Tag Archives: credit cards

retail therapy

How much will that Retail Therapy Really Cost?

Many consumers turn to retail therapy as a means of helping them to feel better for a short while after dealing with a difficult situation. Although engaging in a little impulse spending on that new dress and shoes may pick up your spirits for a short while, the truth is that your retail therapy habit is probably costing you a lot more than you can afford to spend. 

Crunching the Numbers

A survey conducted a few years ago studied the habits of approximately 2,000 shoppers and found that the average American spends a little over $2,200 per year on these ‘pick me up’ purchases. The poll went on to note that the typical shopper purchases around 12 items per month in store and eight to 10 online, with their shopping taking up almost 90 hours a year in-store and more than 70 hours per year online. 

Most Americans have admitted that as much as 25% of their shopping is based more in pleasure than in true necessity nowadays, with more than 65% stating that shopping has therapeutic qualities for them. Around 70% of shoppers admitted having purchased something nice just to cheer themselves up, and approximately 15% of them said that they engage in retail therapy quite regularly. 

More than 70% of the survey respondents also said that they were living from paycheck to paycheck at the time, meaning that their retail therapy habit was hurting their finances severely. 

Ditching the Habit

If you regularly succumb to retail therapy and you’d like to break this habit for the sake of your finances, the tips below will help get you on the right track:

  • Identify your triggers – What causes you to go impulse shopping? A stressful day at the office? Feeling lonely? Trying to fit in with certain friends? 
  • Delete spending apps and emails – unsubscribing to emails from your favorite stores and removing shopping apps from your phone will go a long way in helping to reduce temptation substantially
  • Try a new hobby – although initial expenditure may be needed to get set up with your new hobby, it will leave less time for going impulse shopping – which will help your budget recover over time
  • Entertain at home – if you’re in the habit of heading to the mall to meet up with friends, go shopping and eat out, this will definitely hurt your budget over time. Instead, invite friends over for coffee or a meal at home. You’ll still be able to enjoy spending time together, but for a fraction of the price – and there won’t be any items tempting you in the store windows at the mall

Although there is usually no harm with engaging in a little retail therapy from time to time, it becomes problematic when your household finances start suffering as a result of this habit. A great way to ensure that you’ll still be able to treat yourself from time to time is to set aside a few dollars in your weekly or monthly budget specifically for this purpose. 

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new year finances

New Year, New You? How About a new Financial Plan as Well?

The New Year is the ideal time to set up some new financial goals for your family, but it’s essential to start with smaller goals that will help you work towards those that are bigger over time. Regardless of the financial goals you intend achieving, it will be a good idea to set up a support system that will help make it easier to achieve them. 

Below are some examples of financial goals you can consider setting for your family:

Compile a Realistic Budget

Several individuals who earn six figure paychecks still struggle financially because they don’t take the time to compile a budget for their money. As such, setting up a realistic budget will probably be the most important step you can take if you intend being financially successful. 

Although it might seem intimidating to compile a budget for the first time, you shouldn’t let this stop you from doing it. Tracking your income and expenses will not only help you understand your finances better; you’ll also be able to plan ahead for any major financial decisions that may need to be made. For instance, perusing your spending will help you differentiate between genuine needs and wants – which will result in a change in your spending habits over time. 

When compiling your budget, have copies of bank account statements on hand because this will help you see exactly where your money is being spent each month. If you find that expenses are exceeding your income, you’ll either have to cut items out of your budget wherever possible or find ways to earn additional income to cover the shortfall.

Repay Consumer Debt

The next financial goal to set should be repaying any consumer debt you have from store cards, credit cards and any other places where you’ve been making purchases on credit – and your budget will go a long way in helping to achieve this. 

Most financial experts recommend listing debts from smallest to largest, paying as much as possible towards the smallest amount owing and paying minimum required amounts on the rest each month. As the smaller debts are fully repaid, the amounts that were being applied to them can then be rolled over to the next outstanding bill in line.

Start a Savings Account

Up to 60% of Americans have noted that they would struggle to cover a $500 emergency if it arises because of not having any money saved. 

Once your debts have been fully repaid, place the money you were paying towards them into a dedicated savings account until you have approximately three months of living expenses accumulated. This will provide a lifesaving financial cushion in the event of possible job loss or other emergency that may occur.

If the idea of setting financial goals is leaving you feeling overwhelmed, it may be a good idea to schedule an appointment with an accredited financial advisor. Contact us today if you would like to learn more about taking control of your financial future.

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Why Celebrating Christmas on Credit is a Bad Idea

With the holidays almost upon us, it often means taking trips to visit family, purchasing gifts, going out to celebrate with friends or even a combination of all of the above. If you don’t have much in the way of savings set aside, you may be asking yourself how you’ll be able to pay for it all. 

