Basic Money Management Credit --A Help or a Hindrance?

Basic money management credit. At first glance the phrase reads like an oxymoron. But are the two concepts really mutually exclusive? After all, won't we have more money to manage if we handle our credit well?

To answer that question, let's take a step backward in time. In our grandparent's generation, if a major purchase was planned such as an automobile or a house, basic money management principles were put into practice without hesitation. Money was set aside every week for sometimes years, until enough was accumulated to make the purchase.

But, you say, they didn't have housing bubbles like they do today. Cars were more affordable back then. True and true. But you still have a choice when purchasing a car or finding a home in which to live.

Let's say you want a car for your commute to work. You go to the dealership and look around. A sporty red convertible catches your eye. "That one looks nice," you say to yourself. You look at the price tag. It is twice as much as you had planned to spend, but the salesman approaches you and convinces you to sit down with him to talk about monthly payments.

Luckily, you have already figured out how much you can afford to pay each month. But somehow, he manages to get the payment down to within $100 of that figure.

Now you have a decision to make. In order to justify the purchase, you will have to shave $100 off of some other budget item. Also, the term of the loan he is proposing is two years longer than it would be if you chose a vehicle with a lower sticker price.

The decision then, is not simply whether or not to buy the car, but whether or not you want to prolong your bondage to the auto financing company for more money out of your budget every month. That is basic money management. Credit is just an extension of that.

In ancient times, usury, or the practice of charging interest, was considered immoral. As it gained acceptance, though, it became clear that whoever was in control of the interest was usually in control, period. It goes right along with the old adage which says, "People who understand interest, earn it. Those who don't, pay it."

Basic money management credit, if used wisely for major purchases like automobiles and houses, can fit very well into a sound personal finance plan. However, when it is used unwisely, it becomes a burden that cripples your ability to make financial choices over time.

Here are some tips to help you stay within your budget while keeping your credit under control, compiled by Consumer Credit Counseling of Nevada :

1. Distinguish between wants and needs.
2. Don't use credit cards to avoid finance charges. Pay cash instead. Leave your credit cards at home to avoid the temptation of charging.
3. Consolidate high interest rate debt into a debt management plan for reduction in finance charges and possibly monthly payments. This will allow you to pay off your debts sooner than paying them yourself.
4. Avoid paying ATM usage at banks other than your own to avoid additional ATM fees.
5. Use electronic bill paying. You can save the cost of postage and fees, penalties and additional interest payments for those bills you forgot to mail on time.
6. Combine your auto, life, and home insurance with the same company for possible rate reductions.
7. Increasing out-of-pocket insurance deductibles may result in less expensive insurance rates.
8. Use income tax refunds, cash birthday gifts, or income raises to pay off debt or towards your savings account.
9. Many employers offer pre-tax Flexible Spending Accounts to help you pay for out-of-pocket medical, dental, and child-care expenses. By enrolling you can save money, as contributions are exempt from federal, state, and payroll taxes.
10. Cook at home and reduce cost of eating out.
11. Shop off grocery list and use coupons. Avoid buying pre-packaged or ready-made meals, as they are more expensive.
12. Brown-bag it and take lunch to work.
13. If you use a cell phone, make sure your calling plan matches your pattern of calls (minute usage, long distance, text charges, etc.). Understand peak calling periods, area coverage, roaming, and termination charges to avoid unnecessary charges.
14. Eliminate unnecessary telephone features such as caller id, star 69, call waiting, etc.
15. Shop telephone long distance carriers for competitive rates.
16. Use basic cable service and eliminate pay channels (personally, I would eliminate cable all together. Do you really need all of those channels anyway?)
17. Use dial up modem internet versus DSL or broadband. Use the internet at a local library for free.
18. Cancel any club memberships you don't use and magazine subscriptions you don't read. (Not a problem with the buying club we recommend ).
19. Reduce entertainment costs: rent movies, go to the park, attend matinee movies. Allot a specific amount of money for entertainment each month and don't spend over this amount.
20. Brew your own coffe versus buying pricey lattes.
21. Carpool, walk, bike, or use public transportation to reduce or eliminate auto payments, auto insurance, auto mainteneance, and gasoline costs .
22. Quit smoking!
23. Enroll in a 401k.
24. Downsize your gas guzzling SUV for a fuel-efficient car that meets your family needs.
25. Instead of monetary donations to charities, donate your time and volunteer.

And there you have it. Basic money management credit information at a glance. Be sure to tell your friends! Use the bookmark buttons to share this page on the social networks.

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