Tag: credit

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credit

Big Spender Alert: Credit Card Rewards for High-End Users

If you’re wealthy enough to own an American Express Platinum or Centurion card, you’ve already been enjoying the more than 40 perks of being a cardholder. But your deal just got even better. American Express recently announced three new perks for high-end customers who also happen to be frequent travelers. The first two perks are for both Platinum and Centurion cardholders, and the last is solely for Platinum cardholders. Although both of these cards come with fairly substantial annual fees, these new programs can definitely benefit the right cardholder.

The first new benefit is Priority Pass Select, which involves access to more than 600 lounges in airports all over the world, a perk that typically costs $399 for unlimited access. In the past, cardmembers could already use American Airlines, Delta and US Airways’ lounges. But with this new program, cardmembers will have additional lounges available to them. Also, cardmembers have the option of signing up for a Priority Pass card, which benefits them with complimentary snacks, refreshments and Internet access in more than 300 cities.

The second new perk added for cardholders is Global Entry credit, which offers expedited clearance for pre-approved, low-risk travelers. Before enjoying these credit card rewards, cardmembers must complete an in-depth background check and interview conducted by Customs and Border Protection. They also have to pay a $100 application fee, which covers them for five years. But if cardmembers pay the fee with their Platinum card, they can request reimbursement. Once completing the screening with CBP, cardmembers can save considerable time when traveling – up to 70 percent of the typical wait time involved in international traveling.

That’s not all: American Express has also become one of a few credit card companies to offer cards with no currency exchange fees for its Platinum cardholders. Cardmembers can make international purchases while saving the 2.7% foreign transaction surcharge.

American Express isn’t the only one courting its high-end users. Chase is partnering with British Airways to offer bonus miles for new enrollees to the British Airways Visa Signature Card who apply by May 6. This is the equivalent of 2 free round-trip flights. Cardholders receive 50,000 miles after their first purchase and another 50,000 miles if they spend $2,500 within the first three months. It’s tempting to take advantage of these kinds of offers, and these programs can certainly benefit a frequent international traveler.

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credit

5 Steps To Debt Freedom

Experiencing personal debt can feel like falling into quicksand: no matter how hard you try to climb out, you just keep sinking further down.  In a society where more is better, it can be difficult to watch your peers enjoying the finer things in life while the collections agencies are knocking at your door.

If you’re in debt, you’ve probably made yourself a lot of big promises.  “I will conquer this,” you’ve said, and three days later you were completely overwhelmed.  This may be what’s tripping you up.  The world’s problems are not fixed overnight, just like weight isn’t lost by taking one magic pill.  Be honest with yourself.  Arm yourself with knowledge both about your own behaviors and the many options available to help you reach debt freedom.

5 Steps To Debt Freedom

Step 1 – Understand Your Situation

First, know what you’re dealing with.  Take a pad of paper with you wherever you go for one week and write down everything you spend.  Then rate each purchase on a scale of “must have” to “want to have” to “don’t need.”

If you rely more on debit cards, sign up for a money-tracking site like mint.com to have your spending automatically tracked and categorized.  This will also help you evaluate how you pay for your purchases.

If you have more than one credit card, cut the extra ones up.  Once you’ve evaluated your spending, cut out your “don’t needs,” and think critically about your “want to haves”.  Is there any way you can make them cheaper?  For instance, if you “want to have” coffee, can you make it at home six days out of seven?  Can you use generic rather than brand products?

You don’t need to cut out all of your creature comforts, but by identifying them as such, you can determine just how important they are to you, and instead use them as occasional rewards rather than as givens.

Once you’ve made these decisions, add up all that you’ve cut out.  If you’ve saved, say, $300 per month, this is money you will be able to apply in later steps to paying off your debts.

Step 2 – Organize Your Debt

Next, open up a spreadsheet and start making columns.  Make one column for your fixed expenses-costs that do not change, like mortgage or rent, health insurance, and so on.  Make another column for your variable payments-things like gas, gifts, and restaurants.  Make one more for your debts, and another for your income.

In your debt column, highlight “good” vs. “bad” debt; that is, student loans with lower interest rates vs. credit cards higher rates.  Then add it all up. This is a great way to visualize just where your money is flowing and what you can do about it.

