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Finance and credit, as we know them today, are changing rapidly. Your financial future will be determined by how you use money in this new era of finance. Follow these guidelines to survive and thrive in the new era of finance. Recently, Congress passed new legislation on credit cards and financing. Here is the meat and potatoes from the recent CARD Act of 2009, and what the new government rules for credit card companies mean to you.
The Credit Card Accountability Responsibility and Disclosure Act of
2009
(Forefield)
1 Creditors are required to send statements to consumers at least 21 calendar days before the due date of the next payment. Creditors must provide on each billing statement a written disclosure indicating how many months it will take to repay the existing balance if only the minimum payment due is made each month, and what the total cost (principal and interest) of doing so will be. The disclosure must also indicate the total cost of repaying the existing balance due, including principal and interest costs, over 36 months. Payment due dates shall be the same day of each month. If the due date is a date when a creditor does not receive or accept payments by mail (e.g., weekends and holidays), the creditor must not treat a payment received on the next business date as a late payment. Creditors are prohibited from charging a consumer an over-the-limit fee unless the consumer authorizes the creditor to complete the transaction that causes the balance to go over the limit (opt-in). The creditor is further prohibited from imposing an over-the-limit fee in a subsequent billing cycle unless the consumer obtains an additional extension of credit in excess of the credit limit during that subsequent cycle. Extension of credit to consumers under age 21 is prohibited, unless the consumer demonstrates the independent means of repaying the debt or has a cosigner over 21 capable of repaying the debt. The creditor is required to obtain the approval of any cosigner to increase the credit line of an account for which the cosigner is jointly liable. Creditors are prohibited from charging a fee based on the manner in which a payment is made (e.g., on line, by telephone). Gift cards and certificates must disclose in writing on the card or certificate any dormancy or inactivity fee information, including the amount of the fee and how often it may be imposed (not more than once a month). What's more, the issuers of such cards or certificates must inform the purchaser of these fees before the purchase. Such fees may not be imposed for the first 12 months after issuance. Such cards or certificates may not have an expiration date before five years after the card or certificate is issued. The sections of the Credit CARD Act of 2009 about notification requirements concerning rate increases take effect 90 days after the date of enactment. The remaining portions of the Act take effect nine months after enactment. Okay, back to reality, and what all of this means to you. Credit and lending have been slowly tightening over the past year, despite the Fed's attempts to flood the economy with "Fiat" money. And, this new legislation wrapped in an ACT to supposedly protect the consumer will only create more stringent guidelines and qualifications for lending. Now this isn't completely bad news, because American's need to quit borrowing and depending on credit cards to finance everything they buy. However the ability to access capital can be crucial, and you should be aware of the most effective and efficient ways to borrow money. In today's fast-paced world we are often lured into buying when we ought to be saving. Saving takes discipline, and with the ease of purchasing using a credit that makes the task that more difficult. By learning how cash flows you can reverse the trend and recapture some of the interest you now pay to others. How you finance and pay your expenses will have an enormous effect on your lifestyle today and how you spend your retirement income tomorrow. PROFOUND STATEMENTS: "You finance everything you buy. You either pay interest to others or you lose interest you could be earning. Anytime you can cut out the payment of interest to others and direct that same market rate of interest to an entity that you own and control, with minimal taxation, you have improved your situation." ~Nelson Nash Most all items in your budget are financed either by credit cards or loans. The balance is financed by paying cash, thus, giving up interest that could be otherwise earned.
A perverted twist on our Golden Rule states "Those who have the Gold, make the rules. "Your objective then should be to create more "Gold" or wealth. If you think about how your money flows it probably goes something like this. You get paid; the funds are electronically deposited or manually deposited into someone else’s bank. You pay bills from that account. Some of the funds may have been diverted ahead of the deposit to another account for savings, but again into someone else's bank. You then pay your expenses from those accounts. And, if there is anything left over you may treat yourself or the family to some entertainment. Along the way your money is being utilized by someone else. You not only have given up the use of the money, but also the control. An effective and efficient financial system requires that we maintain use and control of the money in order to create wealth. The number one rule in accumulating wealth is to PAY YOURSELF FIRST. By setting a target, and adhering to that guideline, you will be ahead of most. If you learn how to control the flow of your money through your entire financial system then you can create long-term wealth. While creating a financial system to accommodate your income may sound difficult, it can be relatively simple. The primary difficulties you will encounter will be human factors:
Human
Factors That Will Affect Your Ability To Create Wealth 2. Willie Sutton's Law - wherever wealth is created, someone will try to steal it. 3. The Arrival Syndrome - I already know everything, so there is no need to learn anything new. While we may have been told that creating wealth is a factor of the rate of return, that is only part of the equation. Most often the magical rate of return that we are chasing comes with RISK. A better approach to creating wealth will focus on eliminating the eroding factors and maintaining control of the money. One of the easiest ways to earn a foolproof rate of return is to eliminate fees and debt. However, all debt may not be bad debt. If you are uncertain of the difference between "bad" debt and "good" debt, "good" debt would be a secured loan on an insured asset, like your mortgage. On the other hand, a high interest credit card that is uninsured would be "bad" debt. We have covered budgeting and eliminating debt in our past newsletters and blogs. So, if you haven't read those yet, please be sure to: Avoiding Credit Card Debt PROFOUND STATEMENTS: "The greatest obstacle to discovering the shape of the earth, the continents and the oceans, was not ignorance, it was the illusion of knowledge." ~Daniel Boorstin "The problem in America isn't so much what people don't know, the problem is what people think they know that just ain’t so." ~Will Rogers When considering where and how to invest or save your money, you should keep these factors in mind:
Having your own source of capital can:
Any attempt to achieve financial success that is investment focused (magical rate of return), ignores the primary factors of effective and efficient use of your money. By capitalizing your system first, and then managing these factors, you will be in a position to create true wealth that lives on for generations to come. There is a financial vehicle that offers you the ability to create your own system of finance, and it has existed for hundreds of years. It goes against traditional thinking, and you won’t learn about it from most financial advisors, it's called dividend-paying life insurance. You can STOP depending on financial institutions for credit and loans by Becoming Your Own Banker. Few financial products can offer you protection, savings and growth. Fortunately one does, it's called Whole-Life Insurance. And, when used in conjunction with a sound financial plan it can provide you the opportunity for creating generational wealth. Find out more about the uses and advantages of life insurance in your portfolio with a free financial analysis from Legacy Insurance Agency.
Until
next time, |
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