Category Archives: Miscellaneous

Impulse Spending: You Must Get Control Over This

Gary North

Impulse spending is a big problem for people who are not self-disciplined about spending.

Impulse spending undermines your attempt to get a handle on your spending. It does no good to have a budget if you are an impulsive buyer.

If you know this is a problem, adopt these rules:

1. Do not buy anything that is not on your shopping list, for any reason, for the next six months.

2. Work hard to make your shopping list before you get into your car to drive to shop.

3. Do all of your shopping in the same trip. This will save time and gasoline.

4. If you see a tremendous bargain, write it down in your shopping notebook. Then put it on your next shopping list. Say where you saw it.

5. Compare this price at home by checking the Web. Maybe it’s not that good a bargain. Be sure you check Craigslist.

6. Write down the ways this item will help you. If you can’t think of many ways, don’t buy it. If you do think of numerous ways, buy it in 30 days.

7. The 30-day wait is your cooling off period. It says, “I can buy this, but I will force myself to wait.” This is not going cold turkey. It is going cool turkey.

Your Crucial Purchase: A Shopping Notebook

Gary North

You have got to get your spending under control. A shopping list notebook is a crucial tool.

This is cheap. It fits in your pocket or purse. You must use it to discipline your spending.

You make this rule: “I will buy nothing that costs over $1 that is not in this notebook.” Then you stick to it.

This notebook is for tracking your spending. But it is a to-do list. If something is not on it, do not buy it.

You must make your shopping habits rational. Start here. When you go shipping, write down everything you really need. Write down an estimated price, too. See if you know what things cost. You should.

Plan your shopping for one trip per week. This will cut down on travel time, gasoline, and the wear and tear on your car (42 cents a mile, the Internal Revenue Service says).

Go through the stores fast. Don’t linger. Don’t scan the shelves. In and out. Fast.

No matter what you do, you will be tempted. You see it. You want it. You are tempted to buy it.

Wait!

Start with this “mantra.” “Do I really need this? Let me list the ways.”

Then get out your spending/shopping list pocket notebook and write it down. List the ways.

See for yourself how crucial the item is.

Maybe you do need it. Then wait 30 days to buy it. Have a section in the notebook for buying. Have a date. Turn to it every day. See what that day allows you to buy. Think about this again.

But what if the sale ends? So what? The money you would have saved, once, is nothing compared to the money you will squander on stuff you don’t need or use if you don’t have a shopping notebook.

You are placing roadblocks in the way of your bad spending habits. This will help you.

I call this: “Going cool turkey.”

Buy the pocket-size notebook. That is a real need. For this, don’t wait 30 days. I hereby authorize you to buy it.

Don’t leave home without it!

What You Should Do With a Tax Refund

Gary North

What is the best thing to do with your income tax refund, i.e., the return of your enforced, interest-free “loan” to the U.S. Treasury?

If you have any credit card debt, pay off principal.

If you have no credit card debt, pay down some other debt, other than your mortgage.

If you have no debt to pay down, make a contribution to your IRA.

If you are maxed out on your IRA, set the money aside in a special bank account for your next car repair or new tires. This way, you can avoid charging this to your credit card. If you can get an extra year out of your car, you can defer purchasing a new car for another year. (Do this for the next five years. Then buy a used car.)

The Danger With Debit Cards

Gary North

I am a big fan of debit cards. But there is a problem with debit cards.

An overdraft charge of $30 to $40 is common when a person spends money not in his debit card account. This is a big money-maker for banks. Something in the range of 50% of all overdraft charges come from point-of-sale debit card purchases. This is over $9 billion a year.

It’s annoying to get charged $30 for an overdraft of $5, but it’s not a disaster for most people. But for people with poor spending habits, it is more common.

It’s wise to go to the bank that issued the card and fill out a form that tells the bank’s computer to refuse to honor any transaction that exceeds the money in the account. You cannot afford a mistake here.

If you insist on protection, have the card debit your savings account, if you have one. But you will still pay the $30 fee, per transaction, even if the transactions average $5 each.

Don’t use an overdraft that creates a line of credit. That defeats the purpose of the debit card.

