Happy New Year 2010!

Happy New Year!!!

I pray that this will be a blessed and prosperous new year for you. One of the best ways you can increase your net worth this year is to reduce your debt because you have a guaranteed return on your money.

Here are other suggestions to help you have a prosperous new year. Sit down with your spouse, or by yourself if you do not have a spouse, and plan your spending for the year. You can estimate what your income will be based on last year's income. Likewise you can estimate what your variable expenses will be like food, entertainment, etc. You already know what your fixed expenses are like rent, mortgage, insurance, etc. Taking the time to write out a spending plan for the year is an excellent way to start the new year off right!

This plan is not set in stone but can be modified throughout the year. Then revisit the plan and see how you are doing every pay period. The idea here is to better manage how you are spending the resources God has given you, not restrict you from spending.

The next idea is to set aside $1000 for emergencies. If you already have $1000 set aside increase your savings to one-month's worth of living expenses. If you already have that then increase it further to six-month's worth of living expenses. You want to get out of the dependency on credit cards because the rules are changing and they will end up costing everybody more money. I will have more to say about this later.

Use cash more and credit cards less, even if you pay off your credit card at the end of the month. Credit needs to be the exception in our lives and not the rule. People who use creditcards, on average, will spend about 30% more than they would if they paid in cash. It is a psychological thing having to pry that cold hard cash out ouf your fingers to make your purchase.

My last idea is to keep track of your progress. I mentioned looking at your spending plan every pay period. You may think that is too often. However, when you look at your spending plan every pay period it is easy to see early when you are getting off track and make adjustments early rather than later and have to make huge sacrifices to keep from going further into debt. There is also the benefit of seeing your debt go down pay period after pay period.

Now for the new information on credit cards. Credit card companies now have to follow stricter guidelines in how they bill, collect and calculate payments for credit cards. For many consumers this is great news because the rules make it more fairfor the average consumer.

Among the changes are an end to arbitrary times for when a bill is considered late. Some banks would say that your bill was late if not received by 9:00am the day the bill was due. That is now changed to 5:00pm. Also, your interest rate cannot go up because you were late in paying your electric bill. Your credit history with your creditor will determine the interest rate thatyou will pay. I think that these changes are good and more fair to the borrower

On the flip side, costs for everybody will be going up, even if you pay off your credit card in full and on time every month, like I do. Annual fees will be increasing. Additionally, many people use a given credit card because they get some benefit from using it; some percentage back or frequent flier miles, as an example. Those benefits will be decreasing. So it won't "pay" to use your credit card as much anymore.

If you want to read a good short article on the new rules then I would encourage you to check out this short article on the new credit card rules. Some of the changes have already taken effect; other take effect on February 1 2010. There is even a link to read the bill that the President signed so you read it for yourself.

There is no doubt that having a credit card is useful. But I don't see the need for more than one. And with the change in rules, it seems to me that using cash more and credit less will be saving me more money in the long run.

May you enjoy a blessed and prosperous 2010 and may you be aneven better steward of the resources that God has entrusted to you so that we will be found faithful when He returns (Mt 24:45-46).

Bob