Step 3 – Make a Spending Plan

Now, make a spending plan.  Start by paying your fixed expenses and minimum balances.  Then pay any variable expenses you must to avoid going into more debt.  These are the things you just have to do to keep your head above water.

Take a look at that $300 you’re now saving every month by cutting out extras.  It’s not just a lump of money; it can do things!  Put that money away in a savings or money market account with as high an interest rate as you can find, and keep doing so until you reach the $1,000 mark.  This is your emergency fund; it will help you stay out of more debt should something unexpected come up.

Step 4 – Eliminate Debt Strategically

Choose a target.  Which debt do you want to tackle first?  Start on one with a higher interest rate.  19% might not seem like a lot more than 15%, but it adds up quickly.  If you have many debts with high rates, call the companies and try to renegotiate for a lower one.  You’d be surprised what the term, “I’m a loyal customer” can do!

Step 5  – Increase Your Income

If you’re finding after taking these steps that you still do not have anything left to pay off more than the minimum balances on one debt at a time, then it may be time to consider increasing your income.  This could be by searching for a higher-paying job, but if this is too intimidating, stick to that small steps mentality.

Can you make that extra $300 per month by babysitting? How about working in a coffee shop, or doing some freelance work on the side?

Summary

To summarize, that’s: one credit card (or none!), cut out extras, pay off minimums, focus on one high-interest debt, increase income. You may also want to try old fashioned approaches, like paying only in cash, separating all of your expenses into envelopes labeled, “fixed,” “variable,” and “debt” and not spending anything after those envelopes are empty.  You can also put limits on your cards, or make automatic alerts on an online payment tracker.

Remember, this is about understanding your own mentality.  What can you do to make money more concrete to you?

Feeling overwhelmed?  Here’s a little secret: we all have debt-especially those people you see driving fancy cars.  The theme in any “get out of debt” plan should be moderation.  If you find yourself sliding, try to figure out why rather than beating yourself up.  Did you have a tough week and really need an extra purchase on iTunes?  This shouldn’t be a big deal now that you know your finances intimately.  Just look at your upcoming week and see how you can make up for it.

If you ever start really feeling deprived, make a wish-list and write down things you desire as they come up.  Once you’ve addressed your debt, look back at that list and see what things you can now afford.  You may find that time has satiated those desires more than the purchase itself.

While paying off debt is never fun, remember that you’re paying for your future.  Get the past settled so you can move on and start doing what you’d really like to with that hard-earned money!

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credit

Banks to Reduce Credit Card Interest Rates

The credit card industry has been doing back flips to reach the good graces of the credit consumer. And they have made a step in the right direction.

Since the passage of the Credit CARD Act in 2009, banks have been losing money, and began to charge consumers for services that used to be free. Bank of America began charging credit card users a $59 annual fee, and Chase implemented a $5 ATM fee. Well, these same banks and others, under the guidance of the CARD Act are starting to do something that actually helps pack our wallets – welcome, a decrease in credit interest rates.

Last year, millions of consumers experienced credit card interest hikes, before the passage of the Credit CARD Act due to bank scandals, an unruly economy, and pending reforms. According to Federal Reserve, the average interest rate increased almost a full percent, from 13.57 percent in 2008 to 14.31 in 2009.  Credit-Land.com estimates that between 91 million and 121 million credit cards experienced rate hikes during the recession.

A section of the Credit CARD Act requires credit card companies to review any rate hikes that happened since January 2009. The law explains that if a state’s interest rate was increased due to high credit risk or market conditions, those issues had to be reconsidered every six months. The law then demands that the rates be cut when credit risk declines and market conditions improve.

By law, once the rate has been lowered it can not be raised again, according to Ken Clayton, general counsel for card policy at the American Bankers Association. The law requires banks to warn customers about rate hikes 45 days in advance and limits increases on new purchases.

But any decrease in payment can mean big savings for the consumer. According to www.Credit-Land.com the average balance on a credit card at the end of 2010 was $4,965. At a 19 percent interest rate it would take 13 years, 9 months to pay it off. Interest would be $3,894. If interest rates were cut to even 16 percent it would only take 12 years, 5 months to pay off. Interest would drop to $2,906.

