Leave It to the Pros: Q&A with Financial Editor Erica Sandberg

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Q&A with Financial Experts

Q&A with Financial Experts

We’re up to round four in our “Leave it to the Pros” series, where we take our pressing financial questions to the experts. This week, we’re chatting with Erica Sandberg, editor at large for Bankrate.com’s money and credit management website, Credit Card Guide.

Q: Hi, Erica. Thanks for being here today. Tell us, how did you get started in the financial world?

A: I started in personal finance in a different way than a lot of others. I worked in the credit counseling world for 10 years and was really immersed in the world of credit card debtbankruptcy, and people who were just really having a hard time financially and struggling to keep things together. I loved it. Most people have had times in their lives where they’ve had a hard time financially. Not everybody is wealthy, or even wants to be wealthy, and almost everyone can relate to financial difficulties.

Q: Definitely, we’ve all been there. What are some of the most common mistakes you saw people make with regard to credit?

A: Seeing credit as extra income. That’s the easiest, most common mistake and it makes sense. You have that ability, suddenly, to charge $5,000, instead of this limit you have in your checking account, if you have a credit card. It really feels like extra money. But it’s not. It’s that confusion that comes with credit that people need to clear up real fast.

[Check Your Credit: Don’t Guess. Know.® Get your free credit report and score. No credit card required.

Q: What are some ways consumers can stay smart with credit?

A: It’s a little controversial, but I’d say: allow yourself to make a mistake. There’s nothing like it to make you realize what the truth is.

When I first got my credit card, it was an Express store card. I bought a coat and it was very expensive at the time at $125, but I thought I was just going to blow it with my first card. I was absolutely unable to pay for entire thing when the bill came in and I remember that feeling, that kind of sickening feeling, and that stupid coat took me at least a year to pay off. But, it was a good lesson. So, allow yourself the knowledge of what it feels like to be in debt so you can make that commitment to never be there again.

Q: Great advice. How can readers maintain a good credit score?

A: Don’t be afraid of it. It’s just a tool. You just have to use it right. People aren’t afraid of hammers, but you can use it to your disadvantage. So every time you pick up your card, ask yourself is this going to be to my advantage or to my disadvantage? And just remember, never spend so much that you can’t pay it off in a couple of months. You can’t have a score without using credit, so allow yourself that luxury, make the little mistakes and keep your debt to $0.

[Check Your Credit: Don't Guess. Know.® Get your free credit report and score. No credit card required.

Q: You wrote a book a few years ago called Expecting Money: The Essential Financial Plan for New and Growing Families. What inspired you to write it?

A: I wrote this when I was with Consumer Credit Counseling. I had gotten pregnant, was looking for info about how much it was going to cost to have a baby and was wondering what I needed to buy. But, there were no books, not even a website… to people who were starting a family. So I just figured, I’d write the book.

Q: Way to take matters into your own hands! So, what did you learn from writing your book?

A: My instinct was correct: we really need a lot less than we think we do. When you become pregnant or are thinking about it, your eyes are suddenly wide open to this world of marketing and suddenly you need everything and your child deserves everything, from ridiculous safety products to cashmere blankets. And truth is, you just don’t need this stuff.

A lot of women think that just because you get pregnant, it means you can just stop working and it’s all going to be okay. But your bills stay the same, your expenses go up… so, I found a tremendous lack of reality with people who thought that way.

Q: So, what are some tips for expectant families?

A: Be a happy skeptic. When you are purchasing whatever items you need for your baby, just be skeptical. Look at it and recognize that there’s no logical reason to purchase a $20 bottle of bubble bath. Just be really skeptical by claims and needs and use your common sense. Don’t go overboard. And remember every dollar that you save and don’t spend on frivolous things, you can put toward your savings, which is more helpful to your family and your child. There are unexpected costs associated with kids that have zero to do with the retail world.

If you have a partner or you’re married, you better start talking about money. So many couples don’t, but if there ever was a time to discuss your goals and what your lifestyle should be like, it’s now. Open up the discussion of finance.

So many couples fight about money and it comes from not knowing each other financially. That’s going to be a big point of contention. Anybody who has been raised in a household where there’s arguing knows it’s not fun. Get things out before there’s a major issue. That includes the whole topic of stay-at-home-parenting. Not everyone wants to, or some people do, but it’s not realistic. There’s a huge disconnect between what you can afford for childcare and what your income is. Talk about it.

Q: No doubt about it: childcare is expensive. What is the most important piece of financial advice you’ve ever received?

A: Have a positive attitude; you can do it. Don’t get bogged down in nos: I’ll never find a job, I have to wait until this happens, I have to rely on credit, etc. All of that is complete nonsense. It’s like Nike: just do it. Put your head down and figure out a way. You are far more creative and resourceful than you think you are.

Being hungry is not that bad, it will motivate you to do what you need to do. Everybody takes a crap job in the beginning… but ultimately work toward doing what you love. Don’t expect less.

Q: Great advice. If readers could do one thing to improve their financial lives, what would you tell them to do?

A: Other than stay out of debt, I’d say adjust your expectations. Having a new car every few years, living in a big house… you don’t deserve everything, at least not right away. You work for the things you want. Reevaluate what you think you deserve. It’s going to make you a lot happier financially.

[Check Your Credit: Don’t Guess. Know.® Get your free credit report and score. No credit card required.

Learn to live with the bucket that you have and work toward a bigger and better one, but don’t expect it right now. Accept the fact you may have to take the bus for a while.

Learn more about Erica at www.ericasandberg.com.

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