Credit Cards are Scary

Wow.

Credit cards are scary. 

I got my bill for one of my credit cards today. The bill is 2,035. I called to verify this because I always fully pay my credit cards at the end of every billing cycle.

It turns out that my request to waive my annual membership fee of 1200 through my bonus points was not reflected in time. Because I didn't pay the whole bill & left 1200 remaining, I was penalized a whopping 800 finance charge!

So hypothetically, if I left even 10 unpaid, I would be assessed the 3.5% finance charge on the WHOLE BALANCE of the period, NOT the remaining balance. In this case, I would still have been assessed 800 if I left so much as 10 unpaid.

Of course I called the credit card company to straighten the whole thing up and they cancelled the hefty finance charge and waived the annual membership fee.

I write about this so that all other credit card users may be aware of this fluke with the system and stay on top of it.

Lesson: Pay off all your remaining balance at each billing period. If it's too much, be quick and transfer the balance to another credit card company because it'll save you money and heartaches. Or better yet, never use your credit card to pay for something you cannot afford to pay in full at the end of the billing cycle.

Get an Insurance Plan

I got my first insurance plan when I was single and 23 years old. It was a simple life insurance coverage for P1,000,000. 

'Coverage' is euphemism for what will my loved ones are bound to get if I croak at any minute.

Do I have a morbid paranoid personality?

Maybe ;) But, I did it primarily because I'm a fierce hoarder. I want to save some money & make sure I get my money's worth.

A lot of people are turned off by life insurance because their concept is that they will never enjoy their own money.

But I am enjoying certain benefits now thanks to it's dividend components. But I'm leaving all of that to accumulate. I just loan from my policy once in a while to augment cash flow problems. At 10% interest-pay-when-able-pro-rated terms, it's much better than pawnshops, credit cards or financing.

You cannot be short-sighted when you invest in an insurance policy. It takes about 15 years for it to overtake what you can normally earn from traditional financial instruments such as time deposits and mutual funds.

I see it as a money-making business. 

Like any business, the first four years are the tricky ones. Your expenses far outweigh what you're earning. You start earning on the 5th, get your stride around the 10th year and it really starts earning around the 15th year & if you take good care of it, you can just keep reaping and reaping the benefits.  

For P207,000 total 15 year premiums, I will be getting at least P1,000,000 upon reaching 60 years old on top of my P1M coverage. And after, the dividends will still keep piling on.

Imagine your business running clockwork like this, without you having to do anything, without you having to quit your job and all you have to do is set aside a portion of your current income on the side. 

It's not the major source of income (unless you make it as such), but it's like a rental property that will earn you passive income.

There's also the psychological benefits. 

When someone tries to borrow from me, I can honestly say I have nothing to lend, thus making sure I keep something for the future.

When I'm placed in a potentially dangerous situation, I'm a lot calmer when I think, my loved ones will be okay whatever happens to me. The effect is, I have more focus and courage to do what I need to do.

And all these benefits, I get for P1150 a month, and I only have to keep paying this for another 5 years.

1st Rule in Accumulating Personal Wealth

Do not feel guily keeping your personal savings a secret

from your family, friends and even your spouse.

This is important because people can't ask you for money that they're not aware you have.

Oftentimes, people know how to save but they can't hold on to their money because some loved-one or even just a desperate acquaintance urgently needs the money.  And most of the time we feel guilty for having some money and they don't.

But think about it, why should you feel guilty? You've worked hard to have some savings so that one day, if you're in a desperate situation, you won't have to ask someone else for money. 

Some people will say, that's the reason they loan the money. It's a kind of security so that when they need it the most people would respond in turn. That works too. But how sure are you that they'll return the favor? The way they take care of their money, by the time you'll need their help, they won't have anything to lend you.  And it's a vicious cycle. For everyone's lives to improve, this cycle must stop.

But let's make it easier. It's easier to avoid the whole drama if people do not know you have a surplus saved away.  They won't come to you for money in the first place and you don't have to worry about turning them down.