Bungling Balance Transfers

Moving debt from a high-interest-rate card to one with a low introductory rate can make financial sense–but only if you read the fine print. If you ignore or misunderstand balance-transfer rules, you could end up owing even more.

Boy have I screwed up in this area over the years. My first experience transferring credit card balances came in my early 20s. I managed to accumulate some credit card debt in college by using my card for emergencies like late night pizza runs, t-shirt sales at the bookstore – you know, the bare essentials.

One day, I received in the mail an offer to transfer my balance at 0% interest by opening a new account. Well that seemed like a no-brainer!

Unfortunately, I didn’t read the fine print and see there was a balance transfer fee of 3% of the transaction, which negated a good bit of my interest savings. I also made a critical mistake by leaving the old credit card account open, and when the next “emergency” hit I swiped the card again. Now I owed balances on two cards. Ouch

Ignoring Monthly Statements

Reading your bill can also help you understand how long it will take to pay off  your debt. As mentioned earlier, the length of time required to retire your balance by making minimum payments is displayed, as is how much you would need to pay each month in order to pay off your balance in three years. These numbers could act as a wake-up call for you to increase your monthly payments.

I like to say I used to behave like a financial ostrich, burying my head in the sand instead of facing my debt head-on. The very first step towards getting out of debt is to take inventory of where you stand. Obviously, it’s hard to do that if you ignore your statements.

You’ve probably noticed this in other people, or yourself, but it seems like very few people can tell you how much you owe. I used to say, “I owe a few thousand” and I hear others say, “I guess I owe around $10,000″ (when they actually owe more like $13,500). To put together a good plan to get out of debt, you have to first know what you’re facing.

There are other good reasons to check your credit card statements, even if you regularly pay yours off every month (as I now do).

Mistakes happen. A merchant may inadvertently charge you twice for the same transaction. Issuers have also been known to get their wires crossed and post a charge to the wrong account if a batch processing file gets scrambled.

Fraud happens. The waiter that took your card last month at your favorite restaurant might have given himself a $111 tip instead of an $11 tip by simply adding a “1″ to the front of your tip total on the receipt. Trust me, it happens. I used to see these kinds of things all the time when I worked in a credit card fraud and disputes area.

For more tips, be sure to check out the full article at Kiplinger.com.

How to Become a Millionaire: Three Starting Points

A 25 year-old with no savings needs to save $286 a month to reach $1 million by age 65. If your new employer offers a matching contribution, participate up to the match and then consider investing above that in a Roth IRA. The forty years of growth will make you a millionaire, maybe many times over depending on investment performance.

A 35 year-old with no savings needs to save $671 a month to have a $1 million nest egg in thirty years. Notice the jump in required monthly contributions? That’s what waiting ten years gets you. At 35 there are several family priorities competing for your money such as college savings, housing, etc. However, this is one of those times when you need to exercise the “pay yourself first” plan. No, you aren’t being selfish by wanting to make a million dollars. You are laying the groundwork for a solid financial future to provide for your family for years to come.

At 45 years-old it takes nearly a mortgage payment, $1698, to generate a $1 million portfolio. With only a twenty year window it’s time to get busy, but it’s not too late to get started. Many people this age develop a loser’s attitude, “It’s too late so why even start. I’ll just live on social security.” Social security insolvency aside, this is not a plan for success at any age. Take responsibility for your inability to save up to this point by making it a top priority over the next two decades. You just might be able to make a million dollars in two decades.

From this exercise, two lessons are quite evident. First, it’s tough to become a millionaire! Second, the key to making a million dollars is to start early. The earlier you start, the less out of pocket you have to save, because compounding growth becomes your best friend.