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Are the Rising Costs of Banking Getting You Down?

October 5, 2011 By Kathryn Leave a Comment

There is a lot of talk lately of banks raising fees on checking accounts that have been “free” in the past by charging customers for the use of their debit cards. In the past few years, Americans have finally begun to save more money, borrow less, and pay down their debt, thereby reducing their risk. Yeah, America! The downside is that banks need to make money too. This recent article talks about how some banks are changing their fee structure. So, how can to avoid getting caught up in the rising costs of banking? Here are a few tips.

  • After you pay off your debt you should increase your savings to have a healthy emergency fund of 3-6 months of expenses. Accounts that have a balance of over $15,000, in some cases will have these new bank fees waived.
  • Consider closing your credit card and only using debit cards for items that will not accept cash. What? Not accept cash?!? This may mean shopping locally instead of on the Internet, which will also help your local economy.
  • Consider moving your business to a small community bank or credit union. These institutions usually have lower fees and more member benefits.

It is time to take back control and not let a company, especially a bank run your life. You are their customer. They should be treating you with respect and customer service not controling your financial future. Be empowered, take control and get pointed in the right direction to financial freedom.

Tim and Kathryn Gerken are Financial Coaches in Newcastle, WA. They serve their community in the greater Seattle area.

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Is it Safe?

June 18, 2011 By Kathryn 2 Comments

There is a lot of mis-information flying around regarding the “safety” of the debit card. Newspaper articles and other online reports tell us that we must keep our high interest credit cards because they are safer than a debit card for fraud protection. This is laughable.

You should always be aware of the potential of identity theft. Acquiring low-cost identity theft protection is a fabulous idea. Those two things aside, debit cards that cary the Visa or MasterCard logo are just as safe to use as a credit card is. When used as a credit card to make a purchase, they have the same fraud protection backing that a Visa or MasterCard credit card would.

To enact this protection, when swiping your debit card at the point of sale, you must select credit. If, instead, you input your PIN number, you are not protected. Using your pin number at a point-of-sale purchase acts just like a transaction at an ATM. It does not carry the same protection as the Visa or MasterCard logo imply and you run the risk that someone will skim your pin information and use that to drain your bank account.

We don’t have a credit card. Our debit card has done everything that our credit card used to do, except allow us to go into debt. Find out if you have a daily withdrawal limit on your debit card for any large purchases or a daily ATM withdrawal amount. As with all other aspects of your financial life, you need to stay informed. In doing so, you will continue down the path less traveled towards true financial freedom.

Kathryn Gerken is a financial coach in Newcastle, WA along with her husband Tim. Their website is www.GerkenFinancialCoaching.com

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You Make a Great Income, but…

January 14, 2011 By Kathryn Leave a Comment

Recently, I have been hearing many stories about people who make a “really good” income, but are still in major debt. In these stories, the income has sometimes been well over $100,000 with the debt often exceeding that amount. You may ask why these “successful people” have so much debt and are in such a pickle. The answer in most cases is that these folks did not have any idea where their money was going. They did not have a plan, and they did not start paying attention until it was too late.

Every day people in our society we are marketed to between three and four thousand times via TV, radio and the internet. Each one of these impressions is meant to accomplish one thing: to get your money. Often, when a person earns well above the national average in income they do not feel the need to live on a budget. They assume that they have the money to make discretionary purchases or they feel they deserve to make a major purchase which they make with credit because they can “afford” the payments. This accumulated debt adds a lot of risk to their economic life. Were that person to be laid off from their job or have some other emergency, their ability to continue to afford the payment might not be a reality any more. Missing that payment causes interest rates to go up, not to mention opening the door to future financial fallout.

There is an easy way to avoid this potential pitfall. Make a zero based budget that spends every dollar of your monthly income on paper before the month begins and then … stick to it! Give each dollar a name and tell it where it is going. By building a 3 to 6 month emergency fund and living well below your income, you will have the flexibility to save for those purchases you “deserve”. Delay your need for immediate gratification and make more mature money decisions that will not put you and your family at risk of bankruptcy.

When you pay attention to your finances, make mature decisions and sacrifice to get ahead you will start winning in the battle against the dangerous message bombarded by our society, “As long as it feels good then, do it.” You can do better! True financial freedom and debt-free living feels great! Do it!

Kathryn Gerken is a financial coach in Newcastle, WA along with her husband Tim. Their website is www.GerkenFinancialCoaching.com

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Don’t break even, get mad!

