OWNING a credit card for the first time is, in a way, a big personal achievement. It means you've taken a big step in managing your personal finances.

The appeal of owning a credit card is understandable it can be both a convenient and efficient add-on when it comes to dealing with your finances. However, with so many cards available in the market today, where do you start? Or do you start at all?

There is some work to do before filling your wallet with “plactic money.”

Know yourself

Prior to applying for a credit card, it's important to know the type of spender that you are. P.S. Tan, 33, a self-confessed shopoholic, says that the main reason she got a card was to be able to indulge in what she loves doing best shop!

“With a credit card, I can shop as much as I can so long as I don't exceed my credit limit,” she enthuses, adding that she used to feel “deprived” before she owned a credit card.

“I used to get depressed because I couldn't afford the latest women's clothing and accessories. But with a credit card, I don't feel so limited,” says Tan.

Meanwhile, frugal P. Jeya, 44, says she applied for a credit card so as to be able to pay for big ticket items.

“These include, household stuff or my children's college fees, which had to be paid in a lump sum,” she says.

However, owning a credit card can sway a person's spending habit.

“After getting a credit card, I became a bit more of a spend-thrift,” says Razlan Hashim, 38, a bank officer.

“It's psychological. When you're not physically handling money or seeing it coming out of your wallet, spending tends to be a little bit more care-free,” he adds.

Razlan believes that people who had the tendency to overspend should not own credit cards.

“A credit card is useful if you can't use cash to pay for something or don't have the immediate cash to do so. But you should always ask yourself is it something that you want or is it something that you really need?

“Most of the time, you'll use your credit card on something that you don't necessarily need. It is better to save up the cash for something you want, than own a credit card and have a mounting bill and interest looming over your head.”

Be responsible

Owning a credit card also comes with added responsibilities, namely the need to better manage your finances and pay your bill on time.

Says Tan: “You can be a big spender or a small one. But what's important is how quickly or consistently you're going to repay your credit card debt.”

Razlan concurs: “Before you apply for a credit card, you need to ask yourself if you can shoulder the responsibility of settling your debts consistently and in a timely manner. Late payments or not paying off your credit in full means added interests incurred or even penalties.”

Individuals who have reached their credit limit but still want to continue spending end up applying for a second (or even a third!) credit card, which, if not properly managed, can create huge debt problems.

“We've all heard the horror stories of people with debt problems resorting to money-lenders,” says Razlan.

Of course, having a second credit card also means added annual service charges. However, Jeya notes that one can always waive the annual charges.

“I have two credit cards and have the annual charges for one of them waived. “I tend to use one card more often than the other and it came to a point when I wanted to terminate the one I seldom used.

“But since I was a long-time customer with the bank (of the credit card I wanted to discontinue), the bank was willing to waive the annual service charges.”

Alternatively, a bank is also willing to waive your annual service charges if the card is used regularly.

Choose well

With so many products being offered by multiple institutions, it's always best to determine which bank offers incentives that best suit your needs and convenience.

“Certain banks offer credit cards with rebates or interest points for a type of leisure activity that you tend to indulge in quite often. Perhaps you can get good discounts at a shop or restaurant you frequently visit.

“Or if you're a frequent traveller, then maybe a particular bank offers points whenever you travel overseas,” says Razlan.

Jeya, who has been a credit card holder for over 15 years, says she chose a bank that had a nearby branch to ease settling her bill.

“Of course, today you can pay you credit card bills online. But back then, it was more common to go directly to a bank to settle your debts. Some banks had so few branches that it was so inconvenient.

“Before applying for a card, it's best to ask the people or speak to a professional to see what kind of incentives come with the credit card you intend to apply for,” says Jey

7 Habits of Highly Frugal People

by GUEST CONTRIBUTOR · 642 COMMENTS

The book 7 Habits of Highly Effective People has sold over 15 million copies since it was first published in 1989, teaching people all over the world how to live a happier, more successful and more satisfying life. One of the prevailing themes of the book is the fact that to change your life you need to change your attitude because no one else is responsible for what happens to you but you, so you can either complain about the things you don’t like in your life or you can set about changing them. Not surprisingly, this directly relates to the state of your finances. This post is a parody to the concepts presented in the book.

If you are tired of living paycheck to paycheck, of having your phone regularly cut off or having to make excuses to skip dinners with your friends if the money has run out before the end of the month then you can use the seven habits of highly effective people to take control of your money situation and live a more frugal lifestyle, and a happier one.

Habit One: Be Proactive

The first habit of highly effective people is to take responsibility for their own lives; if they fail, they have no one to blame but themselves. Regardless of how you were raised or how you were treated at school you are able to choose your behavior now. Being proactive means understanding that you are in control of the direction your life takes and in control of your day to day interactions. Whereas a reactive person is often affected by their environment and will find external sources to blame for their behavior, for example if the weather is good they are in a good mood but if the weather is bad it affects their attitude and so the weather is to blame for their bad mood.

