Managing money

[Autonomous Cleaner Bot Cleaners]

I assume you live in the US? The reason I say that is that I continue to be shocked every time by how poorly big American banks treat their customers. Australia is hardly the most advanced in the world money-wise, but the idea of a account keeping fees for a savings account (or a cheque book, for that matter) sounds really antiquated. Apparently Canada is pretty bad too, in that regard. Maybe the lack of comparison is what's kept Americans from burning down branches so far.

The fact that US big banks exist solely to funnel money from account holders directly into the pockets of the bank's shareholders is why I switched to a credit union, which, (at least in theory), is legally structured such that the account holders are also the owners of the institution. Interest on savings is only slightly better than garbage (gotta pay for all those branches, benefits, and services some how), but free basic checking and savings is a given.

Fancier accounts (that is, higher dividends, dividend checking, no out-of-network ATM fees, etc) are probably a different story, but are also entirely optional, and not infrequently come with waiver options (minimum monthly direct deposit, etc).

Don't use credit cards if you can help it.

A credit card is perfectly safe so long as overall spending does not exceed income. For instance, I put regular budgeted monthly utility and insurance (car, renters, etc) premium payments on my credit card. Since my monthly income is split between two checks issued bi-weekly, if I paid these monthly expenses in straight cash when due, I'd wipe out my available cash from one of those checks completely and would have to wait two weeks before being able to, say, buy groceries. But, putting them on the credit card in the middle of the month gives me about a month and a half of paydays (3 to 4 on average) to make payments before the due date on the following credit card statement. Thus, I'm only paying 25-33% as much per paycheck and thus have cash left over per paycheck, and can pay off the balance every statement cycle, and thus don't get charged any interest, even while carrying a non-zero continuous balance on the credit card.

Cash flow management, or the fine art of using the bank's money for free. Heck, with a rewards/rebate program attached, the bank is paying you.

Just because your credit card has a $2000 limit does not mean you should charge $2000 to it every month. That’s a great way to get into debt and ruin your credit score (which needs to be high, because low credit scores mean not being able to buy a new car or new house if you choose to).

Buying a car on credit seems like a terrible idea, since its value is rapidly depreciating even before the keys hit your hand. Unless you absolutely, positively, MUST have a car in order to maintain an income stream. Otherwise, the ROI is as bad as it gets. Buy used with cash, if at all possible. Or do like me, and park the junker your inherited 90% of the time, and just read about the increasing car loan defaults and rising gas prices on the bus.

[Vetalia]

A credit card is perfectly safe so long as overall spending does not exceed income. For instance, I put regular budgeted monthly utility and insurance (car, renters, etc) premium payments on my credit card. Since my monthly income is split between two checks issued bi-weekly, if I paid these monthly expenses in straight cash when due, I'd wipe out my available cash from one of those checks completely and would have to wait two weeks before being able to, say, buy groceries. But, putting them on the credit card in the middle of the month gives me about a month and a half of paydays (3 to 4 on average) to make payments before the due date on the following credit card statement. Thus, I'm only paying 25-33% as much per paycheck and thus have cash left over per paycheck, and can pay off the balance every statement cycle, and thus don't get charged any interest, even while carrying a non-zero continuous balance on the credit card.

Cash flow management, or the fine art of using the bank's money for free. Heck, with a rewards/rebate program attached, the bank is paying you.

Absolutely this. If you pay off your credit card balance in full every billing cycle it's a great way to build credit and in fact make money as you noted via rewards or cash back. It also has superior fraud protection vs. a debit card or cash (in the case of cash, the chargeback option if *you* are a victim of fraud). You just have to be vigilant to never carry a balance unless absolutely necessary and not succumb to the temptation to spend because you have a high credit limit. I did that once when I was younger and dumber and ended up having to pay back in total about twice what I originally spent.

Also, unless you are committed to serious financial discipline never, EVER take out a personal loan to pay off your credit card balance. Banks love to offer those to their customers because they know exactly what happens in the end.

Buying a car on credit seems like a terrible idea, since its value is rapidly depreciating even before the keys hit your hand. Unless you absolutely, positively, MUST have a car in order to maintain an income stream. Otherwise, the ROI is as bad as it gets. Buy used with cash, if at all possible. Or do like me, and park the junker your inherited 90% of the time, and just read about the increasing car loan defaults and rising gas prices on the bus.

