UNPLANNED EXPENSES AND PERSONAL FINANCE - THE MAIN REASON PEOPLE GO INTO DEBT
How to Manage Your Bills, Checkbook and Credit Cards
Personal finance tips for simple management of your money, income and debt.
How to balance a checkbook and easily find mistakes. When to pay bills and avoid late fees, penalties and bad marks on your credit record. How to keep unplanned expenses from making you go into debt.
Consumer guide to frugal living - from previous newsletters © Copyright 1995-2000 by SAVVY-DISCOUNTS.com - All Rights Reserved
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7.0 UNPLANNED EXPENSES AND PERSONAL FINANCE - THE MAIN REASON PEOPLE GO INTO DEBT
7.0.1 IT'S 2 A.M. DO YOU KNOW WHERE YOUR MONEY HAS GONE?
Unplanned expenses (sometimes called miscellaneous expenses) are the main reason that households get deep into debt according to credit counselor Robert Bugai. He has seen the same story over and over. Families find themselves swamped with bills and with no idea how they got into this situation.
expenses are slippery and difficult to grasp. Most people know how much they can afford
for a house or a car or at the grocery store. But what do you do when the car breaks down?
Or the dentist tells you that you need a new crown? Or a couple you've known for years has
a silver wedding anniversary and you're expected to buy a present? On the other hand
should you really worry about the cost of a fresh cup of coffee and a danish each morning?
After all it's a great way to start your day and it's only a couple of dollars.
The way many people deal with these expenses is to charge them on a charge card and forget about them.
Let's take one simple example: suppose each Christmas you charged about $700 (a good average for Christmas) or you charged about $700 a year for that cup of coffee and pastry each morning on a charge card. Let's further suppose you only paid the minimum payment on the charge card each month. Suppose you kept buying breakfast or paying for Christmas presents this way year after year. After 10 years at 18% how much would you owe? How much interest would you have paid and what would your payments be like?
Using the example above, after 10 years you would owe: $4,795
You would have already paid in interest over 10 years: $7,687
Your payments the first year would be only: $14.80 per month
After 10 years your payments would be: $101.40 per month
And bear in mind that you still haven't found a way to pay for the Christmas presents you buy.
Robert Bugai found that couples thought they knew where their money was going, but in reality they didn't. When you buy a magazine here, a soda there, go to a movie, buy a new pair of sun glasses, how can you keep track?