If you are a regular user of credit cards then you must comprehend the basic fundamentals of interest calculations.   You may think that such mathematics is not your cup of tea but then you may find yourself in a soup someday. Credit cards work on the basis of interest that the user pays. As a user you must understand the amount ofinterest you would be required to pay and when. Financial terms are jargons to many people but if you tax your brain a little then it won’t remain a jargon. 

You pay a charge for the money that you owe. This charge is called interest which finally becomes a profit for the money lender. You would not find a lender who allows you interest free credit. You just have the option to understand the credit card’s interest calculations and then use your card accordingly.

Percentage of balance

You must first understand the concept of ‘balance’ and its use to calculate interest. Suppose you and your friend use a credit card to make a purchase of equal value. The same interest rate would be applied to the same bill but it would produce different financial charges for both of you. This is because of the difference in balance.

3 types of balances that determine the financial charge

Adjusted balance

Average daily balance

Previous balance

Adjusted Balance

You may calculate your adjusted balance by subtracting form the previous balance any payments (excluding purchases) made during the current billing cycle.

Average Daily balance

To calculate your average daily balance you would be required to subtract your daily payments from your daily balance on days of the billing cycle. With the results of all the days you would be able to calculate an average daily balance.

Previous Balance

Previous balance is the balance left with you after from the previous billing cycle, before you start a new billing cycle.

Credit Card companies have to let you know the method that they would use to calculate your financial charges. Generally they use the previous balance method and you may also find Credit Card companies using adjusted balance method.

Previous balance method based interest calculations cost the highest financial charges and adjusted balance method produces the lowest financial charges. Hence, you can guess why they use the previous balance method. 

Next time when you use your credit card, make the quick calculations and find out your financial burden. Let not your credit card company rule you, you rule over them, they are not lending you in charity, you are paying for their services.

At a point of time you realize that you might take a wrong investment decision or you get too confused to decide upon a particular plan. Often people seek professional advice at the time of their retirement when they realize that the money needs long-term and profitable investment.

Evaluate your knowledge

If you plan not to hire a professional planner then evaluate your knowledge and capability. It’s your money and you need to decide how and where to invest it. Ask yourself and few questions and answer truthfully. Do you have proper knowledge of investments and if you feel you have then do you have the time to monitor and evaluate them and make changes? If you have expertise in the field then you may not require the assistance of a financial adviser. You may even feel that you lack in a few areas and that the Internet would help you out. Internet provides information regarding almost everything but there are foreign concepts, legal issues or confusing methods that may lead you to the wrong direction. A person who has expertise in the field can help you and you neither have to waste time now you have to tax your brain.

Evaluate the finances

Anything important and big that happens in your life evolves money and where money comes into counting it needs management. Suppose you plan to buy a house then you need to take care of the enormous down payment and the monthly mortgage payments. You life is not limited to a few things. You have to plan about the various insurance covers. Medical insurance, vehicle insurance, accident covers and so on. You even need to plan the future of your children, their education and marriage. There are many professionals who can provide you tax advice or advice on stocks but you need a qualified planner who would evaluate your present earning graph and provide you advise to realize short term and long term goals. They would prepare a structure that would give you an idea to meet your goals while staying within your means. If you get a proper financial advice then you have more money for you and your family, you are able to prepare yourself for changes in life and also have protection against the unforeseen situations of life.

A financial adviser takes care of you and your money

With an unbiased approach financial advisers manage risks, save time and improve your investment benefits.

They allocate resources in a way that your dollars are used fro every important landmark of your life. They plan for your education, marriage, house, your children’s education and your retirement too.

They chalk out an insurance plan for your family and assets.

Your investment may carry short term and long term tax implications. They plan investments in a way to reduce your tax burden. They even file your returns.

Financial planners can’t promise you an increment in your income but they can recommend essential and profitable investments, they can provide long term strategic planning, risk management schemes and many more options. Ultimately taking away a huge burden from your head and allowing you to stay away from money management.

This information is for informational purposes only and is not a tax or legal advice. Please consult a qualified tax advisor, CPA, financial planner or investment manager.