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A credit card without debt?

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Does that really exist? We shall see.

Have you ever been offered a VISA or MasterCard that you can reload with your own money and thought to yourself “WOW that’s a great idea because I won’t get into debt”?  That is definitely a normal reaction, I mean seriously who wouldn’t love to have a credit card without the temptation to spend and get into debt?  I know I would.  This type of credit card is prepaid and it’s often confused with a traditional VISA or MasterCard.

Do you have a prepaid credit card?

Yesterday my Dad called me and said “I got a VISA today.”  I was shocked and secretly proud because over the last few years my Dad’s financial situation has been less than stellar.  To make a long story short my parents got divorced, my Dad wanted to keep our childhood home so he got into a lot more debt (by buying out my Mom) than one person should.  When you combine this with the overwhelming need to give your daughter everything she wants in hopes that you’ll be her favorite parent it’s a recipe for financial disaster.

Fast forward to my Dad selling his house and paying off all his debt.  You would think that’s a good thing right?  Well it normally would be, if the person worked towards rebuilding their credit score.  However my Dad went in another direction.  He moved in with his now girlfriend and let everything – and I mean everything – from the phone and the car insurance to the house and the cable be in her name.  This is not helping my Dad rebuild his credit.

What is a prepaid credit card?

Yesterday when my Dad was at the bank paying his monthly bills (yes he still goes to the bank) the teller offered him a prepaid VISA card.  She explained that he can use it worldwide where VISA is accepted as a payment method and he can load as much money onto it as he wants whenever he wants.  Since my Dad has been without a credit card for over three years he thought this was a good idea.

The truth is it can be because it gives people with less than perfect credit the option of online shopping as well as booking tickets and travel.  It opens a world of doors for payment options that normal credit card less people wouldn’t have.  Since the card is funded with actual money, not credit, there is no possibility of further harm to your credit score.

Is it really the best option?

So what’s the downside?  The exact same gift of a prepaid card is also the curse.  Since the credit card is loaded with cash or money transferred from a bank account or PayPal there is no credit.  Everyone is approved for a prepaid credit card because there is no approval process, but it also doesn’t help rebuild your credit score.

If your credit is less than perfect you may want to consider a secured credit card because as you use it each month and pay it off you will rebuild your credit score.  Photo from my Flickr

Do You Consider Life Insurance an Asset or an Expense?

life insuranceA recent State Farm study found that half of Americans (50 percent) say life insurance is an asset while one-third (33 percent) say it is an expense.

While I completely agree with life insurance being an asset I’m pretty shocked that one third of those polled considered life insurance an expense.

Here are four reasons I believe life insurance is an asset that everyone should have.

Life Insurance Rounds Out a Financial Plan

I’m a firm believer that the right types of insurance round out a financial plan. For instance, you can pay off your debt, build an emergency fund, and start investing but what happens when a major emergency hits? The normal answer is that you’re back in debt or have depleted your savings trying to cover the cost.

If something happened to you or your spouse what kind of financial repercussions would there be?

For most Americans who are still paying off a mortgage and living on two incomes the answer isn’t good.

Once you get all of your ducks in a row, financially speaking, life insurance should be considered the protection layer of your financial plan.

If you need some more proof you can read all the amazing stories on Good Neighbors to see just how important having the right types of insurance is.

Life Insurance Allows You to Protect Your Family’s Future

If you have kids then I know you can understand the feeling of wanting to protect their future. As a parent all you want is the best for your children.

You want them to grow up as happy, healthy, responsible adults but you also want them to have every opportunity possible.

If you’re worried that your kids won’t be able to attend college if you’re not around then life insurance can bring you peace of mind.

You can choose what coverage amount you need and rest assured that you’ll still be taking care of your kids – even when you’re no longer here.

Life Insurance Can Cover These Types of Expenses Too

I don’t want to give off the impression that life insurance is only for couples who have children because it’s not.

Life insurance can be used to cover the cost of a funeral and can protect any co-signers you have on your debt.

If you don’t have a spouse and children to protect (yet) but want to be able to cover the cost of funeral services or cover the amount of debt you have then you probably don’t need a lot of coverage.

Find out how much you do need in these cases and get a quote. As long as you’re in good health I think you’ll be surprised at just how affordable life insurance can be.

Life Insurance Brings Peace of Mind

There’s something peaceful in knowing that even if something happens to you it’s not going to cause financial ruin to those around you.

It only takes a couple seconds to pick up the phone and call your agent but that one phone call could bring you the peace of mind you need.

Do you have life insurance?

Disclosure: This blog post was written as part of a sponsored program for State Farm to raise awareness about the importance of life insurance. All views expressed are entirely my own, and were not influenced or directed by State Farm. You can learn more about this blogger program and life insurance at GoodNeighbors.com, PlantingMoneySeeds.com, and by following #StartLiving on Twitter.

