by James E. Stowers (NAPSA)—Hard work and determination allowed me to become financially independent. I am committed to sharing what I have learned through the years to help people improve their financial position and lead a betterlife. Current research shows the average American household carries nearly $10,000 in credit card debt. This debt is a key factor pre- venting them from attaining financial independence. In order to end this =)cycle of debt, we i i= must all beware of )MD the credit card. The credit card is James an extremely conveStowers nient way of paying for services, provided the bill is fully paid each month. If the full amountof the bill is not paid, you are borrowing money, and the costs are extremely high. Consider the following examples: Assume: You are interested in buying a laptop that costs $1,000. The credit card company charges 20 percent interest. The following examples are the only contact you have with the credit card company. Example 1. You use your credit card to buy a laptop for $1,000. Your credit card company bills you for $1,000. You have cash available to pay thebill. You pay the full amount by check. Your credit card balance is zero. No interest was charged. You had the advantage to use cash until the credit card Beware Of The Credit Card balance was due. You bought a computer that cost $1,000 and paid only $1,000 for it. Example 2. You use yourcredit card to buy a laptop for $1,000. Your credit card company bills you for $1,000. You do not have the cash available to pay thebill. Each month, you pay only the minimum amount. e After 92 months, or 7.67 years, your credit card balance becomeszero. During that period of time, you paid a total of $1,611.84 for a computer that cost only $1,000. Of that amount, $611.84 was the interest paid on the $1,000 loan. You bought a computer that cost $1,000 and ended up paying a total of $1,611.84. By borrowing from the credit card company, you paid 61 percent more money just to get that $1,000 laptop, at a time when you felt you absolutely had to haveit. Example3. You really want a laptop, which costs $1,000. You don’t presently have the money, so you decide to save $200 for five months. During that time, the money you saved earned money. By waiting five months, your computer model was now on sale for $800. The advantage you gained gave you thesatisfaction of being in control. You used your credit card to buy a $1,000 laptop for $800. Your credit card company bills you for $800. You have cash available and pay the full amount by check. Your credit card balance is zero. To learn more about your ownfinancial habits and beliefs, ask yourself the following important questions. Then, why not start living yourlife in such a way that finances become a meansto achieve your goals instead of a burden holding you back from enjoying a betterlife? Spending Money e e Whatare your personal beliefs about spending more money than you have? Do youseriously believe you can afford fo buy everything you want? Do youbelieve thatit is wise to spend more money than you have? Do you improve yourfinancial position by spending more money? (an you actually afford to spend more money than you have? Borrowing Money Do you convince yourself fo borrow money, just to enjoy instantgratification? Whyeverconsider going into debt? Whynotbe absolutely determined not to spend more money than you have? Why not make a firm decision to never borrow any money except to buy your own home? When you borrow money, aren't you digging yourself a deep hole? Notonly are you spending yourfuture income, but you are also forced to pay the large interest amountovertime. How long do you thinkit would take to work your way outof that hole? Whydig a holein thefirst place? Not having enough money absolutely limits your wants. It forces you to prioritize what youreally want. e If you find that you are out of money, why not wake up and be absolutely determined to not let that happen again? Saving Money e Whynot save and accumulate money nowso that you can have what you want, when you want if? If you don’t have the money to buy something, why not save now so that youcanbuyif later? e How can you ever get ahead if you don’t save? @ No interest was charged. You had to wait five months and save, but you bought a computer that originally cost $1,000 and paid only $800 for it on sale. These examples illustrate how credit cards can result in positive and negative consequences. Before using your credit card, ask yourself how this purchase affects your ability to maintain financial control. Using your credit card to purchase items only when you have cash to pay the bill will allow you to enjoy a better life without the burden of credit card debt. As founder and Chairman of the Board of American Century Investments, a multidisciplined, global asset management firm, Stowers is recognized as one of the country’s top money managers. Stowers is the author of “Yes, You Can... Achieve Finan- cial Independence” and “The Best is Yet to Be,” his autobiog- raphy. For more information on improving your financial position and enjoying a better life, visit yesyoucanonline.info.
