Category: Money Management

Buy Now Pay Later Apps vs. Credit Cards

As grocery prices continue to rise, you have probably felt the pinch in your family budget. According to Moody Analytics, the average American family is spending $700 more per month on food and other household goods than just two years ago. Incomes have not kept up with inflation. Consumers are looking for options to pay for groceries, and many are turning to Buy Now Pay Later (BNPL) apps. The use of these apps to pay for groceries has risen by 40% in the past year.

Installment plans have been around for decades. Forty years ago, my husband and I bought furniture for our first home using a similar program. We selected the items we wanted and completed a credit application. The store delivered the goods, and we paid for it in 12 payments with no interest accruing. Many furniture companies and other sellers of high-ticket items still use this type of payment plan.  

What’s new is the BNPL apps offer services for all types of purchases, not just large purchases of long-lasting items. Amazon is offering installment plans on many items priced over $50. And many BNPL offer four interest-free payments on groceries and meal deliveries. In most cases, the consumer makes payments every two weeks. These apps provide the convenience of credit card payments but differ in some ways.

  • Credit cards extend interest-free credit for 30 – 60 days. BNPL apps require the first payment at the time of purchase.
  • BNPL allows for small, more frequent payments, whereas credit card balances must be paid in full when the statement is due to avoid interest.
  • Many BNPLs do not have a minimum credit score, so it may be easier for individuals with poor credit to get approved for BNPL purchases.
  • Most BNPLs do not report payment history to credit-reporting bureaus, so using BNPL apps will not help you build your credit history or improve your credit score.
  • If you use BNPL loans regularly, you may have multiple loans open simultaneously, and the loan payments may total more than you can afford to pay.
  • Returns and disputes are more complicated with BNPLs than with credit cards.

Some of the same dangers of using credit cards apply to BNPLs:

  • Users of both credit cards and BNPL apps typically spend more money than they would have if they had paid cash.
  • The buyer consumes the items before paying the last installment. For example, BNPL splits a grocery order into four payments over six weeks. Typically, the person ate the groceries long before the final payment. 
  • Balances not paid off in the interest-free period are subject to very high interest rates. Currently, those rates can be as high as 36%.

Research shows that BNPL users generally have more debt and are under more financial stress than non-users.   Frequent use of BNPL apps can add to your stress as the number of loans and the total payments increase. Of course, irresponsible use of credit cards will also lead to financial stress.

If you are struggling to feed your family during these tough economic times, look for alternatives to buying groceries on credit with either Buy Now Pay Later apps or credit cards. These can include buying more store brands, avoiding grocery shopping and delivery services, building your menus around grocery items on sale, and seeking assistance from your local food pantry.

God does not intend His people to live in financial stress. He has set forth money management principles in His word to help you. To learn more, please read my other blogs on financial management. My book Honoring God with Your Money is another valuable resource you might want to read.

Three Strategies for Managing Finances as a Couple

One of my clients recently shared that he and his wife kept their money separate. He believed their system contributed to the success of their 22-year marriage. This concept surprised me; however, one key to a successful marriage is to develop a money management plan that works for the couple.

Arguments over money majorly contribute to marital unhappiness, and financial conflicts factor in about 40% of all divorces. The ideal time to discuss spending habits, bill-paying responsibilities, and saving goals is before a couple marries. It will reduce stress if each person in the relationship understands their partner’s money management philosophy before tying the knot. After marriage, the couple should regularly review their plan and adjust for income changes, family needs, and joint priorities.

It was clear from my client’s comments that he and his wife followed a very different budgeting strategy than the one my husband and I use. And our plan differed from my parents’ approach. I will share these three approaches as alternatives that you might consider for your family.

My Client’s Approach:  My client and his wife are well-educated professionals earning higher-than-average salaries. They split all their bills 50-50, and each partner can decide how to spend, save, or invest their remaining income. They have their own checking accounts and do not answer to each other about how they spend money. He mentioned that they had a joint checking account early in their marriage. After over-drawing their account due to both of them spending money unknown to the other, they decided to maintain separate accounts.  

Advantages of this approach: (1) Each person establishes and maintains their own credit, so their credit decisions do not impact the other’s credit score; (2) there is less chance of overdrawing their accounts; and (3) each spouse feels in control of their own spending decisions, so they avoid arguments.

