Avoid the Pitfalls

Most pitfalls are disguised and many are unnecessary, if you know the rules.

Prepare your safety net!   

                                                                                                                                                                                                          

Pitfall by definition is a hidden or unsuspected danger or difficulty.  A stumbling block or drawback. You might encounter a pitfall if you drive your car and never change the oil, or  when you try to use a brand new computer program that is unexpectedly precise. It can even be a habit you don't want to address, like the pitfalls of snacking in front of the television every night.  Our busy, hectic lives can sometime lead us to make hasty or bad decisions, from the type of foods we eat to forgetting to pay a bill on time.   

When we apply the pitfall definition to your financial portfolio, how many pitfalls have you fallen victim to? Here are just a few examples of common financial pitfalls:   

     1. Not having a budget

     2. Having no financial strategy

     3. No will

     4. No life insurance

     5. Allowing taxes, expenses and fees to rob your portfolio

     6. Maxing out credit cards

     7. Borrowing from savings accounts

     6. Procrastination!

Most financial pitfalls are foreseeable and can be avoided IF you devise a plan.  That's where our signature Life Audit comes in.  Once we have a comprehensive overview of your current financial status, we can help you take a closer look at your financial accounts and determine first of all if they are making you money and secondly if those accounts are charging you fees you either didn't know about or simply don't understand.  Plus, most importantly, your Heritage TRA custom designed financial plan will help keep you on track to completing your goals and offset many of these financial pitfalls.   

 

Did you know that one of the biggest pitfalls is BAD Credit?

Credit affects every aspect of your life and you may not even know it. Your credit has a profound affect on your ability to make purchases and even save money. It could be keeping you from getting that big job and you not even know it.  Plus your credit score says more than you think. Are you listening?  Our goal is to inform and educate you to help you make better choices. 

What is a FICO® Score?

A FICO® Score is a three-digit number calculated from the credit information on your credit report. Lenders use these scores to estimate your credit risk – how likely you are to pay your credit obligations as agreed. A FICO® Score assesses the information in your credit report at a particular point in time. It helps lenders evaluate your credit risk reliably, objectively, and quickly. And it helps you obtain credit based on your actual borrowing and repayment history, filtering out extraneous details such as race or religion.

FICO® Scores are the most widely used credit scores:

Experts estimate that when lenders get credit scores from credit bureaus, more than 90 percent of the time they ask for FICO® Scores.

FICO® Scores are used today in more than 20 countries on five continents as well as by the top 50 U.S. financial institutions, the 25 largest U.S. credit card issuers and the 25 largest U.S. auto lenders.

Your FICO® Score is one of many factors lenders consider when they make key credit decisions. Such decisions include whether to approve your application, what credit terms to offer you and whether to increase your credit limit once your credit account is established. Other factors lenders might use in making credit decisions include: information you provided on your credit application, how much you earn, your regular expenses, and how you manage your credit, checking and savings accounts.

Credit Card Statistics 

Credit card debt represents a big portion of our total national debt. It is also a major source of financial hardship for many Americans who struggle to pay their bills each month.

  • Total U.S. revolving debt as of May, 2011: $798.3 billion
    • 98% of that is made up of consumer credit card debt
  • Average credit card debt per household: $6600
    • However, if you count only households that use credit cards: $15,799
  • The average consumer has an average of 3.5 credit cards
    • This number has been greatly reduced during the economic downturn; prior to 2008, Americans averaged 5.5 credit cards
  • There are 178.6 million credit cardholders in the U.S.
  • The average age to get a first credit card is now 20.8 years
  • Average credit card APR (interest rate) as of November, 2011: 12.36%

So what does this mean? Let’s say you have exactly the average credit card debt of $6600. You manage to get a balance transfer to a new credit card without any balance transfer fees at 12% interest – just below the national APR average right now. If you paid only the minimum payment which will start around $132, it will take you over 23 years to pay back your debt and you will pay $6144.87 in interest. At this rate, America is going to be in debt for a long time!

General Consumer Debt Statistics

Credit card debt is only part of the picture when it comes to consumer debt in America. Total consumer debt in the U.S. is at $2.43 trillion as of May, 2011. Not surprisingly, this has caused serious economic fallout for many Americans.

  • Total bankruptcy filings reached 1.4 million in 2009
  • Total consumer debt per household now averages $16,046 (down from $35,245 prior to the economic downturn in 2008)
    • Total debt per household with credit cards still averages $54,000 (also down from $93,850 in 2008)
  • Young Americans (age 25-34) have the second highest rate of bankruptcy after Americans 35-44, meaning the younger you are the tougher your financial situation seems to be
  • The average college student graduates with $20,000 of debt
  • Nearly 1 in 5 Americans ages 18-24 qualify themselves as being in “debt hardship”
  • 26% of Americans admit to not paying their bills on time
  • Prior to the economic downturn, 14.7% of American families held debt exceeding 40% of their household income

Given the tough state of the economy Americans are now struggling to get their finances back on track. Particularly for families with credit card debt this can be a difficult journey. In many cases, you could take the next 20-30 years to pay back what you owe right now alone – and that’s if you don’t buy anything else on credit!

 

 

Sources: scoreinfo.org, consolidatedcredit.org