If you are the super sensible type of college grad who spent all of your time at school working hard to stay afloat, you might well have come out with your diploma as well as a nice pot of savings – or at least not too much debt.

If on the other hand you didn’t (like 99% of your peers, myself included) then congrats, you have just arrived at that point in life where you need to repair and rebuild and start your journey to financial stability.

Step 1: What Are Your Key Goals?

When you have lots of debt and little income you have 2 overriding goals; so these are what we will focus on:

1. To pay off your debts, so that you can begin saving.
2. To repair your credit rating, ready for when you need it.

So before we get started, your first task is to write down all your debts – this won’t be fun, but you need to know your starting point. So make a list of who you owe, how much and what it’s costing you (ie, interest rate).

Step 2: Paying It Off

You need to prioritise which debts are paid off first. In general store cards, then credit cards and overdrafts, loans etc come last.

Paying off the high cost debt will save you the most money, money which can then be used to pay off more debt. As soon as a card is paid off you can destroy it and cancel the account.

High Risk Strategy: If you can take a relatively low interest loan to pay off all of your cards this might be a good idea, it will save you money and give you a much more manageable repayment. Be careful though, if you end up taking out new cards you will just get further into debt. Only take this option if you are sure you can trust yourself and if the numbers add up. [Editor's Note: Definitely high risk and not generally suggested -- be careful!]

Use Your Credit Cards

Long term credit card debt is bad for your credit rating, so pay these off first. Once you have paid them off though, using your cards occasionally will help to improve your credit rating. Again, this is risky and should only be done if you trust yourself to pay off your balance in full every month.

If you can’t use a card responsibly just get rid of it, slip ups will cost you, and you can’t afford that right now.

Be Vigilant

For the time being you are going to be constantly close to your limit, because all of your income will be working hard to pay off debt. It is important to watch your finances closely and be careful to avoid dipping into your overdraft (or at least going past the limit). Set aside 10 minutes every other day to review your progress so that you always know where you are.

Step 3: Getting Them Paid Off

If you have multiple debts, keep an eye on the balances. Sometimes it is worth paying off a smaller debt as soon as you can, even if it is not a high interest one. This isn’t optimal financially, but being able to cross off a debt is great for your motivation.

In the long term you just need discipline; it can be very hard, but as long as you can see progress being made you should be able to stay motivated and keep at it.

This article about becoming financially smart was brought to you by Ricky from CurrencyConverter.co.uk, home of the currency converter widget!

I’ve been an employee of a local credit union for about two years now, and I’ve heard stories from a lot of people who have savings, checking accounts, loans or investment accounts at other financial institutions. I myself used to bank with one of the big banks and ever since I switched my accounts over to the credit union, I have been much happier with the handling of my finances. Most people think enough about their finances to be aware of how much they make and how much they spend. Unfortunately I don’t believe many people really ever think about choosing financial institutions that will benefit them the most, but rather which one is closest to their house, or which one their parents, siblings or spouse do business with. I think this quote from Sandra Masterson’s Banking Blog is a fantastic way of stating the need to think when choosing ones financial institution(s).

Choosing a [financial institution] is not a decision that should be made on a whim. A [financial institution] is supposed to save you [or help you earn] money, but without the proper amount of research it is possible to end up with one that costs you money.

I could not have said it better myself. I truly believe that time and effort should be put into researching local (or maybe even not local) institutions and the different products, rates and fees that they offer and charge. Here’s a quick list of the features I look for when choosing a bank (or credit union) as an example.

• Convenience (this doesn’t necessarily mean closest)
• Product Offerings (how competitive are their rates? what fees are associated with their deposit accounts?)

I have a large majority of all my financial accounts at two financial institutions: Desert Schools Federal Credit Union and USAA. Why did I choose to do my business with these institutions? I’ll start with Desert Schools, which I’ll refer to as DSFCU. I have had a savings and checking account at DSFCU for about three years. Before I banked with DSFCU, I banked with Chase and at one point Bank of America. I don’t have any horror stories from either of these big banks, but they always seemed to leave me longing for more. I learned about Desert Schools through a friend and decided to go check them out. I was pleasantly surprised to learn that not only did they offer free checking, but their savings rates were some of the highest I’d ever found (this is not including online savings banks which have low overhead and can thus offer higher rates). I became especially impressed with them when I noticed how typically friendly and helpful their staff was. Finally I appreciated the fact that they offered overdraft protection through a personal line of credit, which has saved me from overdraft fees on more than one occasion.