Millions will feel the reprieve. Bank of America said that it will reduce the interest rate on about 1 million of its cards, according to the Associated Press. JP Morgan Chase & Co. , Citigroup Inc., Capital One Financial Corp., Discover Financial Services and American Express haven’t revealed the number of cards affected, but all confirmed that some customers will receive lower rates. If all banks changed rates on 2% of their cards like Bank of America is doing, then over 10.5 million card will be affected.

Consumers will not only see the changes in their pockets, they will also see it on their bank statements. Consumers who saw hikes in interest rates during the recession due to poor payment histories and did not reconcile their debts, will not be eligible for the reducing interest rates.

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banking

Why Certificate of Deposits Are One of the Safest Places to Put Your Money

Volatile markets, falling home prices and an unpredictable economy are all reasons for one to be concerned about the safety of one’s money. If you are seeking to keep your assets protected, then I suggest using Certificates of Deposit, or CDs, as one of the safest places to keep your money. There are several reasons for this:

  • Insurance – If you open a CD with a FDIC insured bank your money is protected up to $250,000, up from the previous limit of $100,000. Just as with a savings or checking account if that bank should fail the federal government will make sure that all customers will get back their money up to that limit. There are no such guarantees with stocks and bonds.
  • Guaranteed Return – A Certificate of Deposit often comes with a fixed interest rate that is higher than a regular savings account and that can outperform stocks and mutual funds in a down market. There is no guessing at what your return will be at the end of you CD’s term. It can be calculated and you can plan on having that return on your investment.
  • No Broker Fees – Setting up a CD is just like setting up any other bank account and does not carry with it any origination or maintenance fees. Unlike a brokerage account there is no need to pay someone to keep looking at your assets, changing their allocation and charging you for the privilege.
  • Low Risk – Real estate has climbed and fallen over the past ten years. During that same time the stock market has been flat. Even bonds do not have the return rates they used to. Investing in any of those three over the past decade could very well have resulted, and for many did result, in a significant monetary loss. By contrast a CD would have continued to earn money during that same time period. The low risk of CDs can make it a wise portfolio investment during uncertain times.
  • No Monitoring – Once opened the CD takes care of itself. There is no need to fret or to pore over you monthly statement. Just sit back, wait until the end of the account’s term and enjoy the return.

Some may assume that uncertain times are when risks should be taken. But some investors are looking not for risk but safety. If so then a certificate of deposit is one of the safest places to keep your money.

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credit

Bank of America Implementing New Credit Card Annual Fee

With the CARD Act enforcing credit card regulation, banks have begun fishing for money in a sea of consumer pockets. Bank of America, one of the most popular banks in the United States will be adding a $59 annual fee to consumers’ credit cards. The new changes are set to take place April 11, and set to affect 5% of credit card holders, or approximately 2 million out of 40 million customers.

According to a Bank of America representative, consumers that would not be able to qualify for the card if they were to apply for the credit card today will be the ones being charged in April. The Credit Card Accountability Act, also known as the CARD Act has put some pressure on banks to limit the reasons they change interest rates and fees. In the Act, it states that credit card issuers cannot increase interest rates on an existing credit card unless the card holder is 60 or more days late in making a payment. The act also dictates when credit card issuers can make these moves. By providing consumers with cards that the banks know consumers can’t afford, it effectively allows banks to collect more money from consumers through higher interest rates. If a consumer is using a credit card they can’t afford, they are more likely to be late on payments, and late payments are profitable for banks.

The restrictions laid out in the CARD Act are proving costly to banks, as they must think of new ways to pocket consumer money. It is estimated that the loss of revenues due to the CARD Act will total $25 billion annually for banks across the nation. In order to circumvent this, banks are charging consumers for previously free services, such as new fees for calling customer service representatives and transaction fees. Financial experts agree that the $59 annual fee is driven to increase bank profit. Implementing the annual fee will generate approximately $118 million for Bank of America.

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credit

Why Debt Settlement May NOT Be The Best for You

You’re overwhelmed with credit cards.   You make your minimum monthly payments.  Your balances never decrease.  And you feel trapped in a hole with no end in sight.  Sound familiar?  You’re not alone.  Many people in this situation are looking for the fastest way out.  As they surf the web to look for debt relief options, they will most likely stumble across on an advertisement that says something along the lines of, “Reduce your debt by over 50%, cut your monthly payments in half!”  On the surface, it sounds almost too good to be true.  You decide to call a debt settlement company, and can’t turn down an offer to pay your creditors a fraction of what you actually owe!