If the bank doesn’t offer this savings account-only option, either find a new bank or else monitor the money in the debit account. Don’t assume that just because the charge is accepted you have sufficient funds in the account.

A Clear Guide to Making a Budget

Gary North

Budgeting is essential to getting out of debt. It’s not a one-time operation. You must adopt a budget and stick to it.

Where to begin? This is as good a place as any:

http://articles.moneycentral.msn.com/SavingandDebt/LearnToBudget/Your5MinuteGuideToBudgeting.aspx

What About Your Credit Card? Is It Time to Cut It Up?

Gary North

May 27, 2009

Say that you want to rent a car. You can’t, if you don’t have a credit card. The car rental company wants to know you won’t steal the car.

Your car breaks down on the road. You need to rent a car to get home. You have no credit card. What now? You can’t buy a plane ticket, either.

Our society runs on plastic.

But you are a debt junkie. You can’t quit buying.

That’s what you think!

Of course you can quit buying, as surely as an adulterer can quit. You just don’t have enough incentive.

I suppose that some people do have to cut up their cards as a symbolic act, the same way an adulterer really does have to cut up the secret photograph of his accomplice. But it’s better to just say no.

You can get a debit card. But it won’t help you with a car rental. It may help you with a plane flight . . . if you have enough money in the account.

You should deal with causes, not symptoms. A credit card is a symptom.

It Takes 30 Consecutive Days to Change a Bad Habit to a Good One. You Have Bad Spending Habits.

Gary North

July 2, 2009

You should get started today. Start figuring out ways to cut your spending. Use this site to help you do this.

Your spending is habitual. You must change your spending habits.

To do this will take 30 consecutive days. This will be very difficult. On the 30-day rule, read the following:

The 30-day trial
Breaking bad habits
Coping with stress

Goal: try to cut back your spending on one new item every day. Don’t increase your spending on any of the old ones.

This is the downward ratchet effect.

If you find that you just cannot do this, find out why. This is the time for uncompromising self-examination. Deal with the cause when you cannot deal with the symptom.

But you must overcome the symptom at some point. It’s best to do this by dealing with the symptom, but a victory over a symptom is better than no victory at all.

If you cut spending on marginal items — easier — you can begin to gain the self-confidence required to cut big, non-marginal items.

Cutting spending on small items will not get you debt-free. But getting the habit of cutting spending will help you become debt-free.

Work on your budget to identify small items that are like ants that are eating you alive. Don’t have this on your headstone: “Eaten Alive by Miscellaneous”

You Have to Start Somewhere. This Will Help You Get Started.

Gary North

Procrastination kills.

You must take steps to get control over your debt addiction. Even if you take just one step today, that’s better than nothing. Tomorrow you will take another. As Alcoholics Anonymous says, “One Day at a Time.”

You can take one step. So, take it.

First, find out your FICO score. This tells you what your credit rating is. You can pay to get this information from the three main credit-rating agencies, but the cheap way is to get an approximation. To find out more, click here. (If you are not an American, find out about other nations’ credit scoring here.)

Ideally, your church has a household debt-reduction program supervised by one or more deacons. You sit down with a deacon who is assigned to work with you. He helps you create a budget. He may have Quicken or Microsoft Money on his computer. You bring in your data, and he enters it. You create a secure password on his computer. This means that only you can access the data. Every week or every month, you go in with new data. He enters it. You work with him to see if you are on track.

I realize that most churches offer no program like this. If they did, their members could and would donate more money.

These articles list lots of steps.