USAA is a financial institution that I am especially happy with. They cater themselves mostly to those in the military, which I find especially upsetting because the majority of my friends and family are not able to do business with them. USAA is a full-service financial services provider. They offer products including banking, insurance, and investing. I utilize at least one product from each of these categories. USAA is convenient to me because almost everything can be done online, and this includes depositing checks. I can make insurance payments, transfer funds (between USAA and other institutions) and purchase stocks or mutual funds. They also offer very competitive rates.

I’d like to make a quick list for you of some financial institutions that I’ve done business with in the past or that I am currently doing business with that I have found to be useful in helping me achieve my financial goals. I’ll list them by category.

Banks/Credit Unions

• Desert Schools FCU (Phoenix, AZ based)
• USAA
• HSBC Online Savings

Brokerages/Retirement Accounts

• Scottrade
• Sharebuilder
• USAA

Insurance

• Geico
• USAA

I hope that this has helped everyone recognize the value of researching financial institutions before doing business with them. I also hope that if you are currently unhappy with your financial institutions you do business with that you will take a day to sort out your finances and transfer your accounts to somewhere which will help you along the way to financial independence. Good luck!

People in the real estate business usually have a health insurance as well as other deals and those who work from home particularly use their business cards effectively.

What is a Credit card? How do I choose one? Why should I use a credit card instead of cash? I’ve been asked questions like these over and over again, usually by young people who are just starting to learn about the world of credit and personal finance. However it’s never too late (or too early) to learn more about credit cards. Welcome to Credit Cards 101!

What is a Credit Card?

A credit card gives you easy access to a revolving line of credit which you can use to purchase products and services just about anywhere. There are four major credit card companies in the United States: Visa; MasterCard; Discover and American Express. These card issuers, while all structured differently, essentially provide the infrastructure to companies (such as Best Buy) who want to offer their customers the ability to pay with a credit card.

When you use a credit card the purchase amount is debited from your line of credit and paid to the vendor from whom you made a purchase. Within a month of your purchase (credit card bills are generally sent out on a monthly basis) you will receive a bill from your credit card company showing any purchases throughout the previous month, the full balance owed, and a minimum payment amount. The minimum payment is calculated as a percentage of the balance owed on your card, usually between 3 – 5%. Be careful paying only the minimum payment though, and here’s why:

Let’s say you owe $2,000 on a card with 15% interest and a 5% minimum payment rate. This would give you a minimum payment of $100 at first and lower every month as you pay down the principle. However paying only the minimum (without ever using the card again) will take you 84 months to pay the card off and will cost you over $630 dollars in interest!

Choosing a Credit Card

When choosing a credit card you want to read the fine print. The Terms and Conditions of the card you are considering must legally be provided BEFORE a card can be applied for. These are the things you should pay close attention to:

• Annual Percentage Rate
• Annual Fees
• Balance Transfer Fees
• Cash Advance Fees
• Late Payment and Overlimit Fees
• Minimum Finance Charges

You should look for a card with a low APR, no annual fees, a low balance transfer fee, and NO minimum finance charges.

Why Use a Credit Card?

So why are credit cards important? Wouldn’t it be better to just pay with cash? Credit cards can be a convenience but I make it a habit to think of them more as a tool, and a dangerous one at that.

To understand why credit cards are important, you have to remember that the world practically runs on credit. If cash is King then credit is the Queen, and we all know who is in charge in that relationship. Credit (and your credit score) is a reflection of your ability to borrow and to repay money. So when you purchase something with your credit card and then pay off the balance on time this is reported to credit scoring agencies, who then update your credit report and score on a monthly basis. The higher your credit score the easier it will be for you to qualify for loans of all types.

Fraud Protection

VISA cards offer a zero liability policy, which with a few exceptions basically protects you from all forms of credit card theft and fraud. If someone were to get a hold of your card number somehow and make a purchase with it all that needs to be done is to report it to VISA and you will not be held responsible under most circumstances. MasterCard, American Express and Discover likewise offer fraud protection. This is another reason why I prefer credit cards over cash; the security is far superior.

Credit Card Benefits

Did you know that by using your credit card to pay for a car rental that you are automatically protected with rental insurance?  There are many benefits that credit cards offer to their cardholders, some of which can save you money.

Take this knowledge and use it.  I don’t want to hear about any of my readers applying for bad credit cards.  On that note if you have any credit card horror stories or any further questions please contact me; I try to respond to all messages!