Читать книгу How to Be a Financial Grownup - Bobbi Rebell - Страница 17
Оглавление• CEO, YUMMIE TUMMIE
• STAR OF THE REAL HOUSEWIVES OF NEW YORK
MY FINANCIAL GROWNUP MOMENT
Having credit card companies offer me credit lines as a freshman in college. Without an understanding of the interest rates, late fees, and over-the-limit fees, I got myself in a bit of trouble and had a quick reality check.
MY LESSON TO SHARE
There is no such thing as free money. Credit cards come at a cost. Unless you pay on time every month and use them to your benefit, they can be lethal. Read the fine print and don’t use a credit card for credit, but rather to build it!
DEAL WITH YOUR DEBT
HEATHER HAD AN experience that’s all too common. College campuses are jam-packed with representatives from credit card companies who make it as easy as possible for students to sign up for their first credit card. It’s no surprise that a 2015 PwC survey found that more than half of young adults (53 percent) ages 23 to 35 carried a credit card balance in the last 12 months. In fact, young adults are so tight on cash that nearly 50 percent don’t believe they could come up with $2,000 for an unexpected need within the next month. Living that tight is a recipe for financial disaster. Adding to that recipe is the fact that, according to the same PwC survey, only 8 percent of the respondents demonstrated high financial literacy.
There’s no such thing as free money
For many young people, their first credit card, and the bill that soon follows, is their first real exposure to adult financial issues, just like it was for Heather. A credit card sounds great – no more asking mom and dad for money. But the consequences of not getting debt under control are serious, so paying it down is the highest priority when it comes to becoming a financial grownup.
THE BEST WAY TO PAY DOWN DEBT
Credit.com’s Gerri Detweiler, author of numerous books on debt has this advice:
Face Reality by Adding Up the Numbers
Getting a handle on your debt is the first and most essential step, but it’s also one of the hardest. You probably have a rough idea of what you owe on each card, and know your minimum payments, but, as any credit counselor will tell you, many consumers significantly underestimate the amount of debt they owe.
If you haven’t done so already, make a list of all your debts, including balances, interest rates, and monthly payments.
Be Realistic
Can you dig out on your own or do you need professional help? According to PwC, only 12 percent of young people seek help on debt management.
There is free help available. For example, you can use an online calculator, at many websites including credit.com, to see whether you can afford to pay off your cards in five years or less with what you’re making now. You may also consider consolidating your various debts into one account. As always, do the math and figure out if that’s the best move for your current situation.
But you may find yourself at a point where you need professional help. That’s when it’s a good idea to at least have a conversation with a credit counseling agency, or a fee-only Certified Financial Planner, to see what they may be able to offer.
Prioritize and Get It Done
Tackle the highest-interest-rate debt first. You make minimum payments on each one, except the most expensive one and when that’s paid off you roll the payment down to the next one, and so on. This method will likely save you the most money.
Alternate option: If you’re anxious to simplify your finances, you can knock out the card with the lowest balance first, and work your way up.
Either way can work, as long as you have a plan.
Change the Math
Talk to the people or companies that hold your debt, and make the case for lowering the interest rate. The lower your interest rates, the faster you will get out of debt, so it makes sense to try to get your interest rates down, either by negotiating with your current creditors, transferring balances, or with a debt-consolidation loan.
CREDIT SCORES: A GROWNUP FINANCIAL SCORECARD
Credit scores matter a lot. And with each generation the situation seems to be getting worse. According to Experian, Millennials as a generation have the lowest average credit scores compared to other generations, including Gen X and Baby Boomers. In large part that’s because of the growing problem of student debt, which we’ll come back to soon.
Part of the reason that young people’s credit scores are so low, on a relative basis, is that young people simply aren’t signing up for credit cards as much. Priorities are different by necessity. Young people are more focused on paying off student loans and, in some cases, buying cars. They don’t have the track record to prove they can be counted on to pay off an unsecured loan.
NerdWallet found that about a third of young people ages 18 to 34 have never even applied for a credit card. That’s a problem. To be a financial grownup you have to have credit. Yes, you can take out cash to pay for things. But if you want to get a mortgage, you need good credit. You also need a real credit history if you want to take out an auto loan. A good credit score will also help you get the best rates on insurance.
Not having a solid credit history can even hurt job seekers. Many employers check the credit history of job candidates. Someone with a low credit score could be perceived as irresponsible, unorganized, and, in some fields, even a security risk.
Which is why it’s important to invest time when you’re looking into getting credit, as told by the head of NerdWallet himself below.