With a great credit score, though, you can get a new car for interest rates that are at or near 0% with nothing down, so even with the small amount interest it's a net gain due to inflation. Just make sure to take care of it; a well-maintained car can easily outlive a 4 or 5 year loan for twice that or more depending on the brand. If you buy used, make sure to do your due diligence before buying or else you're going to end up paying a lot more than you thought.

That being said, the best feeling in the world is to be solidly solvent, with all of your debts and 6 months to a year (or more!) of expenses covered by highly liquid assets. If you have that, you no longer have to be a slave to your employer and that is an incredibly liberating feeling.

[Autonomous Cleaner Bot Cleaners]

Also, unless you are committed to serious financial discipline never, EVER take out a personal loan to pay off your credit card balance. Banks love to offer those to their customers because they know exactly what happens in the end.

First, check your quotes above. I'm not Neu Leonstein

At any rate, I'd think that the wisdom of moving a credit card balance to a personal loan would depend on the health of your credit to begin with. If I've spent willy nilly and fallen behind of payments and completely hosed my credit, the rate I'd qualify for on a personal loan probably won't be any better. On the other hand, if I've used a credit card as an emergency stop gap in some situation, but otherwise have good credit, I might be able to transfer the balance over to a personal loan at a lower rate and/or longer term...?

The ideal way to handle an emergency is with insurance and/or emergency savings, probably in any case.

With a great credit score, though, you can get a new car for interest rates that are at or near 0% with nothing down, so even with the small amount interest it's a net gain due to inflation. Just make sure to take care of it; a well-maintained car can easily outlive a 4 or 5 year loan for twice that or more depending on the brand. If you buy used, make sure to do your due diligence before buying or else you're going to end up paying a lot more than you thought.

I guess I'd have to crunch some numbers over a specific example; just generally, whenever I see "net gain" used in a sentence describing a depreciating asset/consumptive expense, I start to get itchy. Especially when I'm paying any interest at all.

That being said, the best feeling in the world is to be solidly solvent, with all of your debts and 6 months to a year (or more!) of expenses covered by highly liquid assets. If you have that, you no longer have to be a slave to your employer and that is an incredibly liberating feeling.

Unfortunately, I'm a slave to an employer (even if self-employed) until investment income will cover monthly expenses through end of life. It's going to be a while yet...

[Vetalia]

First, check your quotes above. I'm not Neu Leonstein

At any rate, I'd think that the wisdom of moving a credit card balance to a personal loan would depend on the health of your credit to begin with. If I've spent willy nilly and fallen behind of payments and completely hosed my credit, the rate I'd qualify for on a personal loan probably won't be any better. On the other hand, if I've used a credit card as an emergency stop gap in some situation, but otherwise have good credit, I might be able to transfer the balance over to a personal loan at a lower rate and/or longer term...?

The ideal way to handle an emergency is with insurance and/or emergency savings, probably in any case.

Yep, I did it again...14 years on NS and I still mangle quotes.

But you hit on a key point - the personal loans are typically at rates not exactly great to begin with but are low enough to get you to take one vs. the rate on the credit cards. I went through this process when paying off what ultimately amounted to around $30k of credit card/personal loan debt several years ago; the bank offered me a personal loan at 8% APR to pay off the credit cards, I took that, and then racked up the cards again leaving me worse off than I was before. That's by design, as pretty much unless you declare full bankruptcy and go through that ordeal or will never earn reportable income again, they'll be able to garnish your future income to repay the debt even if you default. The entire point is to get you as indebted as possible to maximize their income.

I guess I'd have to crunch some numbers over a specific example; just generally, whenever I see "net gain" used in a sentence describing a depreciating asset/consumptive expense, I start to get itchy. Especially when I'm paying any interest at all.

My approach is qualitative. I realistically can't rely on public transportation for my job, let alone the time it would take were I to do so when I could use it so the value of my car is not just the cash flow but also these other factors.

As a result - I buy new, highly reliable, well made cars with high fuel efficiency and no "features" to minimize the cost, and take the shortest loan term possible for my finances to ensure I will have multiple years of ownership with no debt payments. If I can get an interest rate lower than inflation as a result, even better as the cost will actually decrease over time in real terms.

Unfortunately, I'm a slave to an employer (even if self-employed) until investment income will cover monthly expenses through end of life. It's going to be a while yet...

