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I was visiting a good friend the other day and while sitting down at her dining room table, I noticed a HUGE stack of unopened bills. I joked with her that she was going to be in the dark since the top bill looked like it was from the power company. She laughed and told me that if I was really a good friend, I would open all of them and pay them for her.
She knows that I like anything related to personal finance and she knows that I write a personal finance blog. She does not know the address and has not asked for it since she has ZERO interest in personal finance. I think she would rather go to the dentist than read anything related to personal finance. I asked her if she really needed help, I would be happy to help her.
Apparently, this was exactly what she wanted me to say. She ran and got her checkbook (with the blank check register) and told me to fire up the laptop. With her permission, I am posting her story (without names and identifying information).
Long story short, her personal finances are OUT OF CONTROL. Most of her accounts are late. She is paying late fees all over the place. I checked the last six months of her bank statement and she is also paying needless monthly bank fees. She keeps all of her money in a checking account that doesn't pay interest and she does not have a savings account. Thankfully, the only credit card debt she has is on one credit card account with a balance of about $4400.00.
Here's what we did to try and get her on the right track:
- Opened a savings account. She had about $6800.00 in her checking account. I recommended an ING Orange Savings account and explained the account in detail. She was pretty excited about it so we opened an account and setup a once time transfer of $2500. She then setup biweekly transfers of $250 from her checking account to go to savings.
- Changed to a free checking account. She was paying $7.50 a month for a no frills checking account with one of the large megabanks. She liked the convenience of the bank so she wanted to stay but we were able to switch her over to a free account with direct deposit.
- Credit Check. She had no clue what her credit was like. She had missed a few payments on her credit card. She didn't miss the payments because she didn't have the money, she missed them because she just forgot about the due date. We ran a three bureau credit report from Equifax and looks like she is in the clear. Luckily, none of the late payments had been reported by her creditor. She also has a good credit score in the mid 700s.
- Balance Transfer. We moved the balance from her old credit card to a new Discover Card with a 12 month 0% balance transfer. She will be able to pay off the balance in full before the 0% rate expires. She had an interest rate of 18.99% on her old card.
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