This weekend the challenge is to look at what your financial habits are costing you. When you are struggling to change your financial habits it often takes something big to open your eyes and really commit to the change. It may be skipping your first payment or bouncing your first check that finally gets you to wake up to the seriousness of your financial situation. You may think that you are doing well financially, but not realize how much you are paying in hidden fees and costs. This weekend's challenge should only take about an hour. It should help you see how much you are paying in fees and interest each month.
1. How Much Does Debt Cost You?
First take out your credit card and loan statements. The new credit card bills should show you how much you pay in interest each month. They should list how long it will take you to pay off the card if you were to pay only the minimum payments. It should also show how much you would save if you paid it off in three years time. Another figure you should look up is the interest you are paying each month. This should be at the top of your statement. Total the amount that you pay in interest each month on all of your debts. Think about what you could do with that money if you did not have to pay it. Think about what you could do with the entire amount you pay to debt each month if you were debt free.
2. How Much Are You Paying to Your Bank Each Month?
Next you need to take out your banking statement and look at the amount you are paying in fees to your bank. This would include the monthly service fee if you have one, the ATM charges, and any overdraft charges that you have incurred. If you did not pay any overdraft charges this number may be fairly low, but it you may still want to shop around to see if you can lower the amount you pay. If you paid overdraft fees the numbers can add up quickly. It is essential that you begin balancing your checking account on a daily basis and get out of the overdraft cycle.
3. How Much Are You Paying In Late Fees
Finally look at any late fees you have had to pay in the last month or even year. This number can add up quickly, and late credit card payments lead to higher interest rates that can affect any of your credit cards. How much have paid for being late or careless in how you may your payments? You need to being working on catching up on late payments.
4. What Is Your Total Cost?
Look at the numbers that you found. Now consider how much more money you could have if you were putting that money into savings and earning interest rather than paying it. Retirement would be a lot better, and you could begin saving for a down payment for a house. Why are you paying so much in interest? Are there habits you can change?
If you are not paying a lot in interest or to debt each month, then you are doing a great job and just need to stay on track. If you need to change, picture yourself without debt and begin to work towards becoming debt free.