My Parents’ Approach:  My father served in the Marine Corps during the first 24 years of their marriage. Since he spent months at a time deployed overseas, my mother needed to be able to run the household and pay all the bills. Dad, of course, needed some spending money at his deployment location. Their solution was to determine the amount of funds Mom required to run the household and have a reasonable amount of discretionary spending. Dad transferred that amount to Mom’s bank account each month. Dad kept the rest and spent or invested it as he saw fit.  

Advantages of this approach: (1) Mom managed variable expenses, such as food and clothing, exceptionally well, which gave her a significant amount of discretionary money; (2) there are minimal risks of overdrawing accounts, and (3) each of them had financial independence with regards to discretionary spending.

Our Approach:  My husband and I have dealt with our income and spending more uniquely. We have always combined our income and made spending decisions as a couple. I am the financial person, so I pay the bills and balance the checkbook. My husband does not like to write checks, so the risks of overdrafts are minimal. Fortunately, we are both fiscally responsible and only make large purchases if we discuss it with the other. We have multiple checking, savings, and credit card accounts and alternate who is the primary owner to have well-established credit.

Advantages of this approach: (1) We have open discussions about spending and investing so that we are fully informed of our financial position; (2) we both have excellent credit and nearly equal credit scores; and (3) we never view money as his or hers, so there is not a conflict if one person is unemployed for a period.

It is God’s desire that married couples live in harmony. Developing a money management plan that works for you and your spouse is essential to living in harmony. If you do not have a plan in place that you and your spouse are happy with, pray about the situation and ask God for wisdom to devise a better approach. God promises to supply wisdom to anyone who asks Him for it. “If any of you lacks wisdom, let him ask of God, who gives to all liberally and without reproach, and it will be given to him.” James 1:5

My Bible study, Honoring God with Your Money, can give you more steps to manage your money harmoniously with God’s Word.  

How to Manage Your Budget During Inflation

Do you feel like your money is not stretching as far as it did a few years ago? When you come home from the grocery store, do you feel like you have fewer bags of groceries, but your bill is the same or higher? At this stage in our lives, my husband shops for our groceries. Last week, he came home without some items I had written on our list. A few products were out of stock since the supply chain continues to struggle, and other items were priced higher than we felt was reasonable to pay. For example, my favorite salad dressing had doubled in price to $6 a bottle, and the sirloin I needed for pepper steak was more than $12 a pound. So, we found the salad dressing at a lower price at a different store and chose a recipe that used cheaper meat.

Despite the good news of a recent slowdown in the inflation rate, grocery prices continue to rise faster than the paycheck of the average American. Last week, the Bureau of Labor Statistics reported the inflation rate for June was 3.0%, the lowest rate in more than two years. Unfortunately, this 3% price increase since June 2022 is on top of the 9.1% increase from the previous twelve months, so most consumers are paying 12% more for the same goods than they were two years ago, while salaries have risen only about 9.5%.

Woman reviewing her shopping list

Grocery prices have risen more than the average consumer product. In fact, over the past two years, groceries have increased nearly 20%, requiring a more significant chunk of your budget.   Here’s an example:

  • In 2021, if you were making an “average” income of $57,000, you were taking home an average monthly check of $3,700.
  • The ideal food budget is 12% of your monthly take-home pay or $444.
  • If your income has increased only by an average of 9.5% to $62,415 and your take-home pay is now $4,051, then to buy the same “basket” of groceries today that you did in 2021, you would pay $533 per month.
  • Groceries are now consuming $533/$4051 = 13.2% of your budget.
  • A 1.2% increase might not seem like a big deal, but it will require you to cut $49 from other areas of your budget. It would be best to be mindful when shopping for the best deals on your non-food purchases.

Rent and fuel have also increased significantly. Rent has increased an average of about 15% over the past two years, and gasoline prices where I live have increased by about 17%. These increases are reducing the purchasing power of most Americans. Consumers are adjusting their spending and shopping habits to combat the impact of inflation.

Here are some tips to help you manage your budget as inflation grows faster than wages.