November 2, 2010 By Kathryn Leave a Comment

The first credit card began to circulate in New York in 1949, its name was Diner’s Club. It was issued mainly for travel and entertainment uses as a convenience over carrying cash.  By 1966, the general purpose credit card was born and, according to MasterCard[1], a national credit card system was formed when a group of credit-issuing banks joined together and created the InterBank Card Association. This launched a huge marketing engine that has become so advanced that we no longer even know we are being marketed to.  The average American today is so emotionally attached to their credit card that they look at you like you have two heads if you suggest that it might not be a necessary part of life. We, as Americans are caught in our own cycle of marketing buy- in and we do not know how to get off the wheel.

It Takes Getting Mad

In The Money Answer Book, author Dave Ramsey gives this advice to those who would like to break the cycle. “Getting out of debt takes getting mad. It takes a willingness to live off rice and beans for a while. It takes getting a second or third job and selling stuff. If you really want to get out of debt, this is what you will do. It’s called ‘getting mad’.”[2] I would also add that it takes wanting something better for your children and grandchildren enough to break this cycle in your family tree.

Our children watch how we handle money and the method of payments that we use. Small children think that if you “use the card” the purchase is free. Older children and teens see the card as a way to get instant gratification for an item that they want. They do not stop to think about how the card will get paid. As adults, we have some of those same habits that we grew up with, only now the responsibility to pay lays with us. It is too easy to pull out plastic for impulse purchases without thinking through the consequences to your budget. When you realize that you are unable to pay off the balance at the end of the month, it is uncomfortable, but it is that way of life that you have always known and that your parents knew as well.

Breaking the Cycle

How do you break this cycle of spending and debt? You get mad! We all make mistakes in our life and the media is right there to reinforce our mistakes with another card. Do not let them win. Your family today and your grandchildren tomorrow will continue to follow those patterns and live with stressful financial burdens. Build an emergency fund, stop using your cards and cut them up! Get an extra job, if need be, to get intense about getting out of debt and living on less than you make - using cash, just like your grandparents did before the onset of this marketing giant was born. Our grandparents did not have an easier life than we do today. They had expenses and families to raise, but they purchased with cash or they did not purchase at all. Break the debt cycle in your family and change your children’s financial futures today!

Kathryn Gerken is a financial coach in Newcastle, WA along with her husband Tim. Their website is www.GerkenFinancialCoaching.com

[2] Ramsey, Dave. The Money Answer Book, Thomas Nelson, 2004 p. 27

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Pain is weakness leaving your finances

October 25, 2010 By Kathryn Leave a Comment

Most American citizens have some kind of plastic card in their wallets - a major credit card, chain credit card or a debit card. Did you know that you will spend less money if you use cash instead of that plastic? It is said that your brain actually registers pain when paying cash for goods. It is easier to pull out your plastic and impulse purchase, however if you physically hand cash to a salesperson it makes you stop to think “do I really want to part with this cash for this good or service?”

I have been trying to explain this concept to a friend for a few years now. Recently, she went to a cash system for her groceries, household goods, gas and personal “blow” fund. She remarked to me that this method is very visual. She can see how much money she has until the end of the month and re-thinks each item that she purchases. She was amazed at the different feel of spending cash as opposed to plastic. She told me that she lent her mother $5 and she is intending to get that money back into her purse for the month. She knows exactly where her cash is going.

Of course this method requires that you are living on a budget because the amount of money you can spend each month is limited to the amount of cash you allocate. If you are making purchases without a plan and buying whether you have the money to pay or not you will quickly be spending yourself into debt and overdrawn accounts.

It has also been shown that you spend more when you use plastic, even a debit card because of this pain factor. This is why in recent years, fast-food chains have added debit and credit cards to their payment options. It makes it much easier to “super-size” your purchase and spend more than is good for you both physically and financially.

Our family has been using a no credit card life style for the past few years. Our FICO score is zero, since we have not borrowed any money. We are out of debt, but still maintain a monthly budget and spend every dollar on paper before the month begins. If we have a bump in the budget road, we shuffle funds within the budget from another category to cover the change. We use cash for groceries, eating out, household goods, miscellaneous spending and personal “play” money. Everything else goes on the debit card. Does this take time, discipline and practice? You bet, but over the past few years we have funded tropical vacations, the kids’ camp and other activities, house renovations and even Christmas, which is on December 25th this year, all in cash.

We found that the short-tem pain associated with getting rid of our credit cards as truly lead to long term gain.

Kathryn Gerken is a financial coach in Newcastle, WA along with her husband Tim. Their website is www.GerkenFinancialCoaching.com

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