It is a common dilemma when one must decide if they should stop funding their retirement to focus on paying off debt.  There are very few circumstances where high interest or interest of 9%-12% debt shouldn’t be top priority.  Double digit interest is very difficult to deal with.  If you are dealing with high interest debt, it’s most likely because you haven’t been living within your means.

If we are able to get our interest rate down in to the single digits, we must decide if it is a good time to make retirement a priority or not.  If you decide to fund retirement, you stay in debt longer and pay more interest.

There are a couple other situations where investing may make sense. Consider the following:

First, you only have a specific limit per year that you can contribute to a Roth IRA. (This is currently $5,000 per year — $6,000 per year if you’re 50 or older.) Once you miss the window of availability, you’re out of luck. Your new contributions go toward the current year’s limit. You can’t go back and make up contributions you missed for the past two years once you are out of debt.

Second, if you don’t have the discipline to actually apply any new money to accelerate your progress on debt, then don’t halt your retirement. Decreasing your contributions only to spend the difference at *your vice of choice* may be the single dumbest financial move you can make.

There’s no single answer to this dilemma.

Everyone’s situation is different.  Consider all your options. Don’t continue making a certain decision just because it’s what you’re doing right now.

Start from a blank slate. Could you benefit from a singular focus? Are you willing to make further lifestyle cuts to increase you current contributions?  Examine your options and consider the choices.

If you owe a lot of money to a few credit card companies and can’t pay it off so fast, there are still some steps you could take to protect yourself.

Make an effort to pay off your credit cards as soon as possible.  Cut back on expenses and luxuries so you have extra cash to pay off your credit cards.  stop using your credit cards to live beyond your means and start paying them off.  Stop using the card and start paying it off.

Prevent them from claiming they received a late payment.  All the major credit card companies gain profits from collecting late fees, so they have a reason to trick you into paying later. They love to prey on customers who carry big balances. A common tactic is to move your due date and hope you won’t notice.  And despite the fact that their paying processing centers operate 24 hours a day, seven day a week, most credit card companies won’t post payments received after 1:00 p.m. or on weekends. 

You can sidestep this trick by always examining the due date when your statement arrives and paying your bill electronically.  Your bank probably offers an electronic bill paying service (make sure it’s free), you can also make payment directly at many credit card websites. At the time this article is being written, you can pay Citibank, MBNA, Capital One, Bank of America and hundreds of other creditors via Paypal just by clicking a button, and it costs you nothing.  All you have to do is register with Paypal, confirm your bank account and you’re set to go.  When you pay electronically, you have an electronic receipt indicating the date the payment was sent and received as proof that the payment was made on time. 

Put all billing disputes in writing.  Credit card companies want to communicate with you exclusively by telephone so they can deny receiving your call later on, if necessary. Even if you write them a letter, they will respond by phone.  If you have a dispute with them, it is very important that you don’t call them, instead, put it in writing and send it certified mail, return receipt requested and request that they communicate with you only by letter.  You need the written proof to fight them.  Those who fight them with letters often get late fees and such removed.  

Pay all of your bills on time. Some of the major credit card issuers monitor your credit report for negative activity. If they find late payment notations or written off accounts, etc., they will boost your interest rate dramatically.  Almost all of the major credit card companies use this tactic — they raise people’s rates from 7% to 28% just like that when they find a late payment or a high debt ratio on a credit report!  If you don’t want your interest rate quadrupled, keep your credit score high, pay your bills on time, and don’t accumulate too much debt.

Don’t just pay the minimum due each month.  If you have a large balance and pay only the minimum on a credit card for many months in a row, some banks will raise your interest rate significantly.  Try to pay at least $30 more than the minimum each month to avoid their wrath.  Even if you’re struggling with debt, it would be a good idea to make a few large lump sum payments at least twice a year to indicate that you do have some cash to pay down the debt — send them at least three or four times more than the minimum required.