  • Check grocery ads to determine what is on sale and where to get the best prices before you plan your meals. Plan meals around what is available and affordable.Go to multiple grocery stores to get the best deals on the food you want.
  • Stick to your lists, and don’t be distracted by great deals on items you won’t use before they expire. Avoid extreme loyalty to particular brands. Be willing to try other brands and generic items to get better prices.
  • Combine grocery store trips with other errands to minimize gas consumption.
  • Use credit cards wisely if you use them for grocery and gasoline purchases. Always pay your balance in full each month. Use a card that gives you cash back. Sign up for monthly or quarterly “extra” cash-back bonuses. Make a grocery list and stick to it to avoid overspending often associated with using credit cards.
  • Research before making a purchase.  Use the Internet and digital tools to help you find the best prices for items you need. Google Shopping, Price.com, and other online portals will compare prices on various items to help you find the best deals. For an evaluation of some of these tools, see https://www.moneycrashers.com/best-price-comparison-shopping-engine-sites/ or https://influencermarketinghub.com/best-price-comparison-sites/
  • Shop through portals that give you cash back for shopping. Sign into a shopping portal and purchase from the companies they have relationships with. Receive a portion of the sale as cash back. The percentages are typically less than 10%. This option is similar to a discount, except you must wait for the cash back. These sites can be beneficial as they also search out the best prices. They are most helpful if you are not loyal to a particular brand and if you will buy the best deal rather than the brand-name item.

It seems as if the rapid inflation of the past two years is behind us, at least for the time being. However, it will take years for wages and salaries to catch up. Take this time to review your budget and make adjustments based on your current spending for food and other necessities. You may need to reduce discretionary spending until your earnings match the new price levels.

For other guidance on balancing your budget and managing your money, my book Honoring God with Your Money is an excellent resource. If you would like a free budget worksheet incorporating ideal spending guidelines, please email me at Susan.ball5@aol.com, and I will happily email them to you.

A Secret Method for Motivation to Save Money

Where are the holes in your budget? When people start to get serious about saving money, they will begin reigning in the expensive ticket items and carefully research the best price for those purchases. Watching a large amount of money leave your bank account can be painful, so an obvious way to save money is to compare the price of your options before committing to spending a large sum. If you need new furniture, you may research and find that new inventory hits the floor biannually, and stores discount last season’s items to make room in the showcase area. The research will result in hundreds of dollars in savings. 

However, an often overlooked part of a budget is the accumulated sum spent on your smaller ticket items. Shoppers tend to buy less expensive items on impulse without giving them much thought. Since a product is not expensive, you can justify tossing it in the cart and checking out. Over time, these purchases can be a hidden drain on your budget. They can also lead to regret when you realize the product is not worth as much as the money you spent on it.

Perspective: Let’s look at an example involving shoes. 

Suppose you are shopping for a new pair of shoes. Do you stop to take the time to consider if you need the shoes? The average price of shoes for women is $49. Regarding your budget, that might not seem like a bad price for a pair of shoes. But what if we put it in terms of how many hours you had to work to earn the shoes? 

According to the Bureau of Labor Statistics, the median wage for an American worker is currently about $57,000. A salaried worker with two weeks of paid vacation works 2,000 hours a year. Their hourly rate can be quickly estimated by dividing the yearly salary earned by 2. Therefore, we can calculate the average hourly wage rate at $28.50. (57,000/2=28.50) Of course, this is their gross salary. After deductions for tax withholdings, social security, and Medicare, the take-home pay would be about $22 per hour.

Therefore, an average person will work 2.2 hours to pay for an average-priced pair of shoes. A pair of heels could easily cost $150, which will require 6.8 hours of labor; a pair of Jimmy Choo’s can run $800 or more, consuming nearly a whole week’s work. 

Coffee is another possible area of your budget that you might not scrutinize. A woman spends, on average, $2,327 a year on coffee from a coffee shop. She will spend 105 hours working to pay for her coffee. When your daily habit is to drive-thru and grab a coffee without considering the cost, it can affect your budget’s bottom line. Even changing your order to a less expensive coffee can make a difference.  

A simple method to reduce impulse purchases is to ask yourself two questions:

1. Do I truly need this item?

2. Am I willing to trade ______ hour(s) of my labor to obtain this item?

So before purchasing something like the shoes mentioned in the example, you should ask yourself, “Am I willing to trade more than 2 hours (or 7 hours or 36 hours) of my time to own these shoes?”

