There’s a lot of talk about borrowing money vs not borrowing and I’d like to talk about it too.
Credit Cards. Most of us are spending money we don’t have through the use of Credit Cards. It’s perfectly okay to use a credit card to build your credit IF you are paying it off each month in full or if you are under an introductory offer of 0% interest. Just don’t get caught with your pants down when that introductory offer expires and you have a large balance. OUCH!
What we want to do is get on the right side of interest. What do I mean by that? Instead of paying interest, you want to be collecting interest. For example, let’s take Synchrony Bank. The use of their credit card will cost you a whopping 29.99% Annual Interest rate. DOUBLE OUCH if you are on the paying end of that! On the right side of interest with a minimum of $2000, you can get paid 2.75 APY for a 12-Month CD or with no minimum balance a 2.20% APY for their savings account. (Also, see at my Wealth and Riches blog Laugh at 2% Interest Rate and Get 5% instead).
Opt-out of Credit Card Offers: If you are tempted by credit card offers you get in the mail, the best thing to do is to opt-out of the offers. To do so go to www.optoutprescreen.com which is run by the major credit bureaus. Also opting out of prescreened card offers makes it less likely that and ID thieves will intercept them and take out credit in your name. Your opt-out electronically or by phone (888-567-8688) is good for five years or you can mail in a form to block prescreened offers permanently. (You may still receive offers from companies you currently do business with.) If you miss hearing about card deals, you can opt back in.
One of the things to get on the right side of interest is to create an Emergency Fund with the first goal of $1000, the second goal of 3 months of income, the third goal of 6 months of income, and the 4th goal of 1 year worth of income. Why? Because when something goes wrong, you have the cash to pay for it instead of relying on a credit card or loan. And if you have a job and lose it, you won’t sweat it like you would if you didn’t have a year’s worth put aside. Sweet, stress-free living, with an emergency fund.
Taxes: I’d be leaving out a major part of the puzzle if I didn’t talk about taxes that eat up our earning faster than a New York Minute. If you’re self-employed you’ll want to make sure you are paying your quarterly and if you are an employee you want to make sure your withholding amount is enough to cover all your earnings by the end of the tax year. Owing the IRS comes with penalties and interest (once again on the wrong side of interest) and they have the power to attach your paycheck and take up to 1/2 of your checks until the debt is paid unless you first set up a payment plan with them and stay faithful in paying each month of the agreed-upon amount. The IRS can also put a lien on any property you have too, to secure their money owed.
One tax strategy and extra income strategy is to start your own home-based business with the intent to make a profit. This will give you a number of legal tax deductions that you would not have just being an employee. (See your C.P.A. for details).
Tax Breaks for charitable work: You can deduct unreimbursed travel expenses as a charitable donation if you file an itemized tax return and the trip is primarily for your work with the nonprofit. You can deduct airfare, lodging, meals, and if driving, parking, tolls, and mileage at a rate of 14 cents per mile. Keep a mileage log with the date and reason for the trip. You should also get a letter from the charity confirming your activity and stating that no goods or services were exchanged.
Listen, be real with yourself. If you are like most people, you are in credit card debt. If that’s you, then your first financial priority is to get 100% out of bad debt. I say “bad debt” meaning if you’ve used your credit cards for non-income activities then that is “bad debt”.”Good debt” if there really is such a thing would be considered debt towards creating cash flow. My advise if to get out of all debt ASAP. To be 100% debt-free is the start to your financial freedom! Getting on the right side of interest, and being debt-free will create that financial freedom you are seeking.
Laws of Abundance Part 6 Cash Flow is coming soon!