Chance Gates' Blog

By Dan Serra

RISMEDIA, September 28, 2010–(MCT)–Life is full of emotions, but fear can hurt the most. It is strong enough to change a whole community and way of life. And when it comes to money, it’s no different. Fear controls the pocketbook, and too often it gets in the way of financial success.

There are three ways fear can grip an investor.

First, there is the fear of losing money. Many people choose safe investments because they don’t want to lose money by taking a risk with stocks. Taking this approach can eliminate that fear, but in the long term it hurts the pocketbook. The safer those investments, the lower the investment gain. Then when inflation goes up 3 percent, the safe investment earning 2 percent does not provide enough to pay the higher costs, and the money runs out sooner.

Second, there is the fear of not gaining money. This type of fear is more common in younger investors. They worry what they are doing will not provide enough profit to improve their lifestyle. Younger investors often like to compare investment returns. They fear they will not gain enough to outdo a friend and therefore they would not have enough to spend on luxuries. These investors want to make a lot of money by being greedy, investing in high-risk stocks or in a new business. This fear can end up hurting if the extra risk leads to big losses. Investments that have the best potential for gain often carry the biggest potential for loss.

Third, there is the fear of running out of money. Everyone has this fear, either by spending too much or outliving a retirement stash. An income may vanish, or an investment may fail. This fear can result in damaging frugality. This fear can be overcome by saving as much as possible while young to build an adequate retirement fund and sticking to a budget to cut out unneeded expenses.

Properly diversifying those savings can improve the chances of increasing that pot. This also can eliminate the fear of losing money, because enough was saved to afford a loss, and the fear of not gaining money, because the longer it is invested properly, the more gain is possible.

Take a look at your fears and determine what action — saving more, diversifying risk or sticking to a budget — you need to take to make money less fearful.

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog. Please feel free to use my back door to the MLS and search the houses available in the Reno/Sparks and most of Northwest Nevada neighborhoods. I can be reached by email @ chance at ballard-company.com or  http://www.myspace.com/chancegates .  You can also follow me at http://www.twitter.com/chancegates

RISMEDIA, May 17, 2010–(MCT)–If you’re in debt as we head into summer, it’s time to start thinking about snowflakes.

The idea of “snowflaking” is to make small debt payments, often on a credit card balance, more than once a month.

These snowflakes become part of your debt snowball, a technique by which you pay the minimum monthly payments on all debts except one that you focus on. As you pay off that debt, apply all the money you were paying on it to your next debt, which pays off that one faster, and so on. It creates a snowball effect, as if a snowball was gaining speed and rolling downhill.

The benefit of using snowflakes and a snowball is becoming debt-free quicker and paying far less interest. You’ll even be motivated and help your credit score. This is one time when “throwing money at the problem” works.

Here’s how to use snowflakes, also called micropayments, and why those in debt should consider it:

—Call your card company: Most allow you to make many payments in a month for free. Call the phone number on the back of the card and ask about your issuer’s policy. “The majority of the major issuers will allow you to do this,” said Bill Hardekopf, founder of credit card comparison site LowCards.com.

—Use regular snowflakes: Set up additional automatic payments to your credit card company. For example, if you get paychecks weekly or biweekly, make payment on the payday. One painless strategy is to pay half your usual amount biweekly. This amounts to 13 monthly payments in a year, instead of 12. “And all of that extra payment goes to pay off the balance. It doesn’t go to interest,” Hardekopf said. “So, your balance will come down faster.”

—Use irregular snowflakes: Hardcore snowflakers make many small payments in a month. If you skip a $9.46 lunch out at work, ship that amount to your credit card company. Work two hours of overtime or get a tax refund? Slap it against the debt. The point is to immediately make a payment with extra money or cash you saved.

Besides erasing debt quicker, snowflaking makes sense for other reasons.

—You’ll save on interest: Most credit card companies assess interest daily on unpaid balances. So paying early saves weeks of interest charges. Month after month, savings add up. And the quicker you get rid of the debt, the less interest you pay.

—You’ll gain motivation: Making more payments forces you to think about your debts more often and gives you a more frequent thrill from seeing balances dwindle. If you want more motivation, focus the extra payments on debts smallest to largest. That allows you to pay off a few quickly, which can be a big emotional boost, like losing a few pounds in the first week of a diet. If you’re more the mathematical type, pay off debts from highest interest rate to lowest.

“If you feel, ‘Hey, I’m cutting into this,’ you can gain momentum psychologically,” Hardekopf said. “You might think, ‘I’ll skip going to dinner this week and take that 20 bucks and tack it onto my credit card payment.’ “

—You’ll improve your credit score: For those who carry balances, paying off debt quicker improves their credit score quicker. You might avoid late payments because you’re more focused on the debt. Multiple payments can also help those who don’t carry balances. Your credit scores are partly calculated on how much of your available credit you’re using at any time. If you use $4,500 of a $5,000 available limit, you’re penalized by credit-scoring models regardless of whether you pay the balance at month’s end. By making multiple payments, you reduce your credit-usage ratio, which accounts for 30 percent of your FICO score.

As a Reno/Sparks Nevada real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  I can be reached by email chance@ballard-company.com

As credit card companies continue to hike rates and continually change the terms and conditions of your account, it is crucial for credit card users to make the most of their credit. The following tips will help you get on track to using your credit card wisely.

1. Pay on time. Paying your credit card account on time helps you avoid late fees as well as penalty interest rates applied to your account, and helps you maintain a good credit record. A good credit record leads to a higher credit score, which helps you qualify for lower interest rates. Know the date your payment is due. If your bill is due at an inconvenient time of the month- for example, if it’s due on the 10th and you get paid on the 15th- contact your credit card company to see if they will change your billing cycle to fit your cash flow.

2. Stay below your credit limit. If you go over your credit limit on your card, your card issuer could charge a fee and increase your interest rate to a higher penalty rate. To avoid this, keep a record of your spending or check your balance online. Also, be aware that some merchants (for example, hotel and car rental companies) put a “hold” on your credit card based on their estimate of the amount you will charge. This can reduce your available credit until the final charge is processed.

3. Avoid unnecessary fees. Credit card companies not only charge late payment and over-the-limit fees, but also fees for cash advances, transferring balances, and having a payment returned. Some companies charge a fee when you pay your bill by phone. Pay attention to the transactions that trigger these fees. If you need a cash advance, withdraw enough so that you don’t have to take a second cash advance and incur a second fee later in the month. Read your credit card agreement to learn more about the fees that your credit card company charges.

4. Pay more than the minimum payment. If you can’t pay your balance in full each month, try to pay as much of the total as you can. Over time, you’ll pay less in interest charges- money that you will be able to spend on other things, and you’ll pay off your balance sooner.

5. Watch for changes in the terms of your account. Credit card companies can change the terms and conditions of your account. They will send you advance notices about changes in fees, interest rates, billing, and other features. By reading these “change in terms” notices, you can decide whether you want to change the way you use the card. For example, if cash advance fees increase, you may decide to use a different card for cash advances. If you have a card with a variable rate or if you have an introductory rate that is ending, be aware that credit card companies are not required to send you a notice about raising your interest rate. Interest rates are listed on your monthly bill. Read your bill carefully and take note of any changes.

For more information, visit www.federalreserve.gov.