Here’s the catch.  Most debt settlement companies fail to tell you in detail all the pitfalls that are associated with the program.  Don’t get me wrong, a debt settlement program is great for those who are suited for it.  I’ve personally seen some creditors negotiate a settlement for as low as .20 on the dollar!  Before you enroll in this type of program, it’s crucial to know what the downsides are.

What you need to know about a Debt Collection Settlement

  1. Collection Calls – Most debt settlement companies will tell you that they can stop creditor calls just by sending them a cease and desist letter.  This is half true.  According to the FDCPA (Fair Debt Collection Practices Act), a collection company must cease communication with the consumer if they sent a cease and desist letter.  However, this only applies to 3rd party collection agencies.  No one can stop the original creditor from calling you.
  2. Increase in balances- I’ve heard this statement way too often.  A debt settlement company will tell you that they will negotiate on the balance at the time of your enrollment.  However, many consumers fail to realize that once you stop making payments, late fees and penalties will be assessed.  If you enroll an account that has a $2,000 balance, don’t be surprised if you see a balance as high as $3,000 at the time of settlement.
  3. Possible Legal Action- This is perhaps the scariest thing a consumer can go through.  A sheriff delivers a court summons to their front door step, and now the creditor wants to sue the consumer.  If a creditor wins a judgment, the court can order wages to be garnished or a lien attached to any personal property.
  4. Taxed on $$ Forgiven- Let’s say you owe $10,000 on a credit card.  Your debt settlement servicer successfully negotiates a settlement at 35%.  The amount saved ($6,500) may be taxable income.  Any debt forgiven above $600 must be reported to the IRS.
  5. Credit Score– I thought I’d throw in the obvious as well.  Enrolling in a debt settlement program will literally destroy your credit.  You will have delinquencies on your credit as well as potential collection accounts.

After reading this, you might think that no one in their right mind should enroll in a debt settlement program.  That’s not necessarily the case.  Potential candidates for this program will have these characteristics:

  1. Judgment Proof- Just because you are judgment proof doesn’t mean a creditor can’t sue you.  Being judgment proof simply means that a creditor cannot garnish your wages due to federal or state guideline and you have no assets.
  2. Insolvency- People who are insolvent (owing more than what they are worth) are good clients for debt settlement because they won’t be liable for the amount forgiven.
  3. Access to Emergency Funds- In case a creditor is willing to give a substantial discount on a card, you should have some kind of emergency funds (friends, relatives, family, etc) who will be able to help you out.
  4. Ability to complete program under 36 months- Anyone who cannot complete a program within 36 months in a debt settlement plan probably shouldn’t enroll.  If it takes you more than 36 months, bankruptcy is probably the best option.

To summarize, each debt relief option has its pros & cons.  It’s important to fully understand the ramifications of each program before you commit yourself.  Debt settlement is a wonderful option for those who need to get out of debt, but only a certain percentage of people are good candidates for this type of program.

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credit

A Guide for How to Handle Student Loan Debt for Recent Graduates

If you’re one of the many recent college graduates having trouble securing work right now, don’t be too alarmed because it’s happening to a lot of people right now. One thing you definitely don’t want to do though is go into default on your student loans. Many companies will check your credit score during the hiring process, and if you haven’t taken care of your student loan debt it could cost you the job. The good news is that there are plenty of resources available to help you manage your student loan debt and prevent you from going into default.

That’s not to say it’s a completely rosy picture though, many of us are more than just a little in debt from college, and dealing with your loans can add tons of stress to an already stressful situation. If you choose to ignore it though, you will be facing much more stress in the future. American Education Services (AES), who handles most of the Federal student loan programs doesn’t have a reputation for being the easiest people to deal with. It is important that you follow up on everything with them, and don’t take someone’s word for granted over the phone. It’s not official until you have it in writing.

Finally, this guide is written with the repayment of Federal student loans in mind. If you have a private loan you will have less options available to you, and the information here will be of no use.

