Editor's Note: This article is part of a popular Q & A format series in which we interview experts and industry professionals that have made significant contributions to the credit card industry and/or to promoting financial literacy.
Have you ever wondered why it’s so hard to make extra payments (beyond the minimum payment) on your credit card(s)? Have you ever thought how nice it would be to be able to aggressively pay down your credit card debt with savings…if only you had any savings set aside? Here's a great way to build up a savings balance, pay down crucial credit card debt, and learn how to develop good savings habits in the process.
What is the "Pay Yourself First Challenge" and how/why did it come about?
The Pay Yourself First (PYF) concept is intended to encourage consumers to save more money by adopting a more disciplined approach. By directly depositing regularly scheduled amounts into your savings account before you have a chance to spend that money on things that you probably don't need, you will be “Paying Yourself First”.
The Pay Yourself First Challenge was launched to popularize this concept, and to give consumers tips and tools to start paying themselves first. The PYF Challenge tracked 5 people with different backgrounds, from different cities, and with unique savings goals, as they participated in the 6 month challenge. Over the course of the challenge, the participants, and our financial expert Liz Pulliam Weston, posted regular updates on their progress and shared tips from their experiences.
Why should the "Pay Yourself First Challenge" be of interest to our readers... what can they gain?
Now that the first challenge has concluded, we're asking consumers to start their own challenge. By participating in the challenge, your readers will have access to tools and information to help kick-start and maintain healthy savings behavior.
Savings in this country has taken a back seat with a mortgage becoming the chief investment tool for many Americans. And of course, we all know what's happening with the mortgage industry. Are you seeing any trend change during this tough economic environment?
Definitely. The nation's personal savings rate is near 5%. A couple of years ago, when the mortgage boom was at its peak, we saw a negative personal savings rate. Consumers need to return to a more disciplined approach to both saving and spending, and the increase in personal savings indicates that the country is taking notice.
Will the "Pay Yourself First Challenge" continue... what is the future of this program?
Yes - with the country's renewed interest in saving, the Pay Yourself First message continues to resonate. The five challengers proved they could save over $63,000 during the six-month challenge that recently endend, and now FNBO Direct is ready to open it up to America! FNBO Direct will give people the tools to challenge themselves to reduce their monthly expenses and find success with saving more of their money. An interactive savings calculator, tips and tools from financial bloggers, and other promotional items will be available on the new www.pyfchallenge.com site later this summer.
I would like to add just a couple of more thoughts. First of all, I must say that I really like the idea of a bank thinking out of the box when it comes to encouraging consumers to save. I commend FNBO for launching this program. I’m convinced that encouraging savings is key to tackling our consumer debt load…particularly credit card debt.
On a related note, CardRatings.com recently sponsored the 2009 Sammy Rabbit National Rock, Read, and Save for College Tour. The tour spread the message of the importance of savings to over 5,000 elementary students involving 22 schools. It’s just great to hear positive stories like this in the midst of all the negative financial news out there!
We welcome your comments about credit card debt in our popular credit forum!