A warning to those struggling with debt — Most debt counselors recommend that you focus on paying off one credit card at a time.  They advise you to apply all your extra cash to one credit card while paying only the minimum due on all other credit cards.  But this can have very serious consequences if those companies to whom you are paying only the minimum raise your interest rate because you have been paying only the minimum for a very long time.  If your rate is raised from 15% to 28%, it’s going to take you so much longer to pay off that credit card.  

A better alternative is to pay down all the cards at once by sending in at least $10 more than the minimum due each month, but ideally, at least $30 more than the minimum due each month on each credit card to keep your rate from being increased.  And, if you have any extra cash left over after that, you can use it to concentrate on paying off a specific credit card. 

Complain, complain, complain.  Credit card companies get away with all of the above because too few consumers complain to their state and federal elected officials.  If your senator received hundreds of letters from consumers threatening to vote him out of office in the next election if he doesn’t stop taking money from the banking industry and enact regulating legislation as soon as possible, you can be sure he would do something to keep his job and his fat salary and benefits.  Links are below.

When will this madness stop?

Just to recap, let’s look at how much we have already spent in little over one year under a Congress lead by Nancy Pelosi and Harry Reid.

$141 billion in TARP funds (if Barack Obama decides he would like to spend the $200 billion dollars of TARP money that has been leftover—as he has indicated that he would like to do—the actual cost would increase to $341 billion … so much for trying to reduce the national debt)

$30 billion to bailout auto manufacturers

$410 billion for the first omnibus spending bill of 2009

$787 billion for the Obama stimulus (some economists put the potential 10 year cost of this stimulus at $3.27 trillion)

$3 billion for “cash for clunkers” (or $24,000 per car)

And there’s more to come. If Congress passes health care reform, it will likely cost taxpayers at leastanother $849 billion.

The amount of spending going on in Washington is staggering. So much so that it is easy to become numb to another $100 billion here or another $1 trillion there. But we must remember all of this spending will have consequences. Even if all of this spending provides a short term boost to our economy, it will almost certainly have long term consequences that will be disastrous—at least for our children and grandchildren, who will be stuck paying our tab.

With our elected officials in Washington again asleep at the wheel, it is up to the American people to alter the course of the nation before we are all driven off of a cliff. Buckle up for a bumpy ride.

source: http://www.examiner.com/x-28541-Kissimmee-Conservative-Examiner~y2009m12d13-Runaway-spending-continues-as-Congress-raises-debt-ceiling-to-almost-14-trillion

Most Americans agree, credit cards tempt them to buy more.  83% of adults said that credit cards tempt people to buy things they can’t afford according to a Rasmussen reports national telephone survey.  8% disagreed with this and another 9% were not so sure.

The results that the telephone survey found are similar to the results found last holiday shopping season.

20% of adults say they don’t have credit cards, down 5 points from last year. 23% say they have only one credit card, while another 19% say they have two. Just over one year ago, 34% reported having either one or two credit cards.

36% of adults report having at least three credit cards, and 18% say they have more than three. At the end of last year, 38% said they had at least three cards.

82% woman compared to 73% men report having at least one credit card. 1/4 men do not have credit cards.

Americans may be opting to hold fewer credit cards these days since 50% say interest rates on their cards have been raised in the past six months, as Congress seeks to limit the ability of banks to raise those rates.

24% of Americans also say they need to cut back on using their credit cards.

57% of Americans say there is a need for better government oversight of the credit card industry.

A poll that came from AARP said that the older generation will spend around the same amount this Christmas as they did last year.

Of those 65-plus, nearly half (45 percent) say they’ll spend less than $300

“We shop every week and buy gifts all year long,” says Fowler, who retired from IBM in 1990. “We don’t wait till the season. It’s easier, and we get as good a deal as ever because we shop while the stores have sales.”

Most people seem to want to avoid racking up debt this holiday season. More than three-quarters (78 percent) say they plan to buy their gifts with cash, check or a debit card.