The higher your wages, the fewer hours of labor it will take to make the same purchase. Conversely, if you make less than the median wage, you must work longer to buy a pair of shoes or whatever item you consider. A woman whose take-home income is $40 per hour will have to work a little more than an hour to buy an average pair of shoes, and she can buy a pair of Jimmy Choo’s for 20 hours of labor. A woman earning $15 an hour will take home about $11. She will have to work more than 4 hours for an average-priced pair of shoes and almost 14 hours for a dressy pair.

One pair of shoes will not break the budget but consider all the little purchases you might throw in the shopping cart, and it adds up. Use this new method of motivation to curtail your smaller impulse spending. 

Knowing your estimated hourly take-home pay lets you quickly calculate the hours you must work to make any purchase. It is a wise idea to take a few minutes to figure out the investment in labor to make the purchase and evaluate if this makes sense. It will save you from making many regrettable purchases. 

My book Honoring God with Your Money can provide you with more ideas on how to manage your money and achieve financial peace. My free quarterly newsletter is another great resource; click here to subscribe: newsletter

Honoring God with Your Money

When you sit down to pay bills, does it create stress and anxiety for you? Do you feel guilty for not tithing, but you barely make ends meet? Is your first thought, if only I could make more money? If so, you are not alone. For most people, a lack of money does not cause their financial pressure. They do not budget their current salary or live within a budget, allowing their wants and desires to dictate their spending. However, when you see your earnings as a blessing from God, most of your stress turns into financial peace. The first step is recognizing that God has entrusted you with your income. Next is embracing the principles that He laid out in His word. If you consistently live outside of your means, you live in debt. God does not want us to live as debtors. 

Bible study on stewarding financial resources
Honoring God with Your Money

I read Dwight L. Moody’s book Pleasure and Profit in Bible Study several years ago. It inspired me to do a word search on what the Bible says about money which led to searches on riches, wealth, poverty, giving, charity, tithing, and greed. I realized that the Bible has much to say about money and finances and began to create teachings based on those guidelines so others could live in financial freedom.   

From these teachings, I created a Bible study, Honoring God with Your Money. Part One of this book is an in-depth study of what God’s word says to us on the subject of:

  • The role of money in our lives
  • Appropriate attitudes toward money
  • The foolishness of trusting in money
  • Tithing, offerings, and charitable donations
  • Business practices

Part Two applies the biblical teachings and budgeting principles and helps you create a budget for your family to achieve your financial goals. 

This Bible study is an excellent tool for young people about to graduate from high school or college, newly married couples, and anyone who struggles to manage their finances. Individuals, couples, or small groups can work through it. Also, I have developed teaching materials for instructors to use in small group settings. If you would like these materials, please email me at susan.ball5@aol.com, and I will happily email them to you. I do not charge for these materials. 

Recently, Deborah Morrison interviewed me for her YouTube channel, Greater is Jesus in Me. In the interview, we went through all the sections in the book and discussed the blessings of managing money according to godly principles. Deborah split the interview into two parts.

Part 1 of interview:  https://youtu.be/_3QFxywuzqo

Part 2 of interview:  https://youtu.be/euThkOk0Kr0

God intends for money to be a tool to help make your life easier. He does not intend for money to be a source of stress. As you go through this study, I pray that you will allow God to bless you with financial peace and empower you to use the financial resources that He entrusts to you to care for your family, help others, and honor God.

Financial Success Can Help You Realize Your Dreams

One of my favorite songs is “If I Were a Rich Man” from the musical “Fiddler on the Roof.” The family patriarch, Tevye, sings the song, and it begins like this,
“Oh, Lord, you made many, many poor people
I realize, of course, it’s no shame to be poor
But it’s no great honor either!
So, what would have been so terrible if I had a small fortune?”

And it ends with,
“Lord, who made the lion and the lamb
You decreed I should be what I am
Would it spoil some vast eternal plan
If I were a wealthy man?”

In the middle, Tevye shares with God all the ways his life would be easier if he were wealthy. It is a humorous but self-centered rendition of the life of ease Tevye dreams of for his family. He would have multiple staircases—one going up, one going down, and one going nowhere. His wife would have ‘a proper double chin’, and he could sit around having religious discussions with the learned men. Poor Tevye always works hard and provides for his family but never achieves financial success.

