If you’re like me, you never got a formal education in personal financial management. You just learned by doing, made mistakes, and paid for them with penalties and fees. It’s unfortunate that many of us use financial tools like checking accounts, credit cards, and loans without really understanding how they work, and how things can go bad.
Checking accounts are fairly easy to get, and easy to use, until you mess up. If you pay with a check and don’t have the funds to cover the check, you get hit with a penalty. Those penalties can add up quickly, beyond the amount of the check.
Credit cards can be even easier to get. But if you pay with a card, the merchant gets their money, but the credit card company expects you to pay them on time each month. They set a minimum payment to mostly cover the interest on the balance of the account (basically a loan to you). If you pay just the minimum, you will ultimately pay much more in interest than the original purchase. If you pay late, or don’t pay at all, the credit card company reports it to one of the three credit agencies (Experian, Trans Union, or Equifax). Then you have a mark against you for seven years. Eventually, if you don’t pay the money you owe, the account goes to a collection agency, and they will harass you with letters and phone calls until you pay. This may take years, but it will haunt you. Late or non-payments show up on your credit history, and lower your credit score. When you apply to a bank for a mortgage loan, marks against you and a low score can prevent you from getting a loan.
Fortunately, these things can be remedied. If you owe money, pay it, or better yet don’t borrow what you can’t pay back (pretty basic, I know). If for some reason you have unforeseen life challenges that prevent you from paying on time or at all, you can contact the agency you borrowed from to discuss options. They may be willing to work with you. The worst thing is to ignore it, as it just won’t go away. If you do have past debts that are unpaid, start by creating a household budget to analyze your expenses, and see if you have any extra money to start paying back your debts. You can contact debtors to come up with a realistic payment plan. Beware that once you make contact, they will pursue you.
Today, many schools are encouraging financial education through programs like the Young Americans Center for Financial Education which provides fun, interactive learning for all ages. Adults can get schooled as well, with free online programs like Foolproof Real Consumer Education. The Mountain River Credit Union in Salida provides free access to this program. The Chaffee Housing Trust has computers available in our office where you can work online, or you can do it on your own computer. The UAACOG provides financial education and counseling in Salida and Canon City. Contact us at 719-207-4348.