What Good Are Credit Cards If They Only Lead to Trouble?

Credit cards are not bad, but you do need to have some self control. However, credit cards can provide some false financial security. They can be used as an emergency fund if your car breaks down, but a real cash emergency fund is the best policy. If you can't afford to put money aside to start an emergency fund, what makes you think you can make the credit card payments if you use the card for an emergency. A credit card company can serve as a middleman if you have a dispute with a merchant and you can use to make purchases over the phone or on the Internet (hotel room, airline tickets, etc.). But you can also get the same services and do the same things just as easily with a debit card. If you are going to absolutely use a credit card be sure you can pay the balance in full each month. Long term debt has no business on your credit card.

So, to answer the question, what good are credit cards if they only lead to trouble? Nothing really. You don't need them.

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When it Rains, It Pours

Day 307 of my Financial Freedom Countdown.

The other day I discussed how the Lord giveth and the creditor taketh away, but unexpected expenses can take away as well.

We received a text from our renter this morning letting us know the hot water heater was out. My first impression was of water leaking everywhere and there being just a huge mess. Not only a mess, but I was also thinking there goes the budget this month and we are just not going to ever pay extra towards our credit card debt. However, things were not that bad after all.

I have never had a hot water heater go out, but everyone I know who has, had a major leak. In our case it wasn't a leak, but the pilot light just went out and wouldn't re-light. It did need a part replaced however. The good news is the water heater was still under warranty and all we had to pay was labor. The bad news was we had to pay $165.00 for the labor.

Lucky for us we have our $1,000 emergency fund in place. Not only an emergency fund personally, but an emergency fund for our investment property. If your water heater went out out, would you have the money to fix? If not, you can always take cold showers. Those feel real good with winter coming up.  If you don't have your $1,000 emergency fund established, get on it.

[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]

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Should I have a Separate Checking and Savings Accounts?

Yes, you should have a separate checking and savings account. A checking account is for paying bills or purchasing things. A saving account is for well, saving.

I definitely think it's important to have a separate saving account when it comes to your emergency fund. When the money that is intended for your emergency fund is in your checking account, it is very tempting to tap into that money and spend it. When the money intended for bills and such is used up, you know you are out of money and you have reached your spending boundary.

Money market accounts allow you to write you to write up to 3 checks a month, but regular savings accounts allow you to make a withdrawal only. I feel your savings account should have check writing abilities. It gives you one additional option to get money from your emergency fund to cover, you guessed it, an emergency.

[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]

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Emergency Fund Depleted and Cutting Into the Budget

[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]

Well the $400 start to my emergency fund has been depleted. I bought three new tires for my car and went over budget by $109.

I originally had planned to buy two new tires for my car. The front two were the worse and actually were pretty bad, but the rear tires didn't seem that bad to me and I had hoped to be able to wait on those.

Turns out the rear tires were pretty bad too and so I went ahead and bought a full set. I was really happy with the price that Discount Tire gave me for the four tires.

Originally, I had planned to get two run flat tires and hold off on the other two. The tire shop just about matched the price for the four regular tires that what the two run flats would have cost me. Although, my budget was $400 I did get out the door for $509.

The extra $109 cut into my budget of what I wanted to spend, but actually my budget overall had a $200 surplus that I haven't allocated yet. So it wasn't too bad.

I am determined to keep an eye on my finances and not go over my budget or have to charge on my credit cards. I also don't want to jeopardize my balance liquidation programs.

I have the majority of my credit cards set up on a debt reduction program or BLP with Chase and Bank of America and I am determined to make sure I always make those payments on time.

If I miss a payment I can be removed from the program and if that happens my accounts will return to their high interest rates and all the fees and interest that Chase waived will be added to the card balances one again.

I should be able to start re-building my emergency fund within the next week. I'll keep you posted.

We Also Suggest:

• Bank of America's Balance Liquidation Program (BLP) Still Sucks     
• What's the Best Way to Pay off My Credit Card Debt If I Have a High FICO Credit Score ?
• How did This Economic Crisis Start?
• Should I Use My 401K to Pay Off My Mortgage?
• Should I Take Out a 401K Loan to Pay Off My Credit Cards? 

Now What Do I Do? 

• Follow my journey to pay off debt and subscribe by email.
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There Goes the Emergency Fund

[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]

I have just finished setting up my remaining account with Chase on their Balance Liquidation Program this week and the results have been astounding.

It is great to finally be seeing my balances come down on my credit cards. I had also begun to put aside money in my emergency fund.

I had attended a gold party that a friend of mine had and I actually had made some money partying. I had sold some gold jewelry and made $400. That $400 went to start my emergency savings, but that has now been interrupted.

I have put off and put off getting my tires rotated that are now 4 years old and have 72,000 miles on them. A recent road trip however has put them over the edge.

I noticed yesterday that one of the tires has a crack in it and the tread is worn down to the point that the steal belt is visible. This is a blow out waiting to happen.

So I began calling around to prices for the tires and to get the same tires I have is about $200 a piece. Now I have the self sealing tires that have come in handy more than once and that is what is adding to the price.

I don't have to go with the run flats, but they give such a sense of security I am going to go ahead and get them. Thing is I only have the money for two. To me the front two tires appear the worst and those would be ones I would replace. We'll have to save the other two for later I hope.

I guess that is why having an emergency fund is so important. For times when you need money for car repairs and such. In the meantime, back to the drawing board on the emergency fund.

We Also Suggest:

• Bank of America's Balance Liquidation Program (BLP) Still Sucks     
• What's the Best Way to Pay off My Credit Card Debt If I Have a High FICO Credit Score ?
• How did This Economic Crisis Start?
• Should I Use My 401K to Pay Off My Mortgage?
• Should I Take Out a 401K Loan to Pay Off My Credit Cards? 