Student Loan Debt Relief Guide

Repayment Options

  • Postpone Repayment by Forbearance and/or Deferment
  • Adjust your repayment options
  • Cancel the loan if you have a qualifying job
  • Discharge the loan in bankruptcy

Forbearance and Deferment Options

Although forbearance and deferment are closely related in that they give you more time to find work (Up to 3 years), deferment is preferred because the federal government will continue to pay off your interest. There are a number of qualifying factors for each of these options. Although a forbearance is easier to obtain than a deferment, and is sometimes still available even after a loan has gone into default, the interest on your loans will continue to accrue. Please note that deferments will not pay off the interest on unsubsidized loans.

Deferment Qualifying Factors

  • At least half-time enrollment in a qualifying school – This does not necessarily mean that re-enrolling into school is a good idea just to postpone repaying your student loans. Having clear minded and realistic career goals is much better.
  • Graduate or Post–Graduate Fellowship Program – If you are lucky enough to land yourself a fellowship then you will be qualified to defer your student loans.
  • Physical Disability or Rehabilitation – If you have a disability that is currently preventing you from working, or are enrolled in either a drug or alcohol rehabilitation program you qualify for a deferment.
  • Unemployed – If you are unemployed and seeking full time employment you qualify for a deferment.
  • Economic Hardship/Underemployed – You will have to fill out a Statement of Financial Status in order to prove your eligibility and receive a deferment.
  • Family Leave – If you are pregnant you qualify for a deferment.
  • Public Service – For military personnel, if you are called to active duty to serve in a hostile zone while attending school you qualify for a deferment on your student loans. Other types of public service that qualify for deferment are The Peace Corps, Public Health Workers, National Oceanic and Atmospheric Administration Workers, and Volunteers for Tax Exempt Organizations like the U.S. Department of Education.

Adjust Your Student Loan Repayment Schedule

There are several different plans available to make your transition into your professional life easier. If you’ve run out of forbearance and deferment options, then these programs can make repayment of your student loans more affordable.

  • Graduated Repayment Plan – Starts your payment off small and increases them incrementally, typically every 2 years.
  • Extended Repayment Plan – If you have more than $30,000 in student loan debt you may qualify for a long term plan of up to 25 years.
  • Income Based Repayment Plan – If you have unstable work conditions, these types of repayment plans adjust the amount you owe each month based on how much income you are earning.

Canceling Your Student Loan

Certain professions are able to cancel either part or all of their student debt. If you are in a qualifying profession this is certainly a great opportunity.

Professions That Qualify for Student Loan Cancellation

  • Teachers
  • Peace Corp
  • Active Duty Military Serving in Hostile Zones
  • Nurse or Medical Technician
  • Law Enforcement and Corrections Officers
  • Head Start Employees
  • Child or Family Services Agents
  • Professional Providers of Early Intervention Services

Bankruptcy

Although it is certainly not the best option available, if you do find yourself in this unfortunate circumstance you may be able to discharge your student debt. It is not easy however, and you will have to show that you are likely to continue having financial difficulties if the debt is not removed and prove that you have tried to repay the loan in good faith.

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credit

Declining Credit Card Delinquencies Suggest Financial Crisis Recovery

Financial experts and economists have been suggesting that the U.S. economy is in recovery, and now the proof may be in the numbers. American consumers have been making more timely payments to their credit card issuers. In February, the number of delinquent and charged off credit loans and accounts were down. In addition to making their payments on time, consumers are still spending less, which in turn means that credit card companies are earning less money. Have consumers finally learned to live within their means, or is this a temporary trend?

Financial recovery in the works?

Credit Card Spending

The February data for credit card and other consuming spending is not out yet. You can, however, make some observations from January data. For example, credit card balances declined by $4.25 billion in January. This was a 4% decrease when comparing it to the $2.02 increase in spending that took place in December of 2010. Most financial experts attribute the December increase to holiday shopping, however this was the first month that spending had increased since the summer of 2008.

Expectations for spending in February are an increase in consumer spending, especially in the retail sector. The increase is relatively small, only about 1%. When it comes to spending on other types of purchases, though, spending is up in a big way and expected to continue that way.

Types of Purchases

The types of spending consumers seem to be gravitating to is on big-ticket items such as vehicles, boats and vacations. Hybrid vehicle purchases on the Toyota Prius increased by 69.9% in February. Overall, auto sales are up 17%. As consumers search for ways to cut back on gas consumption and to save money at the pump in the process, an increase in purchases of hybrid and good gas mileage vehicles is expected to continue.