Here are 6 Action Steps to Take When You Feel Financially Vulnerable

However what most people forget is that between the stimulus and your response is your freedom to choose your response, and one of the most important things you choose are your words. The language you use is an effective indication of how you see yourself and if you use proactive language such as ‘I can’ or ‘I will’ you are starting with a more positive attitude than a reactive person who uses language like ‘I can’t’ or ‘I have to’ or ‘if only…’

How to be proactive for effective frugality:

Take the first step. You cannot take control of your finances until you make the commitment to do so because the more you ignore the situation the worse it will get. Instead take a long hard look at your finances and your budget, your debts, income and expenses and understand where your money is going and where you can budget better. (To help you out, here are 25 ways to pay off your debt more easily.)
Tell people. Using proactive language to vocalize your goal of being more frugal and more financially responsible not only helps you crystallize your goal but can also help you avoid the peer pressure which can make budgeting and frugality hard. If you explain to your friends and family how you are trying to live a more frugal lifestyle then they are less likely to pressure you into one more round of drinks at the pub or dinner out, again.
Listen. Listen to yourself and listen to the reasons you give each time you make a purchase outside of your budget or decide not to put those spare funds into your savings account. Taking the time to stop and listen to the reasons you give yourself for spending more than you earn will give you the opportunity to hear just how shallow many of those reasons are, and can stop you from making purchases which can impede your goal of effective frugality.

Habit Two: Begin with the End in Mind

Those who are effective in achieving their goals are able to envisage their end result despite the obstacles. Highly effective people adhere to this habit based on the principle that all things are created twice, there is the first mental creation and then the second physical creation, and the physical creation follows the mental creation in the same way as the building follows its blueprints.

If you don’t visualize what you want out of life then you are at risk of other people and external circumstances influencing your life because you are not influencing it yourself. Instead begin every day and every task with a clear vision of where you want to go and how you’re going to get there and make that vision a reality with your proactive skills from habit one.

How to visualize effective frugality:

Define your goal. There are many ways to live a frugal lifestyle and you need to decide on how frugal you want to be. Do you want to be debt free, do you want to build a savings account balance of a certain value or do you want to be able to live on one income in a two income household?
Decide how you’re going to get there. This will again draw on your budget, but you also need to be aware of the obstacles which are standing in your way. These may be literal obstacles such as credit card debts, or they may be obstacles you have identified in your behavior; for example are you spending $10 every day on junk food on your way home from work because you’re starving when you could be packing a two dollar muesli bar or a low GI lunch to keep you going until dinner. Or do you find that when you go shopping with your sister she always helps you justify a frivolous purchase when you could leave your credit card at home?

Make sure your goals are SMART! Here’s what I mean by that.

Habit Three: Put First Things First

Knowing why you are doing something is an effective motivator in helping you take the mental creation and transform that into an actual physical creation of your goal. Therefore ask yourself which are the things you find most valuable and worthy to you. When you put these things first you will be organizing and managing your time aroundyour personal priorities to make them a reality.

However for many people it is hard to say no but this is exactly the skill you have to learn to be able to keep your goals as your first priority. While we have all of these time-saving devices and we are told we can have it all if we just achieve that elusive work-life balance, in reality having it all is really about prioritizing which it is most important to you to have, and then doing that properly.

How to put effective frugality first:

Recognize the effects of your finances. You may not dedicate as much time as you should to managing your finances and practicing frugal principles because you feel there is always something more important to be doing, whether it is work, taking the kids to soccer practice or getting ready for dinner with the girls. However, if your finances are not under control and you are regularly spending more than you earn, then this is having a negative impact on every other aspect of your life from your work to your family to your friends. Therefore you need to recognize that being frugal is your first priority.
Just say no. It is easy to spend more than your budgeted amount each month when you are worried about missing out on a dinner with friends, feel as though you have to cater a birthday party for your son and 50 of his closest friends or you can’t possibly wear the same suit you wore last year to a work conference. However if you recognize that you don’t have to take on everything and that it is all right to say no then you will find you are more in control of your spending and your budget.

Habit Four: Think Win-Win

Most of us are taught to base our self-worth on comparisons to others and competition against our peers. We think we can only succeed if someone else has failed and if you win, then that must mean I lost. We are also taught that there is only so much pie to go around and if you get a big piece then I’m going to be missing out. When you think like this you are always going to feel like you’re missing out on something and nothing is ever fair. As a result many of us retaliate and take the pie before someone else can take it from us.

Thinking in a win-win mindset allows you to see mutual benefits from all of your interactions and as a result, you will see that when you share the pie it tastes even better. If you are able to approach conflicts and problems with a win-win attitude by showing integrity and standing up for your true feelings and values, it allows you to express your ideas and feelings with courage while having consideration for the feelings and ideas of others. When you focus on an abundance mentality, you are able to see that there is enough for everyone and you can see that balancing your confidence with empathy can help you achieve your goals while helping others achieve theirs.