Now What Do I Do? 

• Follow my journey to pay off debt and subscribe by email.
• Subscribe in a Reader (RSS)
• Follow us on Twitter
• Follow us on Blogger 

Dave Ramsey vs. Suze Orman

[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]

The first time I was six figures in debt I turned to Suze Orman for help to get them pesky piles of credit card bills down and paid off. This time around I am looking into Dave Ramsey's techniques.

Now don't get me wrong I still love Suze and her advice worked wonders my last go around with debt. But Dave's approach with debt is a little different.

Being in banking for twenty years and having a finance degree, plus having six figures of debt before, you are probably thinking how the heck did you let this happen again?

Basically, I lost my focus. Everything I have learned about finance and what I learned the last time I paid off my debt went out the window. So I am getting focused again and as Dave would say I am running from this debt like a gazelle.

So, how different are Suze and Dave? Really not all that much, but here's some of the differences.

I feel Suze stresses not putting anything into savings until your debt is paid off. Which I see her point in that the interest on your credit cards is most likely higher than what your savings account is paying so you are losing money. Pay the credit cards first. But Dave teaches with his Baby Step # 1 to build an emergency fund of $1,000.

The emergency fund of a $1,000 has a safety net feel for me. That there is actually cash money safe and sound somewhere that I can get to for an emergency like a night out on the town...just kidding. No for car repairs or something unexpected. After that though Dave does stress to start working on paying off your debt and not worry about savings for the time being.

Next Dave says to start with the credit card that has the lowest balance on it and work on paying that one off first. Just like the savings plan Dave is on the opposite side of the fence from Suze on this one. Suze would say to pay off your credit card with the highest interest rate first. Which mathematically makes sense, but does math makes sense to most people in debt?

Dave's approach to debt is more psychological to me than mathematical. Debt is usually psychological to begin with. The need for stuff, which is what usually puts people in debt to begin with, is psychological in nature itself. So paying off the easier balance to tackle first gives the feeling of wow I can do this. Let's move on to the next one.

As I mentioned in a previous post I have begun building my emergency fund. I have $400 in there now and soon as I hit the $1,000 mark I'll be moving on to paying off my lowest balance credit card. Let's see how this works out.

Get paid to Party: Have a Gold Party to Start Your Emergency Fund

[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]

Ever get paid to party? I was invited to come over a friends for a gold party the other night and actually got paid to party.

Basically you bring whatever gold you have and trade it for cash. For example, rings, bracelets, etc. and you get paid to sell it. I had my doubts what I would actually get for the gold I brought, but I was pleasantly pleased.

I was paid just under $400 and had no idea I would have been paid that much. Four hundred dollars for a couple of rings and bracelet. Best of all I got paid right on the spot. I guess with gold selling for almost $1,100 an ounce these days it really adds up.

So what should I do with my newly found fortune?

I almost have all of my credit cards set up with my creditors on Balance Liquidation Programs or BLP. I have decided that would be my first stage in paying off my six figures of debt. Next I began checking into what Dave Ramsey recommends about paying off debt and recently bought Dave's 'The Total Money Makeover Starter Set'.

Dave has a series of steps to follow that he calls Baby Steps. Baby Step #1 is to start an emergency fund of $1,000. Most people I know would say, "I can't save $10 much less a $1,000." Right now I would probably agree with them.

So what can I do to start my fund? I have decided to put my windfall aside and start my emergency fund. Four hundred dollars isn't a bad start towards my first baby step. I am already almost half way to the goal of $1,000. Thanks gold party.

What Are You doing With Your Tax Refund?

April 15th is just around the corner and hopefully most of you have your taxes done. For those of you who have done that weeks ago, What did you do with your tax return?

New York (CNNMoney.com) shows us some tips from the pros on the best way to spend your refund cash from Uncle Sam.

If you are expecting a big refund this you have visions of plasma screens or Hawaiian vacations dancing in your head. But with the economy beginning to come out of a recession there might be more practical ways to spend the extra cash.

Pay off credit card debt- "You pay off your debt first, no ifs, ands or buts about it," said Drew Tignanelli, president and CPA at the Financial Consulate.

Build up emergency savings. Given the precarious labor market right now, building up a reserve fund of cash ought to be a top priority.

Invest for the long term- While stocks have started to climb back from multi-year lows, the major indexes still have a lot of growing room, and now is the time to take advantage.

Refinance- For those without debt and job security, lowering monthly housing payments might be the way to go. Lending rates are at record lows, and by locking in a lower rate, you save money every month, said Plechner.

Treat yourself- If you're on top of your debt, feel secure in your job, and have a cushion of cash built up for emergencies, then even professional financial advisers are OK with you splurging on that new TV or vacation.

Read the full story

Let's hear what you are doing with your tax refund.

Why Do I Need An Emergency Fund If I Have A Low Interest Rate Credit Card With No Balance?

Because you should be building a real emergency fund with real money. Not borrowed money. Depending on your credit cards for emergencies is not a good idea.

Once you use your credit cards for emergency expenses you begin a vicious cycle. Especially if you can't pay off the balance on the credit cards. You can make your credit card companies nervous if you have an unpaid balance where there was once none. It may also make other credit card companies you have accounts with nervous too. It may cause the credit limits on all your credit cards to get cut. All this in turn can cause your FICO credit score to drop and you may then see the interest rate on your credit card to rise.

The best solution is not to use your credit cards as your safety net. Instead develop a real emergency fund in a savings account.