Two people climbing an incline with a third person helping them up.

Like Tevye, many of us dream of the lifestyle wealth would allow us to have. Then we read Scriptures that speak against being wealthy, and we may rethink our desire for financial success. Matthew 19:24, “And again I say to you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.”

Of course, Christ was not saying that a wealthy man or woman could not go to Heaven. Instead, He was speaking against making riches a priority in your life. If you wish to be rich, so you can be treated as a VIP and live a life of ease, then your focus is likely not on the things of God. On the other hand, if you wish to provide for your family and use your excess money to bless others, then God may be able to trust you with wealth.

Sharing your wealth with others is one of the blessings of achieving financial success. You can go beyond tithing and generously giving to missionaries, food banks, homeless shelters, and other causes that God lays on your heart. You will be a blessing to others and be blessed in return.

Financial success has other benefits as well. It can provide you with the freedom to try new endeavors. As a business consultant, I meet people weekly who want to start their own business. They are more likely to be equipped to launch their business if they have achieved enough financial success to have savings to invest in their business and see them through the start-up phase.

Financial success can allow you to retire at a relatively young age. Of course, retirement can be pretty dull if you do not have meaningful endeavors to keep you active and help you feel worthwhile. However, retirement can be quite rewarding if you use your time to engage in hobbies, travel, volunteer in schools and hospitals, go on mission trips, or care for aging loved ones or grandchildren.

An alternative to early retirement is taking a sabbatical from work. They can last a few weeks, months, or even years. Sabbaticals can allow you to try a new vocation temporarily, take an extended vacation, or engage in short-term volunteer projects. College professors often use them to teach in a different country, whereas some lifelong learners immerse themselves in a different culture during their sabbaticals. The break from the mundane schedule of life can rejuvenate your motivation at work and help you refocus on personal goals. 

What is your dream? It likely requires money. By managing your money well and working hard to gain financial success, you will be more likely to achieve your goals.

God has designed you for a purpose, instilling unique dreams and visions in your heart. Managing your finances well can allow you to pursue your dreams. My blogs on money management and stewardship are great resources for learning how to manage your money and accomplish God’s plan for your life. My book, Honoring God with Your Money, is another resource to help you learn money management principles.

Save Money and Develop a New Mindset with a Financial Fast

If you’ve ever had surgery or bloodwork for your cholesterol levels, the test required you to fast for 8 hours or more. Many people also endeavor to fast for its health benefits to promote better digestion, weight loss, lowering cholesterol, and resetting appetite. Others may fast for spiritual reasons, like drawing closer to God for spiritual direction or increasing discipline.

Sack with bundles of cash falling out

However, eating is not the only item you can limit when fasting. I have “fasted” activities, such as crossword puzzles, computer games, and television, to gain more time to accomplish a goal or project. My time management fasts typically lasted until I achieved my goal or task.

A financial fast might be in order if you need to control your spending better. Whether you are just beginning to set up your budget or years into managing your money and want to reach a new goal, this plan might be the catalyst for your success. A total financial fast eliminates all unnecessary expenditures for a set period, whereas a partial fast eliminates specific spending categories. After you review your budget, decide which option works for you. During the period of the financial fast, you cut your spending. Fasting should increase your bank balance. However, you will likely experience other benefits.

Benefits of a Financial Fast:

One benefit is an increased awareness of how often you spend money on non-essentials. The ease of your purchases can hinder your realization of how much you spend. While shopping, a store offers multiple ways to pay for items. Pulling out a credit card or clicking the online “order button” distances the shopper from feeling their loss of money. Consider if you paid cash for every transaction. As the stack of bills shrinks in your hand, you connect the loss with the purchase. If you habitually charge $5 for breakfast and $10 for lunch every workday, you may not realize that those purchases add up to $330 each month (based on 22 workdays per month). The individual transactions are hardly worth noting when you examine your credit card bill, but the total makes a big dent in your bank balance. You will be surprised when you implement your fast. Those quick habits of taping your phone or swiping your credit card will lessen, and your bank account will grow.

