybe even pay the market a little, simply because it's not a gamble anymore. You are using money you wouldn't have had before you were independent. Or maybe that diamond ring you always wanted to get your wife.... yeah, now you see where this is going. In stead of fighting about money, you could actually be enjoying life.

Advantage Six
You could increase your charitable giving. Animal shelters, homeless shelters, Red Cross, there are so many that need help right now because we have people that were live in $200,000 houses three years ago, who are living with three kids in a van outside the WalMart or McDonalds where they finally managed to get another job. Besides that, now you can mentor them on how to rebuild their lives!

Advantage Seven
You will finally be those magic words that we all strive to attain: Financially Independent! You will see your saving grow tremendously because you don't have to give your hard earned pay check to someone else every week.