Personal Finance Advice

You wander into a store, not really thinking about buying anything in particular, but then suddenly you stumble upon something you really want to buy.  Maybe it’s an outfit, or a television or something else entirely, but the fact remains that it’s something you didn’t know you wanted until you saw it in the store.  It’s not in your budget to buy this spectacular item, but you know you have enough of a limit on your credit card to go home today with whatever it is you want to buy.

Before you reach for your wallet and pull your credit card out, consider the financial ramifications for indulging in every purchase you want to make.  Keep in mind that while it is fine to splurge occasionally, if you whip out your credit card for everything you want you will more than likely soon be deep in debt.  You need to have a plan in place that will help you to walk away from impulse buys, especially if you are usually prone to indulge in buying things you really can’t afford and really shouldn’t buy.

Since personal finance is largely psychological - meaning your behavior is as big (if not larger) a predictor of financial success as your income is - then use some psychological tactics to talk yourself out of buying something that you didn’t budget for and shouldn’t buy.  Here are a few methods you can use:

Use your cell phone to call and check your credit card balance.  Hearing your balance announced over the phone may be enough to stop you from adding to your credit card debt, especially if you have a rather large balance that you carry from month to month. 

Carry a copy of your bank statement or credit card statement with you.  If your checking account balance is low and your credit card balance is high, carrying these two statements with you can be a dramatic reminder that you shouldn’t be shopping for things you don’t need.  Just be sure to safeguard these documents since they have account information on them.

Call a friend.  If you tell one or two friends that you plan on calling them when you need to be talked you out of buying stuff impulsively then they’ll know that you mean business.  Pick some people who will actually try to talk you out of buying something instead of getting excited about your purchase and egging you on to buy the item.

Of course, you can always stop carrying your credit card in your wallet altogether, but with so many retailers allowing you to use an alternate ID in lieu of the merchant card then there’s a chance that this method won’t work.  If all the other methods don’t work, and you find yourself falling deeper into debt rapidly, it might be time to take more drastic measures and maybe close your credit card accounts.

Do you remember the good old days when instead of a barrage of gift cards you would receive checks, cash, or even an actual gift when the time came for a celebration? Of course, a gift card can be a fantastic gift if you actually like the retailer that the card is for and if the card doesn’t come with a variety of usage fees attached to it, but what do you do with gift cards that you don’t really care to use?

Option One: Regift.  Even if you don’t like the store that the gift card is for, chances are you know someone who does.  Hold on to the card and send it on to someone else for a birthday gift or holiday gift.  Just be sure that there is no inactivity fee or other telltale sign that will pop up making it blatantly obvious to the recipient that she isn’t the first owner.

Option Two: Sell or Swap.  There are websites online designed to allow people to sell or trade unwanted gift cards.  Using these sites you won’t earn 100% of the value of the card, but you may be able to make some money from selling the card or at least trade it for a card of a little less value, but from a retailer you actually will visit.  Some online auction sites also feature sections where you can sell unwanted gift cards, but check to make sure the card is indeed transferable before advertising the fact that you’re selling it.

Option Three: Use it.  Why not give the retailer a try? Unless you have a ethical stance against the retailer there is no reason why you shouldn’t go ahead and venture into the store to try to find something that you’ll like within the price range of the gift card you received.  Who knows…maybe you’ll discover that you actually do like the store.

Option Four: Toss it.  This is certainly a last resort, and shouldn’t be done unless you can’t even find a charity willing to take the card off your hands.  Sometimes a gift card is for such a small amount of money - and for such an obscure retailer - that you just want to toss it into the trash.  Although this is an option, it isn’t the best one.  Like it or not, this is essentially the same thing as tossing money into the trash.  Hand the card off to a stranger on the street instead of throwing it away.

If you actually do like the retailer that the card is for, keep these things in mind:

Hold on to the card until it’s completely depleted.  If the card is for a retailer you use frequently, place the card in your wallet and use it each time you visit until it has a zero balance.  Even if the card only has a couple of dollars left on it after your initial purchase you should still keep it and use it the next time.  If you don’t, it’s like giving free money to the retailer and it’s not utilizing the gift to the highest extent.

Register the card if it’s for a large amount.  If you get a gift card with a particularly generous balance then you should check to see if the card can be registered online with the retailer.  This will allow you to receive a replacement card if the original gets lost or stolen. 

Stay in the price range of the card.  If the card is for a retailer you adore - yet can hardly ever afford to shop at - then try your best to keep your purchase within the budget of the amount set on the card.  A $30 gift card at Godiva will get you a nice box of truffles…or it will augment the payment of a $120 chocolate collection.  The best gift is one that you don’t have to reach into your own pocket to help pay for, so stay within the price range of the gift card.

If you’re the one buying gift cards for your friends in family, try buying cards that can be used in a variety of places such as mall gift cards or prepaid credit cards.  These can be great gifts as long as they don’t have a ton of fees associated with them.

A man sits on the couch with his spouse, lamenting about how they can’t possibly make more than the minimum payments on their credit cards this month.  They are both incredibly frustrated because they can’t seem to get ahead financially.  They both agree that this entire situation is unfair, and soon they’ll both sit down and figure out a way to tackle this debt problem once and for all.

Then they turn on the television to browse all the premium channels they pay for while eating the pizza they ordered in.

What is wrong with this picture? The most glaringly obvious thing is that people who do not have the money to pay more than their minimum credit card payments probably shouldn’t be enjoying expensive cable and delivered pizza.  The less obvious thing - and the thing that needs the most attention - is the absence of a comprehensive budget.  These folks don’t have any idea where their money is going, but if they sat down and made the effort to figure it out they would probably take a hard look at their finances and cancel the cable and stop ordering in when they could cook at home for a fraction of the cost.

Getting your personal finances straight involves much more than just not spending money on frivolous things.  You have to be committed to budgeting your money and figuring out where you funds should be going every month.  Sometimes folks don’t really make the connection - like figuring out that the cable bill would probably cover much more than the minimum payment on a credit card - until they write everything down and have a look at it on paper.  It can be an unsettling discovery, but an important one nonetheless.

 If you feel as though you aren’t making the financial progress you should be, start writing down how much money you spend on things you don’t really need.  The picture will become clearer when you start to realize that the money you pay for a mocha latte every morning might cover the cost of a couple of bills you thought you were having trouble paying.

It’s time to get your financial priorities in order.