Fowler, who lives on Social Security and his pension income, says he always pays cash for holiday gifts. “That’s the way I’ve always been, since the 1950s,” he says. “We don’t have any credit card debt.” – AARP

From these results, there is a lesson to be learned.  We should spend less money on gifts and more time with the ones we love.  We should experience a debt free holiday every year.  We should not wait until the end of the year to shop for Christmas and we shouldn’t use credit cards.

People who know exactly how much they spend each month on groceries are twenty times less likely to be deep in debt than those who don’t know how much they have spent.  When we include dining out, vending machines and fast food into the list of food related purchases, we realize how much we are spending.  Prepackaged and ready to eat meals also end up costing a lot of money.  Eating is a necessity but there are many ways to noticeably reduce your food budget.

First of all, stop going out to eat.  Eating out is much more expensive than a meal that could have been prepared at home.  Do not buy frozen meals.  When you buy frozen food, you are spending way too much for way too little.  Try preparing your meals from scratch when you have some free time for the rest of the week.  Don’t buy meats that are already cut.  You are paying the supermarket to cut up the meat for you.  You can save a dollar per pound of meat by cutting it yourself.  You should of course make sure to compare supermarkets. One supermarkets may price items $1.00 $2.00 more or less than another supermarket.  Buy the generic brand products which are usually processed at the same plants as the name brand products.  When you buy a name brand product, much of the cost goes to the expensive of the product.  This can save you over $500.00 dollars in a year!  Buy fruits and vegetables when they are in season because the price will be significantly less.  Eating vegetarian meals once a week can save a family of four about $15.00 a week.  Use Coupons wisely. A lot of people use coupons just because they have one.

It took Montreal 30 years to pay off its Olympic debt of $2 billion, held in 1976!

At least one in 10 consumers has more than 10 credit cards in their wallets. That is equal to 304 tons of plastic or 61 Elephants!

The longer you leave a debt problem the worse it gets and by facing your debts immediately, you’ll be out of your debt problem a whole lot sooner. There is a solution for everyone.  Here are a number of basic tips to get you started

Pay your priority debts first

Priority debts include council tax, TV license, fines, rent, mortgage, utilities bills, hire-purchase agreements, taxes and child maintenance.

Unsecured loans and credit cards are not priorities, so if you must default on any debt repayments then choose these. The fact is that they’re at the bottom of the pile when it comes to repaying debts, which is why they’re often the most aggressive about chasing you.

Be strong

You don’t have to take harassment from creditors. You are well protected in law. If you’re harassed, let them know that it is a criminal offence to demand repayment in a way that causes you or your family fear, distress or humiliation under Section 2 of the Protection from Harassment Act 1997. You can also report them to the Office of Fair Trading under Section 40 of the Administration of Justice Act 1970. Put this in writing.

Tell your friends you’re cutting back

Telling your friends about debts can be very hard, but it needn’t be. Most people have debts, and most have more than they let on. But if admitting debts is a step too far, you can still at least say that you need to cut right back on your entertainment budget. You can use any excuse: redundancy concerns, an unexpected bill, saving for a deposit on a house (or another house) or that you want to be able to save money to take advantage of low share prices.

Contact your creditors immediately

Always call your creditors before things go wrong, and before they contact you. If you promise to call them, call them on time, even if you have to tell them that you can’t afford to pay what you thought

Always attend court hearings

Remember that the law is there to protect you as well as your creditors. If you can’t afford to pay more than $1 per month then no judge will make you do so. You must be able to live, and you must be able to have some money for a little fun, too. Even judges recognize this!

Be totally truthful at all times

Always say what you really can afford. Don’t exaggerate or understate. It is in your interests to tell the truth to your creditors and to the court.

Millions of solutions to debt

There are an unbelievably high number of solutions to dealing with debt, but all most people think of is to consolidate, which is often a poor choice for them. If you’re unable to reduce your debts each month, you should seek help on the millions of ways to tackle your debts, and get a plan that is tailored specifically for you.

