There's a famous saying: Sink or swim. Given the current crazy economic times, those may be your only two options. The question is: how do you stay afloat on our troubled economic waters. Here are some things you need to do so that you can swim instead of sink.
Tell your banker to lower your fees. You are paying more in fees than you earn in interest. You need to let your bank know that you are not happy about that.
Don't be in a hurry to pay your bills. All the bills you receive have a due date. It is important to pay your bills and make sure that you are not late. That hurts your credit rating and could also incur some late fees. So make sure you pay all bills on time but not before their time.
Don't over-pay quarterly estimates to the IRS. Why give the IRS extra money just so you can get a big refund when you file? They don't pay you interest on that money and you don't gain any "brownie points" with them for overpaying.
Don't pay your income taxes with a credit card. The card company will charge you a fee of about 3 percent. Yes, you may get some travel miles for the charge, but that is an expensive way to gain miles.
Debit cards are not your friend. When you swipe that debit card at the store, the money is gone from your account within a few minutes. Those cards give you no float or grace period. The float is the time between the purchase date and the due date for payment. Don't throw away the right to use someone else's money for that period of time.
Consolidating credit card debt can be dangerous. All of a sudden, you check your statement and you owe nothing on your cards so you run up some additional debt. You can really get into deep trouble unless you control yourself.
Call your credit card company. Tell them to lower your interest rate or you are taking your business elsewhere. Sixty percent of customers who call their credit card companies get a lower rate. Do it now.
Service contracts can be expensive. The vendor will usually piggyback the warranty that you have on whatever you bought and may extend it just a little further. Ask yourself, "Do I really need the extended warranty, and is it really worth the additional expense?" Most of the time it isn't.
Increase deductibles on insurance. Why have a low deductible when you wouldn't submit a claim because you know they would probably increase your premiums. You can save up to 20 percent by doing so.
Leasing may not be a better deal. That depends on your cash flow. Leasing is usually more expensive, but it will help you avoid a large down payment that can hurt your cash flow. Remember just because you lease something, it does not make it automatically tax deductible.
Debt-free usually equals asset-free. You must remember one simple rule of finance: "Money is worth what you can borrow it for." To illustrate this, draw a line across the middle of a sheet of paper. That line represents what it cost you to borrow money. If it cost you 10 percent to borrow money, put that on the line. Now examine your debt. If your mortgage is at 6 percent, it is around 4 percent after taxes, so that goes below the line. Credit cards at 16 percent go above the line. It's the ones above the line to be concern about. Don't be in such a hurry to give the bank all your low-cost money so that they can lend it back to you later at a higher rate.
It may be too late to panic but if you just follow these suggestions, there is no reason to panic.
Click here for previous articles by Stanley Greenfield, RHU.