Spending extra for convenience

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Good morning loves.  Last weekend I went home for a family reunion and let me tell you I had a blast.  Every year my extended family, aka my Dad’s oldest friends from childhood who also happen to all be related to each other as well as my God parents, host a family barbeque.  It’s a chance to see all my “uncles, aunts and cousins” (who are of course not related to me by blood) as well as their spouses and children.

Spending the long weekend with family

This year we had approximately 80 people who came out to spend a day in the park.  We ate lots of great food, had a ton of drinks, played volleyball, had a water balloon toss, enjoyed a pie eating contest and basically just had a great time.

I wasn’t planning on attending the family reunion this year because I haven’t spent a long weekend at home all summer.  I was busy travelling and taking advantage of the warm summer months.  So this Labor Day weekend I thought I would stay home.  However after several text messages from my sister telling me that I would be the only person not in attendance and one phone call from my Dad actually offering to pay for my trip – I was guilted in to going.

Travelling the cheapest way is not always the best way

The truth is I actually didn’t want to miss the reunion because it’s always great to see my family, but for once I just wanted to stay home, sleep in and relax in my apartment.  I didn’t take my Dad up on his offer to pay for the trip and I started looking into last minute travel options.

I love taking the train, it’s actually my preferred method of travel because security in airports is a hassle and driving makes me sleepy.  However the last minute train prices were more than I wanted to pay (since I didn’t have a planned budget for this last minute trip) I decided to book a trip on Megabus.

Have you ever taken Megabus?  The concept sounds very appealing; it’s a double decker bus that allows limited assigned seating and tables for drinks and workstations.  The travel time was only one hour longer than the train and the price was half the cost.  I thought it was a win-win; until I actually got on the bus.

Spending for convenience

The one factor that I didn’t take into consideration was the fact that a bus travels on the roads and a train is off road on tracks.  My one hour of extra travel time turned into two hours with traffic and I was late for the barbeque.  There is nothing more that I hate than sitting in traffic; it’s a waste of time and I am extremely impatient.

At the end of the weekend I decided that I just couldn’t get back on another bus so I booked a very last minute train ticket.  If I would have just taken the train both ways it would have saved me a lot of time and actually cost less than the bus ticket plus the last minute train ticket.  Lesson learned.

Have you ever spent a little extra money for convenience?

Photo from Flickk

3 joint credit card myths

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Good morning loves.  Today we are chit chatting about love and credit cards.  I have a friend named Julie who just got engaged. Yep another 30 something year old woman is getting engaged and it’s not me.  As I sat across from her at lunch at our favourite Japanese restaurant she told me all about how her husband-to-be asked for her hand in marriage in a botanical garden.

They spent the day walking hand in hand through romantic gardens, Julie loves flowers. They stopped to grab some cold lemonade when her fiancé dropped his money while he was paying for their drinks.  As he got up instead of having change in his hand he had a diamond ring.  I swear that’s what happened…I couldn’t make this up if I tried.

What to do about joint credit cards when you get married

After I listened to Julie talk about what a surprise her engagement was and how excited she is to get married her tone suddenly changed.  Her face lost the smile and she asked “Now what do I do about money?”

This is a common conversation among my circle of friends.  As a financial planner I am the one my friends turn to for financial advice.  However I rarely give my opinion because I don’t like to mix family and friends with money.  But that doesn’t stop them from asking.  All I can do is tell them the pros and cons of joint credit cards and let them make their own conclusions.

Don’t get fooled by these 3 joint credit card myths:

1. Only one person is responsible for the debt.  When it comes to joint credit cards many people think only the primary cardholder is responsible for repaying the debt.  This is not true.  A joint credit card means that each person is individually responsible to repay the debt in full.  Some people also think that each person is only responsible to repay half of the outstanding balance, once again this is not true.  At any time the credit card company can ask either credit card holder to repay the balance owing in full.

2. You don’t need to manage it together.  This couldn’t be further from the truth.  Joint credit cards have credit limits and it’s important to manage your spending wisely so each person in a couple is aware of what purchases are being charged on the credit card.  This helps avoid overspending and makes sure the monthly payments are manageable.  Could you think of anything more awful than having your credit card declined because your spouse is overspending? How embarrassing.

3. All purchases have to be used by both people. I know some couples who only use their joint credit cards to buy things that are used by both people in the couple.  But this doesn’t have to be the case. As long as both people understand they are responsible for the debt and you manage the spending together to make sure you can afford to pay off the balance each month it shouldn’t matter who is spending what on the joint credit card.  The key to merging your finances is to be open and honest about your spending.

 

Photo by Flickr