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March One Paycheck at a Time newsletter
In this edition:

Just get me from point A to point B
Savings Tip from a One Paycheck at a Time Reader
Credit Card Usage among Young Adults
The Power of $1
First-hand Results from Program Users

Just get me from point A to point B
The other day while I was filling my gas tank ($2.13 per gallon for the cheap stuff! ARGH!!), a man at the cash register was paying for coolant for his vehicle. He clearly was troubled by the $11.24 ticket item as he became flustered and asked his friend to loan him the money. I could relate to not wanting to use a credit card and never having enough cash to cover car care costs. As I exited the gas station, the same man and his friend were adding coolant to what appeared to be a newer model Mercedes-Benz. I don’t claim to know how much car payments for such a vehicle might be, but whatever they are, I just can’t ever imagine making those payments if it meant having to borrow any more money.
When I was in debt, I would reach a point where I felt I had a little breathing space and inevitably my car would need a muffler, brakes, alternator or other servicing. These types of surprises were never welcomed. In fact, I remember a few occasions when I reached for my credit card to pay these bills. Fortunately, my mechanic at the time had mercy on me. I was able to arrange a payment plan with him, but still, it was money I hadn’t planned on spending. I quickly learned that I had better start setting money aside every paycheck for car maintenance. I wasn’t in a position to buy a new car anytime soon, and I couldn’t continue on this path.

I ended up having to take on some part-time work to make ends meet. I was exhausted from my full-time job, but had these dreaded car problems that were costing me money. I met a lawyer through a colleague who needed to generate more business and asked if I could create a direct mail campaign for him. I was to write the letter, stuff the envelopes, mail them, etc. It was a short-term gig, which was just what I needed!

After a month of licking envelopes, I finished paying off the muffler and began setting aside $20 per paycheck for car maintenance. It was a slow process. I didn’t think I was ever going to get ahead at this pace. Working part-time, even on a temporary basis, was sometimes necessary for me to make ends meet. If I didn’t work the extra odd-jobs, I imagine it would have taken me another two or three years to get out of debt.

A few times a month I listen to Car Talk, a funny talk radio program. People call in with their not-so-funny car problems. The callers do their best to mimic the sounds their cars are making while the hosts, two brothers who are mechanics, analyze what could be going on. Based on the return calls, their advice seems to be working! You can go to their website to listen to their program, www.CarTalk.com, or find out what radio station in your city airs their program. On their website, you are able to submit your questions to their message boards, too! You’ll probably see a few postings from me as well. They’ve created a great service for people like me who don’t care to truly understand cars, but want to save on mechanic-diagnostic costs and plan for upcoming expenses.

I sold the old Ford Tempo, and have a different car now. I will probably try to hold onto it for another five years, but I wish it got better gas mileage. All I really need these days is something that gets me from point A to point B.

Savings Tip from a One Paycheck at a Time Reader
Sell items that still have value, but you are not using. Put ads in your employers’ newsletters for free instead of in the newspaper.

Submit a tip for inclusion in the upcoming April Newsletter: https://www.onepaycheckatatime.com/logged_tips.asp#form

Credit Card Usage among Young Adults
In a recent report from Demos-USA entitled “Generation Broke, The Growth of Debt Among Young Americans,� by Tama Draut and Javier Silva, the following statistics regarding credit card use in the United States are frightening:
Average credit card debt among indebted young adults increased by 55% between 1992-2001, to $4,088 (based on the value of the dollar in 2001).
Young Americans now have the second highest rate of bankruptcy, just after those aged 25 to 44. The rate among 25-34 year olds increased between 1991 and 2001, indicating that Gen-Xers were more likely to file bankruptcy as young adults than were young Boomers at the same age.
Among the youngest adult household with incomes below $50,000 (2/3 of younger households [18-24 years old]), nearly one in seven with credit card debt is in debt hardship.
The average indebted young adult spends nearly 25 cents of every dollar of income on debt payments.
Of all college seniors, 96% have credit cards.
Nearly one out of every five 18- to 24-year-olds reported being late or missing payments on a loan within the last year.
The Power of $1
Let’s assume you have one credit card bill with a balance of $5,000 with a 15% interest rate. If you don’t charge any additional money to this account and pay the assumed $100 minimum amount due each month, it will take approximately 79 months (6.6 years!) to pay off this loan. At the end of this loan you will have paid $2895 in interest charges to use that original $5,000.

Paying just an extra $10 each month ($110 payment) will reduce the term of the loan to by an entire year and save you $459 in interest charges.

Payment Amount Cumulative Interest Months Required
$100 $2895 79 months
$101 $2841 78 months
$102 $2789 77 months
$103 $2739 76 months
$104 $2691 75 months
$105 $2644 73 months
$106 $2600 72 months
$107 $2557 71 months
$108 $2515 70 months
$109 $2475 69 months
$110 $2436 68 months

If you can pay an additional $25 each month ($125 payment), the loan will then be paid off in 2 years less time, and the interest charges would be reduced to $1,974 ($921 less charges in interest).

Payment Amount Cumulative Interest Months Required
$125 $1974 56 months

We are all accustomed to making payments every month, approximately every 30 days. Since credit card companies don’t charge additional payment processing fees, why not send partial payments each month? As in the example above, if all you can afford is to pay $4 additional each month, split this payment in half and make two payments of $52.00.

How does a partial payment impact the process of paying down your debt?
Every credit card product is different which is why we often never truly can get a full understanding of them. Interest rates, Annual fees, Grace periods, etc., for credit card products vary greatly, which is why it’s so important to shop around for the lowest rate, the lowest annual fees, and the longest grace periods.

For example, some credit cards have a 22-day grace period while others have a 30-day grace period. This grace period is very important if you carry a balance month to month. The 15% interest, from the above example, is calculated on the previous month balance. If the bank is assessing a 15% fee every grace period, which, in many cases, is less than a full 30 days, interest charges can add up quickly.

By splitting minimum payments into partial payments (bi-monthly or every week), the outstanding balance on the interest charged to the previous cycle will be that much less.

First-hand Results from Program Users:
"I purchased the One Paycheck at a Time book a year ago, and I've been using the program ever since. I’m happy to tell you that there has definitely been an improvement in my cash flow. I've had some major changes in my life, recently, which have included being on temporary disability for 6 weeks. My finances have been hit as a result of this, but no where near as hard as they would have been if I had not been on this system. I didn't have to cut down and make deals with any of my creditors for making lower payments either."
Theresa, California [1 year on the program]

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If you are struggling to set up a system to get your finances under control, One Paycheck at a Time eTools may be the perfect solution. By entering your income and expenses into the program, eTools calculates a payment schedule, including suggested dollar amounts. This spending plan works to help you pay off your debt as quickly and painlessly as possible. The program is flexible, allowing you to work out many different spending strategies to see what is best for you. This is a savvy tool that even allows you to plan for emergencies.

The greatest benefit of this program is peace of mind.

Melissa Tosetti
Budget Savvy Magazine

Click here to visit One Paycheck at a time.

[missnic]

Great post! I will definitely have to check out that site!

[yougotdeals.com]

It's not to shabby at all. :mrgreen:

Shows how credit cards are