The above-mentioned scenario has resulted in several lending institutions now offering holiday loan products to clients. However, it’s crucial to remember that these are nothing more than unsecured personal loans being marketed under a different name. While this may seem like the answer to your holiday finance problem, there are many reasons why you should never succumb to celebrating Christmas on credit – especially this form of credit. 

  1. Discretionary Spending is a Bad Reason for Borrowing Money

When you opt for using a holiday loan, you’ll end up paying a high amount of interest for items that you want, but don’t truly need. Regardless of whether you have an excellent credit score or not, obtaining a holiday loan or even maxing out your credit cards will put you in a more difficult financial situation than ever when January arrives. 

  1. You’ll be Making Christmas Even More Expensive

Although purchasing gifts and everything else you’ll need to celebrate Christmas on credit may seem like it will be extending your buying power, the truth is that your buying power will actually be decreased and gift giving will become unnecessarily expensive. 

When borrowing money, you’ll spend more than you would have if you limited yourself to the cash you have on hand. To add insult to injury, the money you borrowed will have to be repaid with interest as well – making your so-called Christmas celebration costlier than you imagined. 

  1. Borrowing Helps Set Unrealistic Expectations

If you ‘do Christmas on credit’ this year, you’ll be helping to set unrealistic expectations with regards to gift giving and general spending for the years to come. It will also make you a lot more likely to depend on credit for the next Christmas…and the one thereafter. 

Borrowing to pay for Christmas will also not only get your children into the habit of expecting large and costly gifts each year; you’ll be teaching them that it’s OK to borrow money so that you can have what you want when you want it – not a good idea. 

  1. The Joy of Giving will be Stolen because of Borrowing

Although your kids will be thrilled to open their gifts on Christmas morning, you won’t be able to truly enjoy the moment because deep down, you know that it’s going to be difficult to repay the amount you borrowed to buy them. You’ll also experience feelings of guilt because you know that those gifts will only really belong to your kids once your borrowing has been fully repaid. 

Instead of succumbing to putting your Christmas spending on credit again this coming year, commit to saving some money each month. By the time December arrives, you’ll have a tidy sum saved up and be able to enjoy a guilt-free celebration. 

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Overwhelmed by Credit Card Debt? Take these Steps to Improve your Finances

The aspects that consumers love the most about credit cards are safety, convenience; being able to track spending and often earning rewards are unfortunately the same qualities that cause so many people to accumulate high levels of debt on them. 

If you’re unfortunate enough to have accumulated large sums of credit card debt, chances are that it’s leaving you feeling overwhelmed and stressed because you think that you’ll never be able to repay it all. However, the good news is that there are effective strategies and tips that can be implemented to help ensure that you’re able to repay every last penny in full.

Target One Card at a Time

Although minimum monthly payments will be required on each of your credit cards, paying a little extra over and above this amount on the card that carries the lowest balance will help lower its balance just that bit quicker. Once this card has been paid in full, take the amount you were paying on it each month and add it to the minimum payment amount on the next card in line to be repaid – and keep repeating this strategy until all credit cards and store cards have been paid in full.

Request Reduced Interest Rates

In many cases, getting the interest rate reduced on a credit card can be as easy as contacting the issuing company directly and asking – provided that you either have a fairly decent credit score or you’re a long-term client that always makes payments on time. 

If any of your other credit cards have lower interest rates, be sure to inform the customer service representative that you’re dealing with – in many cases, they will at least be able to match it.

Transfer Balances to Interest-Free Cards

These days, many new credit cards offer interest-free introductory periods to customers who want to transfer credit card balances over to them. Interest-free timeframes can range anywhere from six months to as long as 18 months in some cases.

While this is an excellent strategy to use to save on interest charges, keep in mind that you will need to commit to repaying the balance in full before the introductory period expires. Failure to do so can result in hefty interest rates being billed on outstanding balances.

Commit to Not Accumulating More Credit Card Debt

Once you’re on the journey to get all of your credit cards fully repaid, it’s crucial that you not take on any further consumer debt. After everything has been repaid, you’ll usually be able to start saving a portion of your income each month that can either be put towards an emergency fund or invested in a retirement fund. 

If you’re feeling overwhelmed by the amount of debt you’re carrying and aren’t sure how to go about putting a plan of action into place to repay everything, contact our financial advisors today. We look forward to being able to assist you with becoming financially independent over time. 

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Are you Really Benefiting from those Credit Cards?