A second benefit will be breaking bad habits and creating good ones. If you have been going through a drive-up for a coffee and breakfast sandwich, and now you skip that, you may begin to make coffee and breakfast at home. After a few weeks of this, making breakfast at home should be a regular habit, and going through the drive-up might become a once-in-while treat.

A third benefit is saving time. It takes time to get from your office to your car, drive to a restaurant, eat, and return to your office.   Packing a lunch takes much less time, and you can use that time savings to do something else, such as taking a walk, writing a letter, or engaging in a friendly conversation with a co-worker.

Finally, you are developing a new mindset of finding ways to enjoy life that do not require spending money. If you decide to fast spending money on recreation, you will work harder to seek free entertainment options. You will likely find many available to you and your family.

Action Plan for a Financial Fast:

  1. Decide on a goal for your financial fast. Possible goals might include:
    a. Paying off some debts
    b. Saving for a vacation
    c. Developing an appreciation of “free” activities and habits
    d. Demonstrating to your children that you have the self-control to delay a purchase until you have ended your spending fast.
  2. Set a time frame. Many financial experts recommend a 21-day fast, which is based on estimates that it takes 21 days to make or break a habit. Other experts recommend a period of intermittent financial fasting, such as fasting financially for one week out of every month. Your time period could be shorter or longer, depending on your goal and what spending category you will fast.
  3. Decide what you will fast. One option is to go on a strict fast, where you only pay bills and purchase groceries and medicine. Another option is a partial fast in which you forego spending for specific categories of items. For example, if buying shoes is a personal weakness, you might fast shoe purchases for an extended period. If you are saving to go on a cruise, you might give up dining out and recreational spending to have more money going toward your cruise budget.
  4. Plan for success. If you give up eating fast food for breakfast and lunch, ensure you have groceries to prepare those meals at home. Have motivational phrases and Scripture verses in your wallet, car, and computer to help you stay motivated. Celebrate your success without breaking your fast.
  5. Avoid temptations. If you are fasting clothing expenditures, avoid visiting your favorite apparel sites and stores. Throw away catalogs and delete marketing emails without reading them.

Recently, I participated in a 24-hour dietary fast at the request of a friend with a terminally-ill child. The purpose of the fast was to spend time in prayer for the child. I had no other motivation. Although I have been working to lose weight for a while, I did not fast with the expectation of losing weight. When the fast ended, however, I found that my appetite had been “reset.”  I have been able to eat less and feel satisfied, which has led to weight loss. A financial fast can provide the benefit of resetting your spending mindset, which will reap economic benefits for you long after you have ended your financial fast.

My Bible study, Honoring God with Your Money, is a great resource to help you understand how to manage your money better and achieve your financial goals. It is available on Amazon. If you would like to receive my quarterly newsletter with tips on managing your money, please complete this short form: Honoring God with Your Money (list-manage.com)

Hope is Not a Plan

As a Christian, my hope is in the Lord, who holds my life in His hands. As a writer, I hope people buy my books and read my blogs. As the owner of short-term rental property, I hope that vacationers decide to stay at my home. But, as a small business consultant, I share with my clients the mantra, “Hope is not a plan.”

Hope is essential to taking risks and moving forward with new opportunities in your life. However, hope does not bring me readers or renters. I must take action to inform potential readers of my books and blogs and potential renters of my property. Those actions involve effort, such as marketing, advertising, and asking for reviews.

If you are trying to achieve a financial goal, hope will not help you to accomplish your goal. You need to have a plan:

  • If you want to purchase a new home or car, you need a plan to accumulate the down payment.
  • If you want to get out of debt, you need a plan to start paying off one debt while meeting the minimum obligations on your other debts.
  • If you would like to retire early, you need to start putting money into a retirement account at an early age and be consistent in making contributions.
  • If you want to improve your credit score, you need to obtain your credit report and assess what debts need to be paid off, what errors need to be corrected, and what steps you can take to reduce your total amount of debt.
  • If you want to start your own business, you must maintain a high credit score and set aside money to invest in your business.
  • If you want to start budgeting, you need to research and evaluate budgeting tools to determine which one you will actually use.