Stop using your credit and debit cards immediately. Also stop taking other loans, either from banks or finance companies or friends or family. Stop getting into more debt.

SAVE! The most important step you can take, in the beginning, is to start a small savings account if you haven’t already. Begin depositing into it regularly, at least $100 per paycheck if you can. If you can’t find $100 then see the next step for how. Make it an automatic deposit, the first bill you pay each payday, because it is the most important! A savings account will help you smooth out your finances — when an emergency comes up, like your car breaking down or someone having to go to the hospital, you won’t be thrown back into debt. You will have some cash to pay for that emergency, and you can use your regular paycheck for regular expenses.

Discretionary spending. If you can’t find $100-200 to save per paycheck, then you need to cut some things from your spending. This is where tracking your spending comes in handy, but even if you don’t, you know some of the extras you spend on — cigarettes, coffee, snacks, candy, desserts, eating out, magazines, shopping for clothes or gadgets or toys or shoes, books, going out … these are just a few of the examples. I’m not saying you need to cut everything out, but if you can cut a few of them, or maybe just one at a time, that can add up. Then, take the money you didn’t spend on those discretionary items, and put that amount into savings each payday. Increase this over time.

Start a debt snowball. If you haven’t heard about debt snowballs, they’re simple. List out your debts and arrange them in order from smallest balance at the top to largest at the bottom. Then focus on the debt at the top, putting as much as you can into it, even if it’s just $40-50 extra (more would be better). When that amount is paid off, celebrate! Then take the total amount you were paying (say $70 minimum payment plus the $50 extra for a total of $120) and add that to the minimum payment of the next largest debt. Continue this process, with your extra amount snowballing as you go along, until you pay off all your debts. This could take several years, but it’s a very rewarding process, and very necessary.

Make a budget. I know, it’s a dreaded word for most of us. But it’s not that hard, and if you set it up right, it’s fairly simple. I recommend using a simple spreadsheet. List all your regular expenses (rent, car, utilities, internet, etc.) and their amounts, and then your variable expenses (groceries, gas, eating out, etc.), and then your irregular expenses (things like car maintenance or medical that might not come up every month, but break them into estimated monthly expenses — if you spend $600 a year on car maintenance, budget a $50 monthly expense). Now match that up against your income. The expenses should be less.

Automate your bills. Try to get your bills to be paid through automatic deduction. For those that can’t, use your banks online check system to make regular automatic payments. This way, all of your regular expenses in your budget are taken care of. Make sure that your savings is done the same way – automatic deduction.

Save for your irregular expenses. Some call it a freedom account but the key to ensuring that you have smooth finances and that you stick to your budget is to take into account all your irregular expenses, such as insurance, car maintenance or repairs, gifts (think Christmas!), medical and other such things. List them out, estimate your annual spending, and begin saving for them each month. Again, if you spend $600 on car repairs, budget $50 a month for that expense, and put that amount in savings. You could set up different accounts for each expense in an online bank or put it all in one account and use Money or Quicken or a spreadsheet to keep track of each. Then, and here’s the key, when these expenses come up, use that money for those expenses! That way, you can use your regular budget for the stuff it’s meant for, not for these “unexpected” expenses.

Use the envelope system for your variable expenses such as food and gas. This is optional, but it’s a good tip. I’ve been using it myself, and it works like a charm. Let’s say you set aside three amounts in your budget each payday — one for gas, one for groceries, one for eating out. Withdraw those amounts on payday, and put them in three separate envelopes. That way, you can easily track how much you have left for each of these expenses, and when you run out of money, you know it immediately. You don’t overspend in these categories. If you regularly run out too fast, you may need to rethink your budget.

Start thinking and planning your goals. When do you want to retire? How often do you want to travel? When do you want to buy that dream house? Do you want to save for your kids’ college education? Think about what you want in life, and start planning to save for them, especially once you’ve done all the above.

The origin of the word budget is the Latin bulga which is a little pouch or knapsack, which may have come from a Gaulish source that’s related to the Irish bolg, “bag”.

