The little money I have – that is my wealth, but the things I have for which I would not take money, that is my treasure.  ~Robert Brault

Friends are such a valuable treasure. And friends who share helpful girlfriend advice on things we often need to know, are invaluable as well.

We’re thrilled to share the wealth wisdom from Girlfriend Guru MIATA EDOGA – this week on consolidation loans – are they a good strategy for our finances? (Share with a friend who might need a little ‘friendly’ financial advice!)

A friend of mine was paying for lunch last week when I noticed her shiny new credit card.

I said jokingly, “That’s a pretty one!”

She replied, “I just rolled over my balance from another card to get the zero percent rate on balance transfers. It’s my debt consolidation strategy.

As the clerk rung up her purchase, I realized that she was just adding more money to the debt pot by paying for both of us, and she’d have to “strategize” more to get out of the hole. By adding money to the new card she might be creating new problems

She caught the look in my eye. “Oh no. Here comes Miata my financial savior!” We both laughed. Then on the way home I told her the secret about debt consolidation.

Debt Consolidation

Much is made of debt consolidation plans, especially by the credit card industry. Frankly, there’s a reason for this: the strategy doesn’t often work, and you end up with more debt.

Here’s what often happens:

• You continue to spend money on the old card instead of cancelling it.
• The introductory rate expires and you’re left with a high-rate card.
• You spend money on the new card, just continuing your debt problem.

Does any of that sound familiar?

That doesn’t mean that debt consolidation can’t work. In fact, consolidating your loans into a smaller number (hopefully at a lower interest rate) can be a boon for you, as long as you follow a few simple points:

• Forget introductory rates (Zero Percent for Six Months on Balance Transfers!) offers. In fact, it might be better to forget about using credit cards for debt consolidation altogether.
• Ask your credit union or bank about debt consolidation loans. You’ll need to ask about fees and any pre-payment penalties. Don’t forget to ask about the interest rate, too.
• Transfer your debt to the new loan, then cut up the card. I know this hurts your credit rating over the short run, but you can quickly regain credit. Open credit cards can and often will sink your best-laid financial plans.
• Instead of the minimum payment, add up the payments of all your transferred cards. Pay at least this amount, but hopefully much more per month.

Credit card balance transfers only work well if you don’t use the old card AND don’t add debt to the new card. If you can trust yourself to do this, you’ll find a better rate—often zero percent—in the credit card market than with a credit union or bank. Let’s be clear here:  they offer low rates because they think you’ll spend more. Can you seriously trust yourself?

My friend went to her credit union a couple days ago and applied for a real loan. She called me and said she felt better now because she actually had a plan.

“There’s bad news for you though. I’m not paying for lunch for us both anymore!”

You know what? I can live with that…happily.

MIATA EDOGA is the President and Founder of Abundance Bound, a 10-year old company committed to utilizing humor, inspiration, and lots of love to give individuals around the world the necessary tools to thrive financially, while keeping focus on the things they treasure most. Visit the Abundance Bound Facebook Page for your free copy of Financial Success for the Creative Soul!

What’s YOUR Girlfriend Advice for Debt and managing your Finances? Please share!

Thanks Miata and thanks for being one of our Girlfriend Gurus! Check out her girlfriend advice on:

• How much to save for Retirement
• How to Buy a Car without feeling like dirt
• Pay Yourself First
• Financial success
• Saving money on your next getaway/trip
• Credit card advice on paying the minimum payment

By the way, we LOVE guest blogs here at Girlfriendology. Have a great girlfriend story to tell? Want to celebrate your fabulous female friends? SHARE! (And, we also have Girlfriend Gurus – check that out to be featured on Girlfriendology!)

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