Whether or not the U.S. economy is in full recovery mode is yet to be seem. In the meantime, there are some positive signs that this is the case. A decrease in delinquent credit card payments and charge off accounts and an increase in consumer spending are all symptoms that suggest the financial crisis is coming to an end.

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credit

What Are My Debt Relief Options?

With the decline of the current economy, many people find themselves struggling to stay afloat during these tough times. Individuals find that they have mountains of debt with no end in sight, and they have debt collectors calling them at all hours of the day. Medical bills, student loans, the loss of a job, or just overspending could contribute to the financial crisis. Things just keep getting worse and worse. It can be devastating for a person to face. However, financial debt can be conquered. Here are some realistic choices to consider to help with debt relief:

What Are My Debt Relief Options?

Debt Negotiation

Sometimes people have so much credit card debt that they cannot even make the minimum payments. The credit cards are maxed out and the situation seems completely out of control. In this case, debt negotiation is one option to seriously consider. Individuals negotiate with their creditors to obtain lower payments, lower interest rates, and reduced fees, making it more manageable for them. Sometimes the negotiator can reduce the debt up to 50%. Most of the time, before creditors will negotiate, consumers will need to be more than 3 months delinquent on their accounts. However, while consumers are in debt negotiation, it can lower their credit score.

Debt Consolidation

With debt consolidation, a person usually takes out one loan to pay for many others. People can usually secure a fixed loan at a lower interest rate. Consumers will take debts from credit cards, department store cards, and other secured debt and combine them so they are easier to manage. Sometimes companies charge a lot of money for this service so consumers need to make sure that this is cost effective.

Credit Counseling

Sometimes people are not organized enough to form a budget and stick to it. Therefore, they might consider a credit counseling company to help them get out of debt. Credit counselors can direct individuals on how to manage their money and create a budget so that they can become debt free. They will inquire as to what might be the source of the problem so they can develop an understanding on how to proceed. The counselor will show consumers how to acquire a personalized solution to solve their financial burdens.

Debt Management Plan

Another debt solution is a debt management plan. A debt management plan is not for everyone, but one’s credit counselor could suggest that they sign up for a debt management plan. A person gives the credit counseling company money each month in which they pay the unsecured debt. Individuals come up with a schedule that works best for them, and a creditor might agree to lower interest rates or some fees. A plan will entail that all monthly payments are paid on time, and while in the plan, consumers may be required not to apply for more credit.

Do It Yourself Approach

A person might decide to forgo all of the counselors and negotiators and just do it by themselves. They want to take control of the situation and budget their finances on their own. They can negotiate with creditors and pay off the highest interest rates first, or they might get another job to make some extra money. They also get the scissors and cut up the credit cards. In order to do this, a person needs to have a lot of self-discipline and control and stick with it until their financial burdens are lifted.

Chapter 7 Bankruptcy

This should be the last resort for a person to take. With bankruptcy, a consumer obtains an order from a court that says that they are not required to pay their debts. It is a very long and burdensome process. Bankruptcy will greatly affect a person’s credit, as it stays on the report for 10 years, and it can make it hard to buy a home, car, get insurance, and possibly even get a job. People need to consider this option long and hard because much of the time, the long-term consequences are not worth it and it is public record for anyone to view. However, if the financial situation is completely hopeless, it can allow a person to start over and rebuild their life.

Do Nothing

Sometimes people do not want to believe that their debt is out of control. They are in denial and so the creditors keep calling. This option will result in more stress and anxiety and possibly even a lawsuit. It is advisable not to disregard the financial burdens because they will continue to pile up and only get worse.

Consumers who find themselves falling more and more behind on their debts need to take charge of the situation and find the help that they need. Consumers need to research the options and find the best solution for them so that they will become free from debt.

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saving money

The Psychology of Delayed Gratification: How To Save Even When You Don’t Want To

Everyone has a vague idea in the back of their head that they should be saving money. If it was that easy, though, everyone would be doing it. But they’re not! Most people struggle to save money, for many reasons, and if you have this problem, know that you’re not the only one. The marketing industry keeps up-to-date with psychological research and they are using this research to make it as easy as possible for you to spend your money!

