Ready for Reality?

Christmas is over and you will be returning to work soon; or already back at work. Have you checked you bank balances yet? Or worse, have you peeped at your credit card balances? If you are like 43% of Americans; you will likely be carrying that balance into the new year. So what do you need to do?

Step 1: Pay off the Balance

Credit card debt is, in my opinion, is the worst kind of debt. You have purchased a consumable item, that you will be paying exorbitant interest on for the foreseeable future. You must get a handle on this and bring your balance to $0. Cut something out, work a side hustle. Do what you need to do to get that balance down.

Step 2: Adopt the accrual method

You need to make next year less financially painful. I suggest adopting my method, which I stole from GAAP (Generally Accepted Accounting Principles). The accrual method of accounting recognizes that costs should not necessarily be incurred all at once (This is more like amortization, but for the CPAs reading this; it’s kind of like a hybrid approach that I developed). Sometimes, in the accounting world, it is necessary to spread the costs out. If you know you are going to have large purchases in November and December; why wait to make them until November or December? I used to save all year in a dedicated Christmas account, but I found that for me, this was not particularly useful as something would always come up. instead, i started progressively making purchases all year long. This year, I bought the first present for my son in February and I had all immediate and extended family members completed by October.

Step 3: Make the Credit Card your ally

Start paying your credit card off every month. Credit cards, when paid in full, can become powerful allies. The American Express card that I have comes loaded with extended warranties, purchase protection, car insurance on rentals, and most importantly, Reward Redemption. Reward Redemption is the most powerful part of credit cards. In my last trip to Disney; I spent nothing of my own money; the credit card points were my only spending money. That is how quickly these rewards can be accumulated when you are disciplined and pay your card off each month; you can get a whole vacation on the house.

Are you ready to make a change? The above topics are just a road map to get you to your financial destination; they are not an end point.

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