If you listened to the Prime Minister, Gordon Brown yesterday as I write, you will have heard how the world economy is the reason the UK are experiencing the economic crisis at the moment. I happen to think the problem lies nearer to home and it has been disguised by the increased uses of the humble flexible "friend" the credit card.
The reason this challenge is being shown is to hi-light the need to re-think everything you think you know about your own financial education. When I first wrote Control Freak a Recipe for Debt Freedom I thought I'd invented the wheel! I was completely elated, enlightened, enriched with this new knowledge, it literally changed my life and I hope you can see how it can change yours.
As I further developed my own financial education I realised that my formula was the most basic level of money management and I realised pretty quickly that I had a long way to go before I could consider myself Financially Astute. Imagine how difficult you are making things for yourself if you do not even take the time and trouble to look at your finances in detail every week and ask yourself how you can improve them?
Whilst I agree with the Prime Minister, Gordon Brown that there are economic influences outside of our own control, such as rising oil prices, I would argue that the entire last ten years or so in the UK has been a FALSE economic "boom" because of the amount of easy credit available. The rise and rise of not only the number of credit cards people have per person, but the amounts of money they can borrow on them on top of a mortgage, a consolidation loan, a car loan and an overdraft is staggering. You even hear stories every week on the Property Ladder programmes of people funding tens of thousands of pounds they haven't budgeted for to finish their property developing project on credit cards.
If there was one thing I would urge you to do today it would be to cut up your credit cards ( keep one for emergencies, hotels, online protection and travelling ) but for too long those plastic things that make you feel a little richer are actually making you poorer by the day. The first thing you should realise if you do not clear the balance on your credit cards every month is you are absolutely hopeless with them, GIVE THEM UP, get in good financial shape and move on.
When I get to a cash till and the Sales Assistant offers me a discount if I sign up for their store card, I simply say " No thanks I gave them up years ago!" It always raises a smile, and it reminds me how far I have come.
At a seminar recently I had the whole room nodding about credit cards except for one lady at the back of the room who was shaking her head from side to side. I met up with her at lunch and asked why she was not nodding like the rest of the guests, and she simply said " If I do not have a credit card, I can't go shopping anymore!"
This subject is going to be returned to many, many times on this challenge, all a credit card actually does is to give you a pay rise for a while.
For this part of the Pay Off Your Mortgage Challenge we are suggesting switching one or two, preferably all of your cards to a 0% 12-month credit card deal, this will save you around £237 a year on a £1500 balance on a high rate card.
For the purpose of the challenge we would estimate most people have at least two cards they could switch saving just over £ 9.00 per week.
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