"My husband and I are going through a tough time trying to get out of debt. Currently. we are $15,000.00 in credit card debt. We have never missed a minimum balance payment, our credit history is great! We are just tired of living pay check to pay check! I was hoping for some advice on debt management to getting our 2 credit cards  paid off as quick as possible for us to buy a house. Please let me know what your advice is! We are open to any and all suggestions and we want to be educated to learn how to better manage our money and to make our current situation better. All we want is to get out of this credit card debt! The cards have been cut up so we have made that step!! Hope to hear from you and I look forward to learning all I can from you and your books!!"

Thank you so much for your response.

 

As for your situation, I suggest the following recommendations for managing your debt:

 

 

"How can we get a credit card company to lower it's interest rate?"

 

Ann:

It all has to do with basic economics and market forces.  That is, supply & demand, and competition in the market place. 

Unfortunately, the use of credit cards has become so deeply imbedded in our western society,  the banks and institutions have got the upper hand.  The demand is greater than the supply. 

 

Unfortunately, over the past 20 years or so, it has become more and more difficult to live without a credit card.  So, do what I do - only get one credit card with a maximum limit of $1,000 and pay the balance off every month.  The rest of the time you live off cash.  You will always have more control over your finances, gradually become better at managing your cash outflows, and will ultimately assist in helping your country's economy improve.

 

Credit cards have been the bane of the 20th-21st century and progressively destroying the economies of our western world.  Yes, we can blame the taxes, government policies, etc, etc. - but the truth is (from basic economics) if the overall population is not saving and investing but getting deeper and deeper into very expensive debt (via credit cards), our economies will all gradually decline. 

 

The other answer to your question - is to shop around until you find an institution with lower rates - or better still, pay off your balance at the end of every month and therefore not incur any interest.

 

 "I am about to receive around $150,000 in an out of court settlement. I plan to pay off approximately $30,000 in bills and debts. We also want to buy a small home. We rent now. $75,000 (cost of home). We have an 11 and 8 year old and we would like to put what's left away for college. We hear people say there are lots of places we can put our money so it makes more money. Can you give us any suggestions?

Thanks in advance"

As an accountant my expertise is in providing money management advice, not financial planning advice.  I can however make the following recommendations:

I hope this helps and I wish you all the best for your financial future.

 

"I watched your segment on Today Tonight - Adelaide the other night and was intrigued as to the concept.  I remember the debt reduction concept of 40, 30, 20, 10 but would like more info on the categories for the various splits, eg: where does mortgage go and where does the electrical bill and food bill go etc

 

Hope u can help me"

 

To fully explain the concept of the 40%-30%-20%-10% Money Rule goes beyond the scope of a single email reply, therefore I have attached a short article on the subject, which is an extract from my book. (Refer article:  How to Live Within Your Means.)

 

"I just purchased your book after seeing you on 'Today Tonight'.  I have read it with great enthusiasm & it has given me heaps of hope for our future.................BUT I am having big problems right now.

 

I am 49 & my husband is 53.  He has just started in a new job which has good potential for him to earn bonuses and I have a casual job which I just LOVE.  The problem & question that I have is how do we pay for current outstanding bills.......(I have put them in the Fixed costs) and they all add up to 71.39%  Our Variables are 25.9% and our Discretionaries are down to 1.39%  I have put away 10% for savings.  I am still over (yikes)

 

Is it acceptable to put away only 5% until we can do the 10% or will I have to work a full time job instead (which I really don't want to do...........but.................I know I have to consider it).  I am trying to get our 23 yr old son to pay more than $50 a week board.  (like extracting teeth!!)

 

I have cut down so much...........My husband has cancelled a gym membership and I haven't even included cosmetics.......a sad story!  Well, if you have time to reply, I would really appreciate it."

 

Firstly, you need to accurately access your Fixed Costs.  These are regular, known and constant payments such as mortgage, rent, insurances, council rates, and all debt repayments.  Because Fixed Costs are based on our lifestyle choices (such as the size of our home, cars, etc) and debt, these are often the hardest to reduce - but well worth it in the long run.  If your Fixed Costs are too high, then you are really living on 'the edge', so to speak, with your finances.  If you want to live within your means and want to stop worrying about money (which is the one of the greatest freedoms in life), then the Fixed Costs need to be managed.  As you have already identified this - you are on the right track. 

Are your Fixed Costs too high because of:

You need to identify which one of these causes is the main culprit and tackle that.  Creating more income, as you have identified, is obviously the best, and often an easier choice to make.  Rather than working longer hours, think laterally about how you can earn more money.  Is there a special hobby or craft that you can turn into cash?  Will adding more value to your work, increase bonuses and pay rises?

I also think that your 23 year old son needs to be taught to be more responsible about money.  He is an adult now, and if it were me, I would set stronger boundaries for him to take more responsibility around the expenses you occur on his behalf (eg. food, utilities, telephone, etc.).  Often we are too kind to our children by being overly generous, but this is not training him how to manage money when he goes out into the real world.  It would cost him a lot more than $50 a week to survive, if he wasn't living at home.  I hope I'm not sounding too hard - but sometimes we have to be a bit 'cruel' to be kind in the long run.  Teach him to save as well.

I would really like you to continue saving the 10% if you can.  Having savings - and later converting them into investments - gives you the feeling of security and knowing that you are managing your money!

 

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