Take This On-Line Test of Your Spending Habits
Gary North
This is where to get started: “Take a rigorous inventory of your spending habits.” . . . keep reading
The Three Word Question That You Must Get Answered Before You Can Achieve Your Goal of Debt Freedom
Gary North
If you fail to ask this, you will probably quit before you have gone very far. . . . keep reading
Breaking the Credit Card Addiction Habit: Watch This Video
Gary North
For addicts, begin here. . . . keep reading
The Recovering Debt Junkie’s Mantra: “Do I Really Need to Buy This?”
Gary North
Ask this question every time you are tempted to buy anything. . . . keep reading
It Takes 30 Consecutive Days to Change a Bad Habit to a Good One. You Have Bad Spending Habits.
Gary North
This is a widely recognized fact of life. Implement it. . . . keep reading
What About Your Credit Card? Is It Time to Cut It Up?
Gary North
You can’t live with it, but you can’t live without it. What now? . . . keep reading
A Clear Guide to Making a Budget
Gary North
You need to start budgeting. You may not know where to begin. Begin here. . . . keep reading
Find Out Your FICO Score
Gary North
Your FICO score reveals how the credit-ratings agencies view your performance as a debtor. The lower the score, the more interest you will pay on loans. You will be turned down by some lenders. . . . keep reading
The Danger With Debit Cards
Gary North
They don’t tell you this when you sign up. . . . keep reading
What You Should Do With a Tax Refund
Gary North
Don’t think twice about this. . . . keep reading
Know Your Your FICO Score Before You Start Trying to Raise It Through Debt-Reduction
Gary North
Your FICO score lets your crediors know how far in the hole you are. You had better know what they know. . . . keep reading
Your Crucial Purchase: A Shopping Notebook
Gary North
Some spending is OK. This is one of them. . . . keep reading
Impulse Spending: You Must Get Control Over This
Gary North
Head off your urge to spend by writing it down. The act of delay will help. It will also let you know where your problems are. . . . keep reading
Before You Buy Something, Write Down Why You Really Have to Own It.
Gary North
These are simple steps. You can take at least three of them. Four would be better. . . . keep reading
How to Break the Credit Card Habit if You Are a True Addict
Gary North
If you cut up your card, no problem. If you cancel it, this could lower your credit rating after you get debt-free. Start with cutting it up. . . . keep reading

Pay Off a Small Debt First
Gary North
You need a victory. Victories add up. . . . keep reading

How to Stop Living Paycheck to Paycheck
Gary North
These are basic steps. At some point, you must adopt them. Why not today? . . . keep reading

Budget Time as Well As Money
Gary North
If you have little money, you must make better use of your time. Here’s how. . . . keep reading

The Recovering Debt Junkie’s Mantra: “Do I Really Need to Buy This?”

Gary North

When you are driving on a road trip, and the gasoline warning light goes on, accompanied by a bell, you will soon need to buy gasoline. Life has few warning signals as powerful.

Most items are not in the same category as this. You can usually defer a purchase a little longer.

One reason not to defer is that you can buy something at a sharp discount. But will you really use it later? If you are not sure, do not buy it.

“Do I really need to buy this?” The habit of asking yourself this question is basic to getting out of debt.

You may want it. Do you need it? Probably not.

As your disposable incomes falls because you have mentally spent money on tithing and paying down debt, the ratio between needs and wants must grow. That which seemed like a need before must be re-classified as a want.

If you don’t re-classify your buying habits, you will not be able to stick with the program. You will not stay on your “diet.”

You already own most of the things you need. Only rarely does a new need pop up.

Take gasoline. Is it a need? Yes. Is it a continual need? No. Cut down on your driving. Schedule your shopping so that you buy the week’s goods in one trip.

All of this requires budgeting. But, even more important, it requires a new pattern of behavior. To help you make the necessary transition, keep asking yourself: “Do I really need to buy this?”

Breaking the Credit Card Addiction Habit: Watch This Video

Gary North

Some people have become addicted to credit card debt. You must break this habit.

A good place to begin is by watching a PBS documentary on the history of the credit card. Think of this as step one in “know thyself.” You can view it here:

http://www.pbs.org/wgbh/pages/frontline/shows/credit

As you watch it, ask yourself: “Does this apply to me? Was I one of the targeted victims?”

The power of this documentary is in providing motivation. You may think to yourself, “I will no longer be a victim. I will change my behavior.”

The banking industry relies on credit cards for its profitability. The spread between what banks pay depositors and what credit card debtors pay banks is enormous. There are few price spreads to match this in a modern economy.

You must cease being a credit user. You can be a credit card user, but not a credit user.

If you cannot yet break the credit habit, use your credit card only for renting a car. You have no choice in this case. In all other purchases, use a debt card if you use plastic.