The word turned up in English in the fifteenth century, having traveled via the French bougette, a diminutive form of bouge, “leather bag”.

Its first meaning in English was “pouch, wallet, bag”, and followed its French original in usually implying something made of leather.
So the great traveler Thomas Coryate could write in 1611, “A certain peddler, having a budget of small wares”, and Aphra Behn had the character Hellena say in her play The Rover in 1677: “And was it your Man Friend, that had more Darts in his Eyes than Cupid carries in a whole Budget of Arrows?”.

At the end of the sixteenth century, the word could refer to the contents of one’s budget as well as to the container itself. People used this in the figurative sense of a bundle of news, or of a long letter full of news, and the word formed part of the name of several defunct British newspapers, such as the Pall Mall Budget. This was the sense that Washington Irving used in The Legend of Sleepy Hollow in 1820: “From his half itinerant life, also, he was a kind of traveling gazette, carrying the whole budget of local gossip from house to house; so that his appearance was always greeted with satisfaction” and which Thomas Jefferson meant in a letter he wrote in 1785: “I receive by Mr. Short a budget of London papers. They teem with every horror of which human nature is capable”.

The connection with finance did not appear until 1733, as the result of a scurrilous pamphlet entitled The Budget Opened, an attack directed at Sir Robert Walpole: “And how is this to be done? Why by an Alteration only of the present Method of collecting the publick Revenues … The Budget is opened; and our State Emperick hath dispensed his packets by his Zany Couriers through all Parts of the Kingdom” (the anonymous writer is using zany in the sense of the comical assistant of a fairground quack medicine salesman or mountebank, a decidedly unflattering comparison). The allusion was that the government minister responsible for financial affairs opened his budget, or wallet, to reveal his proposals. It probably also echoed the idiom to open one’s budget, “to speak one’s mind”, which was current then and continued to be so down into Victorian times (it turns up in Trollope, for example).
If he survived a few years, the pamphlet writer must have been chagrined to see his intended victims expropriate his satirical term and turn it into political jargon. By the 1760s, it was clearly well established, and has been the standard term ever since. But it was only in the 1880s that it began to be used as a verb in the sense of planning one’s expenditure, and the attributive meaning of “inexpensive; suitable for someone of limited means” is first recorded only in 1958.

There are two other closely-related words in English. One is bulge, which at first had the same meaning of a bag, but soon came to refer to an irregular swelling, lump, or protuberance, not a surprising change if you think of the often irregular shapes of old leather containers. The other is bilge, the lowest part of a ship’s hull. Because foul odors collected there, the word was used figuratively to mean nonsense or rubbish, a bit of British public-school slang current in the early years of this century, especially in the phrase “he talks the most utter bilge”.

So if an honorable member in the House of Commons should lose his cool and refer to the Chancellor’s budget speech as bilge he’s committing an etymological tautology as well as showing how out of touch he is.

Impulse spending is a common problem that many people have. The first step in fixing this problem is to monitor your urges for about two weeks. Keeping a small notebook in your pocket and using it to tally every time an urge comes along to buy something can be very useful. Even if you decide not to purchase the item, it would be a good idea to keep track of the urges. The reason being is that these urges are commonly in our subconscious. If we record every time we have an urge to buy something, it will be our first step toward awareness which will allow us to take more control over our spending. After a month, we should revisit the list of items we were going to buy impulsively and see how many of those items we actually still want. If we have the money after that time period and still want the item, it is ok to purchase it now rather than on first impulse. It is a good idea to avoid shopping areas and malls because we will most likely make a purchase in this sort of an atmosphere. If shopping is a must, it would be a good idea to carry a list of what you need and stick to the list. It’s never a bad idea to go somewhere that impulse buying would not be as likely such as the park or the beach. Last but not least, when the urge hits, take a deep breath, become aware of the urge and take a drink of water. A quick break can actually help us overcome our urges.