How to create frugal win-win situations:

Recognize that you don’t always know the full story. As you aim to implement frugal principles and stick to a budget, you may often find yourself thinking ‘it’s not fair’. It’s not fair that they get to go out to dinner. It’s not fair that they get a new car, and it’s not fair that they get to go on holiday and I don’t. However, take the time to realize that you are only seeing a small part of the finances of your friends and family who seem to ‘have it all’. And even though your best friend is taking that dream European holiday of yours or your brother is buying a sports car before you are, you will get there too if you manage your finances frugally and there will still be plenty of holiday destinations and plenty of fast cars when you can afford the expense.
Understand the difference between possessions and net worth. While your friends and family may seem to have a fuller lifestyle because their house is bigger or their car is newer, you need to consider that it could just be a facade to cover their mountains of debt. True wealth is not measured in possessions but in assetsand when the value of your assets is greater than the amount you owe in mortgages, car loans and credit card debts, then you have a strong net worth and are truly wealthy. And in aiming to live a more effectively frugal lifestyle you will be able to achieve true wealth rather than just a life full of stuff.

When building wealth, remember to look at the big picture too.

Habit Five: Communication

Communication is often the desire to be heard and understood and most people will listen with the intention to reply to what you’re saying rather than to understand what you have said. However, to effectively communicate you need to first understand and then be understood because if you communicate with the sole intention of being understood you can find that you ignore what others are saying and miss their meaning entirely.

How listening can help you be effectively frugal:

You are not the only person in your life. Chances are you are married, in a relationship, have children or all of the above. As a result, you are not the only person being affected by your decision to live a more frugal lifestyle. To be effective in your goal of frugality, you need to be able to listen to and understand the goals and behaviors of the other people in your life too. Consider how effective your frugality would be if you were taking packed lunches to work and avoiding the afternoon coffee run with your partner going on shopping sprees during their lunch break. Instead of living a more frugal lifestyle, you are really saving on one end and spending it on the other.
Understand the goals and needs of others. While it is important to explain your desire to live more frugal lifestyle, it is also important that you understand the goals and needs of your family so that you can find a way to be more frugal without them having to give up all of the things which are most important to them. You can’t know what those things are unless you listen.

Habit Six: Synergize

Interactions and teamwork are some of the most important ways you can learn new skills and more effective behaviors. To synergize is the habit of creative cooperation where you work as a team to find new solutions to existing problems. Synergy is not something which just happens but is a process where you need to bring all of your personal experiences and expertise to the table to enable more effective results than you would have been able to achieve individually – the whole is greater than the sum of its parts.

When you have genuine interactions with people you are able to gain new insights and see new approaches to your problems which you would not have otherwise thought of.

How to synergize for effective frugality:

Look for new ways. In a society which has become so good at consumerism you have probably already realized that you need to find new ways of doing just about everything to be frugal. It is easy to buy your lunch every day but it is more frugal to take a packed lunch. It is easy to drive to work but it is more frugal to catch the train. It is easy to buy a new cocktail dress but it is more frugal to make one.
Surround yourself with other frugal people. To be successful surround yourself with people who are where you want to be and whether you join online forums onfrugal living websites or strike up a friendship with the woman who runs the local shop you will be able to share ideas and learn from others to be successful.

Learn to embrace the positive influence of saving money here as well.

Habit Seven: Sharpen the Saw

You are the greatest asset you have on your journey to achieving the lifestyle you want and so you need to look after yourself physically, emotionally, mentally and spiritually. When you take time to renew yourself in all four areas of your life you are creating growth and change which allow you to continue with the previous six habits you have mastered, which still need to be maintained to achieve success.

How to frugally renew yourself:

Physically. By eating better you will feel better and if you start your own vegetable patch for example you will be able to save at the supermarket and will be eating better at the same time. Exercising keeps you fit and healthy and it doesn’t cost you anything to go for a walk or bike ride or even skip rope in the backyard. To rest your body you don’t need to go to a day spa you can simply slide into the tub at home and relax.
Emotionally. Interacting socially with others allows you to make meaningful connections and this can come back to a conversation with the woman at the op shop or even scheduling in coffee and a chat with your mum once a week.
Mentally. Exercising and expanding your mind through learning, reading, writing and teaching can be done frugally at your local library or even by volunteering at a school or retirement home to teach others a skill you may be taking for granted.
Spiritually. Spending time close to nature to expand your spiritual self through meditation, music, art or prayer can be done frugally by taking a quiet moment to center yourself and empty your mind before you go to bed or going for a bush walk and being grateful for the beauty of nature surrounding you.

Frugality does not mean having to give up all the luxuries and things which make you happy because if you go through developing habits 1 to 6 without spending the time to renew yourself this is how you burn out, and frugality is something you want to develop and maintain for the long-term and with these seven habits you can be a highly frugal person.

This post is originally written by Alban, a personal finance writer. He offer money savings tips and helps people to compare home loans online.

Tagged as: Frugality, Money Beliefs

Sunday, April 22, 2012

I'm drowning

Saturday, April 14, 2012

Handling Credit Card -- from The Star