Key Factors of a Plan to Accomplish a Financial Goal:

  1. Live below your means. If you want to save money for any reason, or if you’re going to pay down debt, you must spend less than you make. This requires you to know what you spend and evaluate where to make cuts.
  2. Write down your goals. Studies show that writing down your goals significantly increases your chances of achieving them.
  3. Have an accountability partner. If you are married, you and your spouse should hold each other mutually accountable. If you are unmarried, ask a friend to be your accountability partner. Hold each other accountable by encouraging each other and reminding yourselves that money spent cannot be used to meet your goal.
  4. Celebrate milestones. Give yourself a pat on the back when you hit an intermediate milestone, such as paying off a debt or saving a certain amount of money. Milestone celebrations should be free or low-cost to keep you on track to achieve your goal.
  5. Make it easy to save. Set up payroll deductions for retirement or other savings so you never have access to the money. Download a budgeting tool that makes it easy for you to track your spending. Avoid “window shopping,” which increases your desire for items you do not really need.
  6. Keep your goal in front of you. Have a picture of your dream home or car on your refrigerator. Write your business plan and look around for possible locations. Develop a bucket list of all the fun things you will do in retirement.
  7. Evaluate your progress periodically, and if you have gotten off track, take action to correct your mistakes and get back on the right track.

Your plan does not have to be complicated to be effective. Start dreaming, set a goal, and develop a plan to reach that goal.

Setting and achieving financial goals helps you honor God in how you use and manage the financial resources He has entrusted to you. It also allows you to build treasure in Heaven. For more tips to help you manage your financial resources, please see my other blogs in the Finance tab. My book, Honoring God with Your Money, is full of guidelines to help you use money in a way that builds true wealth.

If you have never accepted Christ as your Savior, please consider accepting the free gift of salvation from your sins and eternal life in Heaven. It will pay dividends for all of eternity.

Minimizing the Costs of Credit Card Balances

Americans have a love affair with credit cards. They make life easier while also making it easier to overspend. Studies reveal that a purchaser will spend an average of 20% more on an item when using a credit card than when paying with cash.

Person using a laptop computer and holding a credit card. Title is "Minimizing the Costs of Credit Card Balances."

Credit card usage peaked in the fourth quarter of 2008, as the nation entered a severe recession, with balances reaching a then-high of $866 billion. Credit card balances fell significantly over the next 5 years. As the economy recovered, however, the use of credit cards and credit card balances began to rise. Today, credit card balances are approaching the $1 trillion level. The average consumer carries a credit card balance of $7,279 (Lendingtree.com). Fifty-three percent of credit cards being actively used are not paid off in full each month. The average interest rate of these balances is 20.92%, and the average interest rate being offered to new borrowers is 23.65%. 

The good news is that most Americans make regular credit card payments, and only 2.25% of credit card balances are delinquent by 30 days or more.

The minimum credit card payment is typically about 2% of the balance. On the average balance of $7,279, the minimum payment would be $86. At that payment and an interest rate of 20.92%, it would take a borrower 28 years and 3 months to pay off the debt. The total interest paid would be $27,776. In this scenario, the $7,279 in debt would cost the borrower $35,055.

When a consumer (that’s you) begins to take an active role in their financial future, they can minimize the interest on credit card balances. Remember, interest is handing part of your hard-earned paycheck to someone loaning you money. If you are not paying off your credit card each month, you need to determine why you carry a balance. 

The steps below can help you make advances on getting a handle on your credit card debt: 

  1. Always pay at least the minimum balance on time.
  2. Set up automatic payments to ensure that payments are always made on time.
  3. Pay more than the minimum balance whenever possible.
  4. Consider the actual cost of debt before making large purchases on credit cards.
  5. If your balances are on multiple credit cards, prioritize paying off the card with the highest interest rate first.
  6. Live below your means so that you will have some money each month to put toward your credit card balances.
  7. Create a budget to live within your means. (Refer to my past posts on budgeting) 

To learn more about how to manage your money and pay off debt, please click the Finances categories tab to find many blogs on money management, budgeting, and stewardship. My book Honoring God with Your Money is a great tool for financial money management.

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The Costly Use of Credit Cards – a real life example

Credit cards are an important part of transacting business.  Without a credit card, you may find it difficult to rent a car or reserve a hotel room.  Credit cards can simplify life and make it easy to buy online, pay for gasoline, and get in and out of a store quickly.  For those of us who pay our balances in full each money, credit cards extend free credit and provide the ease of making one monthly payment.  Yet, for those who do not pay their balance in full each month, credit cards usage will result in interest payments and late fees.

