In Your Best Interest

Last night in class we discussed the profound reality of debt due to credit card interest and finance interest rates based on your debt to credit ratio and past credit activity. It was horrendous! Our teacher is so awesome in that she not only used visual aids- Power Point graphs and figures- she did role playing. One of my classmates was the banker and each of us approached her about a car loan. My scenario involved having no credit at all so I was high risk. Any classmate who actually was a visitor to our class had years of revolving credit with several late pays and charge-offs on her credit report. Another classmate had positive credit history, several long-term accounts with zero balances and no late pays. I received the loan with 18% interest; the bad credit classmate was denied the loan because her credit score was in the 500's and the positive credit score classmate received a loan with 5% interest. Our teacher then gave me and the positive credit score classmate model cars that were exactly alike to represent we purchased the same vehicle and got loans from the same bank or credit union. Due to the differences in our credit scores and history, she will over $3,000 less in interest than I would because her credit score was much higher than mine. The lesson: Do whatever you need to do to have positive credit.

The most profound example was buying a $500 stereo with a store credit card that has 18% interest rate. If you pay the minimum payment, it will take you almost 11 years to pay it off and the stereo would have cost you about $1300. If you have a fixed amount greater than the minimum like $20/month, it will take you 6 years or less to you will have paid a little over $600 for the stereo. The lesson: Pay cash!

The guest speaker for our class was a friend of hers who with his with decided they were sick of being in debt. So about two years ago they made a commitment to pay off everything within X amount of time period and they will be debt free in 7 months. He admitted the only thing they will have is their mortgage payment and by paying one extra mortgage payment a month, it will decrease their 30-yr note to 20 years. He gave us about 17 suggestions for decreasing your debt but these were the easiest that I will use to educate my future clients:
- eliminate Starbucks and convenient store snacks.
-educate your self'; read personal finance column in local newspaper or listen to financial news to get familiar with terminology
- find inexpensive ways to entertain your family (borrow movies from library, use the parks)
- use Credit Unions for loans because interest rates are always cheaper
-put credit cards in the a baggy with water then place in the freezer; thaw out if home or family emergency
-never buy retail; everything goes on sale if you wait and watch; furnish home and clothing with garage sale items; thrift and consignment
- do not eat out more than once a week for dinner and when you do pay cash; it will make you think if you really want to buy desert

Prior to taking this class, I thought I knew everything I needed to teach others how to manage their money but I quickly found that to be false. Yes, I know a lot through experience and education, but realized there is always things to learn from other people. You know the ultimate realization or solution to any money management tool is not a magic wand or key points but how bad do you want to change your lifestyle so you control your money and not let your money control you. Our guest speaker shared that for him and his wife, they told each other, "Enough is enough!" We want to see some fruit from our labor.

I hear the brother and he has stirred up something in me that hopefully I can pour out on my clients. "Enough is enough. I want to see the fruit of my labor!"