These days, a number of rewards-based credit cards are available to consumers and incentives such as air miles, discounts on store-specific purchases have never been easier to obtain – or so it seems. While many of these cards may seem to provide extremely attractive incentive options, it’s crucial to read the fine print associated with each of them before signing up.

Those Rewards Likely come with High Fees and Interest Rates

Accumulating rewards may seem awesome initially, but you’re totally defeating the object if your card comes with fees that actually outweigh the benefits you think you’re getting. 

In most cases, the average reward redemption value on these credit cards is around 1% of what you’ve paid to earn it. This means that if your interest rate is higher than 1% on the card, then the credit card company is the one who is really benefiting from this arrangement – and not the cardholder. 

Another thing to keep a close watch on is any annual fee that may be charged – these can often be quite exorbitant on rewards credit cards.

You’ll be Encouraged to Spend More

Basic human psychology suggests that when someone is offered anything that seems like a good deal, most people will be tempted to purchase it – even if they don’t need it. As such, companies that offer reward credit cards take full advantage of this type of thinking.

Before putting any purchase on your reward credit card, do the math to see how much you’ll really need to spend before you’ll qualify for any decent type of incentive. For example, it’s not worth spending an extra $1,000 on credit just to get a reward of $10.

Rewards may come with Limitations

That long list of potential rewards that can be earned with your credit card may seem tempting, but it’s crucial to read and understand all of the terms and conditions associated with using these cards. For example:

  • Rewards may expire – some credit cards rewards may expire after a predetermined period of time, so ensure that you’ll be able to redeem them before this happens
  • Rewards may be limited – some credit cards reward programs limit the amount of incentives that can be earned in a quarter or during a year, so you may not end up getting as much of an incentive as you’d initially thought
  • Beware of redemption thresholds – Unless your credit card offers cash-back rewards, you’ll have to convert accumulated reward points into something useful such as a gift card or even airline ticket. However, keep in mind that many reward programs require a minimum number of points to be accumulated before you’ll be allowed to redeem them for a reward – and this could mean that you’ll have to spend thousands of dollars before being able to take advantage of rewards you’ve earned

In most cases, consumers will benefit from using standard credit cards that charge lower interest rates and don’t charge annual fees of any sort instead of signing up for rewards-based options. Always ensure that all fine print is fully understood before signing up for any type of credit card – whether it’s reward-based or not. 

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Break These Bad Credit Card Habits

Bad credit card habits not only cause chaos with your credit score; over time, they will result in you accumulating more debt than you can afford to comfortably repay. Your long-term financial plans can also be derailed completely, which is why it’s essential that you eliminate these bad habits right away.

Failing to Inspect Credit Card Statements

While it may seem like nothing short of the most boring chore on earth to check your credit card statements thoroughly, the truth is that perusing each line item on them can help prevent any fraudulent purchases from being added without your knowledge. 

If you notice any charges that you haven’t made, you’ll need to notify your credit card provider immediately so that the necessary actions can be taken to reverse them. Another aspect you should always check is your credit limit – over time, your bank can change this without notifying you and this can result in some hefty fees being charged if you exceed your limit.

Only Paying Minimum Amounts

Credit card companies provide a convenient feature in that they only require you to repay a small amount of your outstanding balance each month. While this may seem handy, you will not ever be able to repay your card in full if only minimum require amounts are being applied. In addition, you’ll be paying hefty amounts of interest on the outstanding balance.

When the time comes to make repayments, always ensure that you pay as much as you possibly can against the outstanding balance. Over time, you’ll save thousands of dollars in interest.

Withdrawing Cash

Taking out a cash advance is most likely the costliest type of credit card transaction. Not only will you pay a higher interest rate on the amount you’ve withdrawn; the grace period for interest being charged with normal transactions is usually voided and an additional cash advance fee will normally be charged as well.

Purchasing Unnecessary items

This is another bad habit that should be stopped immediately because it results in you accumulating debt that you might not be able to repay at a later stage. 

If there are items you want, but cannot afford to pay for in full, it’s best to save up instead of placing these purchases on a credit card. You will feel a tremendous sense of satisfaction in knowing that you own the item from the start instead of only truly owning it after repaying your credit card balance.

Making Late Payments

These days, it’s possible to schedule payments so that they are sent to your credit card provider on time each month – meaning that there is literally no excuse for making late payments anymore. 

Late payments not only affect your credit score; over time, additional penalty fees and interest will be applied to your credit card as well. Again, this will result in you wasting money on unnecessary late payment fees. 

Exercising good credit card habits such as never carrying a balance until such time as interest is charged and ensuring that repayments are always made on time will go a long way in helping to build an excellent credit score – while allowing you to keep more of your hard earned cash because of not paying interest. 

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