Pay Bills, Start Saving

The holidays are finally over, but most of us are about to be haunted by "the ghost of Christmas past" in the form of credit card bills.

David Bach, author of the "Finish Rich Workbook," gave some advice on The Saturday Early Show on how best to pay off those big bills and start saving again for 2003.

Bach says holiday bills are huge problem for some people. The average family spent $500 to $1,000 this holiday season. For many families, that means a 20 percent increase to their credit card debt load in just 30 days.

To help pay the bills, Bach suggests negotiating. He says everything is negotiable. The current lowest average interest rate on credit cards is 4.5 to 6.5 percent. There's a 95 percent chance yours is double that. You can fix that in just five minutes by calling your credit card company and asking them to lower it.

Bach says when you call your current credit card company, the first question you should ask is, "What is my rate?" Then say, "Great, but I just got an application from your competitor offering me 4 percent." Try to persuade them to give you the same rate. But, don't have this conversation with first person who answers the phone. Ask for the supervisor. If he or she doesn't help you, go to that person's supervisor. Today there is so much competition, they won't want to lose your business.

Next, don't pay the bill's minimum balance. If you do, it will take you 20 to 25 years to pay off your card. Bach says always to pay more. You should at least double or triple the minimum as a rule. Try to pay much as you can.

If you are unable to pay the minimum, then you have a problem. You should talk to a consumer credit card counseling service and think about canceling your card.

The next step is to "crunch the numbers." Bach suggest that you call your credit card company and tell them you want to pay off your debt within a certain time frame (6 months or a year) and ask them how much each payment needs to be to accomplish this. They have to give you this information. The credit card company will calculate the numbers for you. There are also some web sites that will do this for free.

Finally, Bach recommends that you never use individual store credit cards. The average rates for retail cards are 20 to 26 percent. The retail card interest rate is four times greater then the average credit card rate. That $50 you think you're saving when you buy that sweater will actually cost you $200. So, pay off your retail cards and cancel them.

Saving Better in the New Year

First, Bach says to throw out your budget because it won't work. He says budgets are too complicated. Nobody sticks to them and people usually give them up by February.

Then you should start thinking about paying yourself first. Put money into your savings. Don't live to pay bills. Increase your wealth.

Finally, you should find your "latte factor." Bach says a common complaint is that people don't have enough money to put into their savings because of bills. He says save the amount of money you normally spend each day on your coffee or latte. You will see an increase in your bank account. A simple savings of $5 to $10 a day can make a major difference down the line. You can actually become rich by saving $5 to $10 dollars a day, if you take that money and put it into the right savings plan.