The Psychology of Impulse Control and Delayed Gratification

As babies, we have no impulse control – that is, when we want something, we want it more than anything else and we want it NOW. That’s normal and natural and as we grow into toddlers, children, teenagers and eventually adults, so grows our capacity for impulse control. Delayed gratification – that is, not getting what you want now but instead getting it later – is something which we become capable of as we learn to control our impulses and understand concepts such as not having one marshmallow now, so that you can have two marshmallows in 10 minutes (a study that has been done with young children) – or the adult equivalent, not spending that hundred now, so that you can save it and earn interest into the thousands over time.

Some primal impulses/instincts are retained through to adulthood

The thing is, even though we learn how to control our impulses as we grow, we still naturally retain many emotional triggers as adults – everyone likes sweet things, for instance (nutrient-seeking from berries and honey); another two examples of universal human desires are fun (natural highs from feel-good hormones) and sex (procreation and the survival of the species). These are primal instincts which have been serving our survival and cooperation since humanity evolved.

Understanding how marketing techniques trick our brains into wanting products

Marketing techniques tap into our primal desires and link those desires with products that we’re being tempted to buy. For instance, a beautiful young woman is draped over the shiny convertible, or a handsome young man is shown walking on the beach with a bottle of coke. All the people at the fast food chain are dancing around and having fun to great music. Before we know it, our impulse control is short-circuited and our brains tell us that we need this thing to feel as happy as the people in the ad. With the advent of credit cards with sky-high spending limits, we no longer even need to have the money in our possession to purchase a product, so we are enabled to make the purchase fast while we are in that vulnerable state of having had primal instincts aroused. We can just swipe the plastic and have the gratification of the purchase instantly – and this, in turn, also reinforces the high that we get from acquiring new things, thus consolidating the habit.

Small amounts add up to big savings

One of the reasons we have trouble saving money is because we imagine we need to save large sums of money for a long, long time to actually get anywhere. This puts us off the initial idea of saving because it seems like such a far-off return that we can’t even imagine the end reward. If you can’t envision the reward you’re going to get for doing something difficult, then it makes it pretty hard to get up the motivation and to stick to the cause throughout. And it’s true that if you save money over a relatively long period of time (in contrast to simply spending your income as soon as you have it) you can make a very handsome return: at average stock market rates it is possible to double a sum of money over approximately 8 years for very little effort.

Your vision of the future helps you stick to your saving today

It only takes a small purchase here and a small purchase there to add up: if you buy a coffee every day you’re at work, you can easily spend $1000 in a year just on coffee. Saved instead, that money could have bought a handsome coffee machine and a fancy insulated mug – which would mean you would never had to buy a coffee for the commute again. Armed with your vision of owning a shiny new coffee machine, your rational mind stands a much better chance against your emotional impulse next time you drive past a tempting coffee chop.

Avoid involving your willpower

Of course, it’s not easy to say no to the impulse to buy. Here are some ideas: cancel catalogues, put up a “no junk mail” sign, avoid the mall, refuse to go “social shopping” (try a walk or a BBQ instead), unsubscribe to online store email mailings, never go grocery shopping (or any type of shopping) while hungry, participate in pre-tax government contributions and employer paycheck deduction schemes, create a less-accessible bank account and have a percentage of your weekly pay placed automatically into it, and set up automatic voluntary contributions to your superannuation fund. Freeze your credit cards in an ice block in the freezer, and take cash out your bank account to buy essentials. In short, avoid confrontations with your willpower – your emotional impulses will usually win. Expenditures somehow magically stretch to fill the budget allowed – so simply limit your budget by reducing the amount of money available in your everyday account.

Delayed gratification gets easier

In many ways, delayed gratification is a skill that is learedt and honed over the years. A steady saver who is 5 years older than you may have not been such a good saver 5 years ago. It is never to late to start and you will find that as you go on, it does get easier. Seeing a lump sum grow in the bank and watching it begin earning you a decent amount of interest is exciting and rewarding – your money is making money for you! You will find it increasingly easy to forgo that coffee, or the new computer or car as you know that you can make your money grow by holding on to it.

You will never regret saving money

Also, by saving money, you get the self-satisfaction of knowing that you are stronger than the marketing campaigns which bombard us; you gain confidence and self-esteem knowing that you can achieve something that frankly, many others never manage. You will also reduce your carbon footprint by consuming less stuff, you’ll enjoy a less cluttered home, and finally, you’ll enjoy the security and reduced stress that having savings will bring to your life.