Money Adviser helps cut through financial thicket
Published: October 6, 2009
WASHINGTON It used to be that our personal finances were so uncomplicated -- a simple bank account, 30-year mortgage, company pension.
That was then.
This is now: Our personal finances come with frustration, complication and financial products that seem incomprehensible. There is so much information to grasp and so many scam artists to avoid that you need CliffsNotes for your money, much like the guides that have helped students interpret complex literary works.
Well, as it turns out, there is the equivalent for personal finance. For the Color of Money Book Club selection for October, I'm recom mending a monthly newsletter -- Consumer Reports Money Adviser -- which is as informative as it is visually appealing. The newsletter is published by Consumers Union, a nonprofit group that also publishes Consumer Reports magazine.
The newsletter, which can't be purchased at the newsstand, costs $29 for a 12-month subscription. To subscribe online, go to http://www.consumerreports.org/moneyadviser. You can also order by telephone at (800) 234-1970.
The typically 17-page newsletter covers a wide range of personal finance topics in short, engaging articles -- from credit to investing to saving to insurance to real estate to retirement planning to taxes.
I was particularly interested in a feature story in the current issue that evaluates which strategy is best for paying off credit-card debt. The options, as analyzed by CRMA:
- Pay off the card with the highest interest rate first. Mathematically, this option will result in the lowest amount of interest paid.
- Pay off the card with the lowest balance first. When the smallest balance is paid, you then put all your payback funds toward the card with the next lowest balance. This is the method I recommend. In my experience of advising people how to pay off their debt, there's a psychological boost when people can quickly knock debts off their list.
- Pay off the highest balance first. CRMA says borrowers with large balances -- especially those that constitute more than 50 percent of the total line of credit -- have become especially vulnerable to having their credit limits reduced.
By concentrating on credit cards that are maxed out or close to being maxed out, consumers work toward getting their balances below 30 percent of their credit lines, which helps boost their credit scores.
It's important for consumers to find the most effective debt-repayment method, the newsletter points out, given that Americans currently owe $917 billion on revolving credit lines and nearly all of it is a result of charging purchases to credit cards. It's also useful for the many credit-card holders who are receiving notices of increases in their interest rates.
So which debt-repayment method is best?
"As long as you stick to it, any of the approaches we've highlighted here have merit," CRMA found.
"You can even change tactics midstream -- for instance, pay down a high-balance credit card first, then, when that balance is below 30 percent, switch to paying the card with the highest APR. The greatest challenge will be resisting the temptation to backslide toward making only minimum payments."
Michelle Singletary welcomes comments and column ideas but cannot offer specific personal financial advice. Readers can write to her c/o The Washington Post, 1150 15th St. NW, Washington, DC 20071, or e-mail her at
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