Credit Basics

Do you have trouble making ends meet? Keeping your spending under control? Finding money to save or invest? Often the path to financial success doesn't come from sheer discipline or money savvy but from tricking yourself into saving more and spending less.

You know, for example, you need to pay off your credit cards, but before you know it you've either racked up more debt or run out money that month before you could make an extra payment. You know you need to start saving for your future -- but you can barely make ends meet. Sound familiar? Have no fear. No matter how scary your finances, we've got ten tricks that'll bring you some pretty sweet treats.

TRICK #1: Give up your daily latte.

Don't think you have enough money to invest or make ends meet each month? Nearly everybody has some fat they can trim from their spending. Forgoing your $4 latte every day, for example, would save you about $120 a month. Investing that money every month for ten years into an account earning 10% annually would net you nearly $25,000. Keep it up until retirement, and you'd have more than $765,000 in 40 years.

In his book The Automatic Millionaire, David Bach calls this the "latte factor." But it really isn't about coffee at all. Rather, he says, it's about identifying those small purchases that dribble your money away -- whatever they may be -- so you can save big over the long term. Use our calculator to see how quickly small investments can add up. Then check out our Ultimate Savings Guidefor 89 ideas on how to save money every day.

TRICK #2: Put your credit card on ice -- literally.

When you're trying to pay down your credit card debt, you'll whittle away at it much faster if you avoid making any more charges in the meantime. To resist the temptation, think "out of sight, out of mind." Take your credit cards out of your wallet entirely. Stash them in the bottom of your sock drawer, or entrust them to a friend or relative for safekeeping. You could even place them in a bag of water and throw it in the freezer -- you'd have to wait for it to melt before you could use it, which would hopefully be long enough for your impulse to pass.

TRICK #3: Use cash for all your expenses.

Looking for a foolproof way to keep your spending under control? Try stashing cash in envelopes according to categories so you can see how much you're actually spending. For example, use one envelope for groceries, another envelope for gas and transportation, another envelope for eating out or entertainment, etc. Then when you run out of money in each envelope, you simply don't spend any more until next month. The so-called "envelope system" may sound corny or a little old fashioned, but it could be just the trick to keep you disciplined.

TRICK #4: Pay your bills automatically.

You forgot to write the check. You couldn't find postage. You lost the pre-printed envelope that came with your bill. There are a lot of excuses for forgetting to make a payment or paying a bill late, but they all result in the same negative effect on your credit rating. Thankfully, many banks will allow you to sign up to have all your bills taken directly out of your checking account, including your credit card, cell phone, utility and cable bills. Some banks may charge a monthly fee for the service. Or, you can probably make individual arrangements with each biller to take the money directly out of your checking account. This requires a little initial legwork on your part, but once you set it up, you can forget about it.

Using an automatic bill pay service for your credit cards specifically is also a good way to whittle away your balance faster. You can arrange, for example, to pay off your balance in full each month. Or arrange for a fixed amount to be paid off without having to lift a finger.

TRICK #5: Ask for a lower interest rate on your credit card.

It sounds almost too easy, but this little trick is amazingly effective. A five-minute call to your lender could save you hundreds of dollars on interest charges and help you pay off your debts sooner. In 2002, the U.S. Public Interest Research Group asked 50 consumers of varying credit backgrounds to call their lenders and ask for lower rates. The strategy worked for more than half the group, with the average rate reduction going from 16% to 10.5%. That big of a rate chop on a $2,000 balance would save you nearly $200 over 2 1/2 years. Credit card companies spend hundreds of dollars trying to acquire new customers, so they may be willing to negotiate to keep your business, says Howard Dvorkin, founder of Consolidated Credit Counseling Services. It certainly doesn't hurt to ask. Find out more tricks to lower your debt right now.