Consumer Issues

September 20, 2008

Cultivating the habit of financial discipline

Filed under: consumers,finance — Tomi @ 9:01 pm
Tags: , ,

Financial Discipline requires both focus and self discipline. Attaining self sufficiency and wealth requires determination as well as hard-work. Below are some guidelines for developing a habit of financial discipline.

1. Limit your credit options. It is often said that the more credit you have access to the better it is for your credit. This is only true if you do not use the credit. However, if you have the habit of using up your credit, then the best option for you if you are determined to cultivate financial discipline is to limit your access to credit lines. Pay cash for the things you need. Whatever you cannot afford to pay cash for, either save up for it or forgo it. If you have to take on credit, try to limit it to capital items like a home which tends to appreciate in value.

2. Before buying a home, take the affordability challenge – 2x income and never go above that

3. Buy what you need NOT what you can afford

4. Think long term. Payoff and cancel excess credit cards newest cards first. Hold on to older cards as they give you a longer credit history. Canceling your credit cards might affect your credit score in the short term but the longer you go without dependence on credit lines, the better your credit score.

5. Invest excess cash. It is much easier to spend money that is readily available.

6. Save as much as you can. Clip coupons if you must. Compare prices for bargains. Try eBay.

7. Get organized, pay your bills on time. Sign up for email bill notifications (if you check your email regularly) otherwise try phone alerts – for bill payment notification. Set up bill payments on quicken, Microsoft money etc or set up auto pay via direct debit with your service provider.

8. Get rid of stuff you don’t need.

a. Donate and get a tax break (some charities will pickup from your home)

b. Sell it on eBay

An added bonus is that you get some free space around the house.

9. Learn to negotiate – you may be eligible to cut interest rates on your credit card. Call up your credit card company often (they won’t call you to tell you of your eligibility)

10. If you can’t make a payment some companies will let you skip a month without reporting to the credit bureau but only if you have previously paid on time.

11. If you have no rewards on your card, ask your credit card company to switch it for a rewards card, usually you get a new account number but if it’s the same company, the history from your previous card is transferred to the new card ex. Length of account etc. Some credit companies offer you cash back which you can get as a cheque or apply towards your payment.

12. Register for rewards = points, cash back etc. store cards (not credit cards) sometimes give you discounts on groceries (Vons, Albertsons, Shoprite, Ralphs, Wegmans etc). Most grocery stores these days have rewards cards which you register for free. For example the Shoprite card helps you earn cash back for Upromise eligible products and also when linked to your continental airlines Onepass account, gives you 1 mileage point for every 2 dollars spent (after the first $250 upon registration). It also offers your free cash for purchases on baby items via its own program called the baby bucks point and give you access to free turkey or ham – Thanks giving and Easter.

13. Have excess cash? Open a CD if you have money available now but which you would need at a specific later time. CDs usually have higher interest than regular savings. Some banks like Bank of America also offer risk free CD accounts though with a lower interest rate than the fixed CD the risk free CD gives you easy access to the money without penalties.

14. Go for quality rather than quantity when buying the stuff you need.

15. To cut your living costs, try discount shopping. Try wholesale clubs (Sam’s, Costco, BJs) especially for non perishable items. For perishable items, the wholesale clubs might not be worth it except you have a large family. For items like for clothes (Marshalls , Ross, TJ Maxx),for shoes ( try the discount aisle at DSW, famous footwear and payless shoes amongst others). Some of these stores even have home products and Walmart as well as Target are always a cool place to go for reasonable priced items.

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