Thursday, January 5, 2012

Thursday, my smart move is scary...

     When I moved my business account from USBank to the credit union it changed quite a few things.  All of them good, especially the interest rates.  But  before I had a credit line attached to my business account.  I did not apply for this it was just given to me.  It was a $10,000.00 line.  I use it up almost immediately.  It was used for remodeling, and for costumes and summer bills.  I would pay it down and rack it up.  But I never worried about over drawing the business account so I rarely knew how much was in the account.  I did not care and it led me to debt.  When I did balance every 4-5 (yes can you believe that)months I was always shocked by how much I owed this account.  Oh, by the way, the payment was taken out automatically so I never had to really pay attention. I also had a $22,500.00 limit on the USBank CC.  I could spend for a long, long time.
     The Credit Union does not have a credit line attached to business accounts.  I did apply for a line and was granted one for $5000.00.  But I have to call and advance money and I have to pay it back with a phone call or go into the office.  I guess I could do it on-line.  The difference is I have to know if I need the money.  How would I know I needed then money unless I balanced the account?  So you guessed it.  I really have to pay attention.  I run a zero based budget and I cannot overdraw.  No one will save me but a big old overdraft charge.  I also cannot seem to get approved for a CC in the studio name right now.  This is why my personal card is so high, most of it is studio costume debt from the last show.  Well at least $2100.00 of it is.  So when I order costumes for spring I will have to go to the new account and take money out and put it back as needed.  I guess what I am saying is that the Credit Union forces their members to be a little more accountable.
     But, but.....but I am not used to this and it is such a good lesson for me.  Instead of just writing checks for bills and knowing they are going to go through I have to get a deposit in and stay on top of things.  I was going to pay all my bills last night and realized that I was short about $1200.00.  Before I would have sent those off and just expected the Overdraft to protect me.  But no more now the bills will wait until there is money to pay them.  There will be.  But I can no longer live in LA LA Land.
     Slugmama, also gave me a good piece of advice.  Wait a few days when there is extra money, before you throw it at a debt.  Something may come up, or I may have forgotten something.  This happens all the time and then I am broke and I am using the credit line.  Gee I think of myself as a pretty smart person, so why could I not see this?  Well, okay I did but my impatience and my gazelle intense attitude sometimes over shadows my reason.  So we will work on this.
     I am also experiencing a payment shock with my new house payment.  I am very happy that we refinanced, our interest is down almost 2% and I am no longer just paying interest on a $75,000.00 equity line, but our payment has gone up to $450.00 a month and our income has not changed.  This is a big old chunk of change when you consider that my husband only brings home $950.00 on one paycheck and $888.00 on the other.  Factor in gas, utilities, tithing, car payment, food.  You can see why I worry.  When you are self employed it is all you. But again  I must be accountable. This can be done, but I have to pay attention.  I don't have any extra money lying around to cover this payment.
     I think that people who have trouble with debt also have trouble with accountability.  We are very careful to make sure we always have a safety net.  Like another Credit card.  But our safety nets always involve someone else's money!   Hence the emergency fund.  Now for me 2 emergency funds.
    As I become more financially solvent and I make changes to better my financial life and get out of debt I find I have to be more responsible, before, I was just kidding myself.  Now it is me.  Scary.

Has any one else experienced this same phenomena?  I guess what I am asking, have you ever felt that having credit at your disposal made you more secure?  Or is this just childish ignorance?

Have a great and productive day!

Kim
    

9 comments:

  1. Knowledge is power. You might be scared by what you've learned, but you will make better decisions in the future as a result.

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  2. I'm nervous about credit card debt. I've been debt averse since I was in college, so minus a small debt about 10 years ago & a student loan, I haven't taken on much consumer debt. However, my husband is infinitely more comfortable with debt. Hence, our $1M in real estate loans. :-) We are able to pay everything we owe every month, but it's a struggle to get him to understand that too much debt (regardless of the type) makes me nervous. We're working on it.

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  3. I wouldn't want to rely on credit in case of an emergency which is why I'm so adamant about building up our EF! :) CASH in case of an emergency is what makes me feel secure!

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  4. I felt the same way until about three years ago when I sat down and realized it was just a horrible cycle.

    I agree with sluggy though. I used to throw any extra money at debt right away and then two days later realize that I didnt pay something. Its all about accountability

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  5. Oh ya - been there done that! When dh was self employed we had a line of credit and credit cards, lots of credit cards :-( It was not a good thing and I'm so glad those days are gone. It was too stressful. We could never get caught up.

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  6. I also discovered (the hard way) what slugmama mentioned. I'd bring my account to 0, then have to scramble when things happened... and they ALWAYS happened, and I half expected them. Took me about 4 overdraft fees and 2 transfer fees (from savings to checking over the limit amount) to learn this. Now I just wait until right before the next paycheck before I zero the account. Makes me feel a lot safer, if you ask me.

    I do think that having available credit makes you feel a bit safer... When Murphy strikes, I don't have to panic and search for alternative routes to solving my problem; I just charge it and hope/expect to pay it later. That's a mistake that kept me running in place for a full year.

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  7. One thing you may be able to do, since you aren't approved for a card in the business name, is open a second credit card in your own name, to use EXCLUSIVELY for the business. This keeps your personal and business expenses separate.

    There won't be any question now as to what is what. Running my own business, this was the first thing they told me to do - this way there can't be any issues with "embezzlement" from yourself by accident. And you'll know always, exactly what is business and exactly what is personal.

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