Marketplace Money and Credit Cards
I really started paying attention to money when I was in college somewhere around the age of 20. Largely after I started listening to the NPR show that was then called Sounds Money (now called Marketplace Money. Incidentally, I think pretty much everyone should listen to that show. You can listen to show online and they also have podcasts. Generally, the show has a basic theme for the week which isn't always of interest. However, if the main theme isn't directly related to me, there are almost always good, down to earth discussions that are very helpful. I can largely credit this show with my first introduction to how money really works. For example, one thing they tend to talk about is how it's not in your favor to carry credit card debt. My freshman year in college I signed up for a credit card and proceeded to max it out (to I think $500) pretty quickly. Not a big deal as I could easily afford the minimum monthly payments. Of course, the interest the card was charging (if memory servers around %16) wasn't working in my favor. I kind of got this intuitively each time I paid the bill but it never really clicked. So, over the next few years I kept adding to my credit card debt. Naturally, the credit card companies helped me out in this by upping my limit each time I moved in around the max. It wasn't till I started listening to the show that the actual amount I was actually paying started to click. And more to the point, the fact that I was effectively paying way more for things than the initial purchase price because of the interest really got to me once I understood it. At that point in time, I was still in school and was pretty much self supported. I wasn't starving by any means, but I certainly wasn't raking it in. Based mostly on what I had learned on the show, I started to pay off my credit cards. I would still charge things to them occasionally, but in general I was trying to pay them down. I don't remember when I finally got them completely paid off, but once I did, I kept them that way. This is not to say that I don't still use them. I put most of my purchases on my credit card these days. The difference is that now I pay it off in full each month. I don't even know what the interest rate on my card is right now, because it doesn't really have any baring on me. I never pay interest because I always pay the card balance off in full when the bill is due. I'll be the first to say, that it was not easy to pay off the card. This came from two levels. First, I was in a college job when I first stated so there wasn't a tremendous amount of income heading my way. The second thing was the fact that as soon as I paid some down on the card I would be sorely tempted to use the newly available credit to get any number of things. This was much harder to deal with. What finally helped get me there though was reminding myself that I wanted any interest to be coming into my pocket instead of going out. Discounting Bill Gates, Warren Buffett and the other few super-duper-ultra-rich in the world, there will always be more things out there that we want than we will be able to afford. Credit cards (and the like) allow us to get some of these things when we really shouldn't, but they charge a hefty price for this. Not only do we end up paying the interest to the them that wouldn't be necessary if we made the purchase in cash (or paid off the card every month), but it also prevents us from saving money for ourselves. This is badness compounded by the fact that we also lose the growth that those savings would have otherwise provided. Your classic Double Whammy. The wild thing about this is that if you manage to tip the scales in the other way and save money so that interest and other returns are coming in, after a while you'll have a lot more money to do things with. If you don't, it's not hard to end up paying for things forever with much less to show for it. So, all this is to say, if you have a credit card and you carry debt over month to month and pay interest on it, I'd recommend really taking a look at what you are spending on and see if you can't start to swing things back in your favor.