Credit card companies make money on (1) transaction fees when you charge a purchase and (2) interest and late fees on accumulated balances. They are incentivized to lend borrowers more than they can repay in order to earn interest, and they encourage borrowers to carry balances by setting low monthly minimum payments.   In fact, many companies set the minimum payment so low that it could take as long as 6 – 9 years to pay off one debt even if you did not charge anything else on that account.  The interest that would accumulate during this time adds significantly to the cost of the item purchased.

The following example is based on a close friend’s true experience; for this illustration I will refer to him as John.  John purchased a riding lawn mower for $3,600 from a well-known retail chain.  John charged the mower on a store card at an interest rate of 21 percent.  The minimum monthly payment of $98 was calculated so the loan would be repaid in 5 years.  Had John made only the minimum payment and made all the payments on time, the mower’s total costs would have been $98 * 60 = $5,880. So the mower was $3,600 at the store but he would pay a total of $5,880 if he made the minimum payment of $98 each month to the card. The total interest paid would have been $2,216, which is more than 60 percent of the original purchase price.

When I met with John, he had been paying on the mower for 24 months.  His payment record looked like this:

MonthPaymentInterestLate FeeBalance
1$98.00$63.00$30.00$3,595.00
2$98.00$62.91$30.00$3,589.91
3$98.00$62.82$30.00$3,584.94
4$98.00$62.73$30.00$3,579.47
5$196.00$62.64 $3,446.11
6$98.00$60.31 $3,408.42
7$98.00$59.65 $3,370.06
8$98.00$58.98 $3,331.04
9$98.00$58.29 $3,291.33
10$98.00$57.60 3,250.93
11$98.00$56.89 $3,209.82
12$98.00$56.17$30.00$3,197.099
13$98.00$55.96 $3,155.96
14$98.0055.23$30.00$3,143.19
15$98.0055.01 $3,100.19
16 54.25$30.00$3,184.45
17$98.0055.73$30.00$3,172.18
18$196.0055.51 $3,031.69
19$98.0053.05 $2,9786.74
20$98.0052.27 $2,941.01
21$98.0051.47 $2,894.48
22$98.00$50.65 $2,847.13
23$98.00$49.82 $2,798.96
24$98.00$48.98 $2,749.94

Through a misunderstanding of when the first payment was due, John’s first four payments were considered late.  Eventually, he reviewed his bill and made a catch-up payment in month 5.  He made the next 7 payments on time but then made several more payments late before getting back on track.  At this point, John had been assessed $240 in late fees and increased his expected accumulated interest on the loan by $145.  The lawn mower’s total expected cost was now $6,265, which was 74 percent more than the original purchase price.

Ironically, at this time, John had some money in savings.  We determined that he could use his savings to make an additional payment of $1,000.  This payment reduced his expected interest on the loan by $659, making the lawn mower’s total cost $5,606.  After making the additional payment, John called the credit card company and asked that his interest rate be reduced.  His interest rate was lowered from 21 percent to 12 percent, saving even more in interest.

John learned some expensive lessons about credit card debt, including:

  1. Make sure you understand the terms of any debt you take on.  Ask questions and read the sales agreement carefully.  Make sure you know the total costs of the debt and when the first payment is due.
  2. Never pay late, and never skip a payment.  Interest and late fees will apply and will add significantly to the total costs of the debt.  Some companies will increase your interest rate if you have two or more late payments.
  3. Make more than the minimum payment whenever you can.  If John had simply rounded his payment up to $100, he would have saved $83 in interest and paid off the lawnmower 2 months earlier.  If he had paid an extra $15 per month, he would have saved $503 in interest and cut out 13 months of payment.
  4. If you find yourself in over your head, call the credit card company and try to renegotiate the debt. 

This example is a good illustration to use with your children as they start to earn money and establish their own credit. It will show them the true costs of using credit unwisely and help them to get started on the right path to credit card usage.

To learn more about how to manage your money and improve your credit score, please read my other blogs on finance and money management. My book, Honoring God with Your Money, is a great resource to learn how to manage your money according to godly principles.

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