Hi! I'm Erin from Broke Millennial for The Financial Diet welcome to the 3
Minute Guide brought to you by Skillshare. It's easy for personal
finance experts to say, "You should never have credit card debt!" or "You should
never spend more than you earn!" or any other cliched trope of the genre. Problem
is shit happens and there is lots of shades of gray when it comes to your
personal finances. Today I'm going to overview two controversial money moves
and when it might make sense for you to employ them. Number one:
Whether or not you actually have
debt you've probably received a piece of snail mail that says something along the
lines of "0% APR for 18 months". These deals are commonly known as a balance
transfer. Aptly named because you move the balance from one card to
another. That might sound insane to you. Why would you move your debt to another
credit card and tempt fate like that by opening a new credit card?
Well that 0% interest rate could help put a huge dent in your repayment plan
if, and this is a big if, you don't screw up. The average interest rate on a credit
card is just shy of 17 percent according to creditcards.com which is why it
feels like it takes forever to get out of debt but if you move the balance to a
0% rate then every penny that you're putting towards your debt is actually
going to pay off the principal balance which helps you get out of debt much
faster. Even though the balance transfer cards typically charge a fee of around
three to four percent of the balance the amount that you save paying off your
debt at 0% makes the fee worth it. It sounds like a miracle cure but of course
it's not. You have to be very careful to follow the rules in order to avoid
losing the 0% promotional rate. You always need to pay your bill on time.
You usually have to roll over the balance within 60 days of doing the balance
transfer and remember if you don't pay off the debt in full by the end of the
promotional period then any remainder is going to get charged the regular
interest rate. You also shouldn't be using this balance transfer card to make
any purchases. Just focus on paying down the debt. Before you do any of this be
sure to carefully consider why you're in credit card debt in the first place
If opening a new credit card is going to tempt you to spend more and create more
debt then it's really not worth the ris.k Controversial money move number two:
Personal finance experts
myself included harp on the importance of contributing to your employer match
401k. It's free money we say! While saving for retirement and maximizing your
employer contribution are both important there are times when
it just might not make sense to take advantage of your employer-sponsored
401k. For example, you can forego contributing to an employer matched 401k
if it's a crappy program and you know you probably won't be at the company all
that long. For instance, your employer might not even start matching your
contributions until you've been at the company for one or two years or maybe
the company has a cliff vesting schedule. A vesting schedule is the amount of time
it takes before you can leave the company and take your employer
contributions with you. A cliff vesting schedule usually means that you can't
take any of your employer match until you've worked with a company for five years.
Reminder you can always take your contributions with you. To top it all off
perhaps you looked at the investment options and the fees and realize, "Meh, I
can do better investing this money myself instead of using this program.
Besides I'm probably not going to be here for two years let alone five". Don't
use this as an excuse to forgo planning for your future. If you take this tactic
and don't contribute to an employer sponsored 401k plan then consider
investing for retirement by yourself through an IRA. One move that's never
controversial is investing in yourself and improving your resume skills. You can
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classes Skillshare has to offer. Have a money question you want to learn more
about? Then leave your topic idea in the comments section below
I'm Erin from Broke Millennial for The Financial Diet and don't forget to be
here next Thursday for a new 3 Minute Guide