Start small and save up enough cash to cover a few months' expenses. It's not about making enough investment income to cover your expenses, it's having enough in the bank to tell a bad employer "fuck you" one day and walk off the job knowing you have many months of income saved up until you find a better one.

And *that* is the one thing I learned more than anything else; I dealt with a true asshole boss back in the day when I was in debt and it was pure misery. Now, I've got enough liquid assets saved up to cover me for many months and I know if I ever encountered that again I could simply tell them I'm tired of their shit and walk out the door free and clear. Incidentally, it also significantly increases your confidence in those situations so chances are it will actually enhance your career.

[Autonomous Cleaner Bot Cleaners]

Yep, I did it again...14 years on NS and I still mangle quotes.

But you hit on a key point - the personal loans are typically at rates not exactly great to begin with but are low enough to get you to take one vs. the rate on the credit cards. I went through this process when paying off what ultimately amounted to around $30k of credit card/personal loan debt several years ago; the bank offered me a personal loan at 8% APR to pay off the credit cards, I took that, and then racked up the cards again leaving me worse off than I was before. That's by design, as pretty much unless you declare full bankruptcy and go through that ordeal or will never earn reportable income again, they'll be able to garnish your future income to repay the debt even if you default. The entire point is to get you as indebted as possible to maximize their income.

I see. Yeah, another reason why I use the credit card to auto-pay budgeted monthly expenses is that once I set those up, I can encase the card in concrete and bury it in the backyard, and thus not rack things up. I suppose simply cutting it up would have been easier.

My approach is qualitative. I realistically can't rely on public transportation for my job, let alone the time it would take were I to do so when I could use it so the value of my car is not just the cash flow but also these other factors.

Well, I mean yeah, fair enough. If a car really is necessary to maintain an income stream, then it does look a lot more like a long term investment, and credit makes more sense.

Start small and save up enough cash to cover a few months' expenses. It's not about making enough investment income to cover your expenses, it's having enough in the bank to tell a bad employer "fuck you" one day and walk off the job knowing you have many months of income saved up until you find a better one.

Oh, sure, I've changed jobs more than once. Never over a bad boss/employer (unless just being paid less than I'm worth counts), though, and always with a new offer in hand first, so I suppose I've been lucky.

[Ifreann]

I don't means we individually, I mean we as in our society.

Unless you know how to create matter out of nothing, scarcity will always be a thing. How on earth can you concede that people have unlimited wants but somehow come to the conclusion that society doesn't?

Matter and energy are abundant. Just far away. It is, as it so often is, a question of distribution, not of scarcity.

[Vetalia]

I see. Yeah, another reason why I use the credit card to auto-pay budgeted monthly expenses is that once I set those up, I can encase the card in concrete and bury it in the backyard, and thus not rack things up. I suppose simply cutting it up would have been easier.

You're smarter than me than back then...what a fiasco that was.

Well, I mean yeah, fair enough. If a car really is necessary to maintain an income stream, then it does look a lot more like a long term investment, and credit makes more sense.

If you don't have to drive a lot, I agree with you. A car is a waste of money unless it's well-made and can last, it's a way to get from Point A to Point B and nothing more.

Oh, sure, I've changed jobs more than once. Never over a bad boss/employer (unless just being paid less than I'm worth counts), though, and always with a new offer in hand first, so I suppose I've been lucky.

I had to deal with a real sociopath back then. I ended up settling for a mediocre severance package (because I was so in debt), an agreement not to sue for wrongful termination and a non-compete. It has worked out very well financially in my favor since I got out of there, at least. Good riddance to bad rubbish as they say.

[Autonomous Cleaner Bot Cleaners]

You're smarter than me than back then...what a fiasco that was.

Not necessarily. I once tried to expand my cash flow management scheme across multiple credit cards with zero balance transfer fees. Things got out of hand, but I did pull the plug rather quickly.

One is enough.

I had to deal with a real sociopath back then. I ended up settling for a mediocre severance package (because I was so in debt), an agreement not to sue for wrongful termination and a non-compete. It has worked out very well financially in my favor since I got out of there, at least. Good riddance to bad rubbish as they say.

Sociopath or not, employment is a business transaction, and nothing more. If you can find a better deal (be it more money for your labor or fewer sociopaths), take it.

[US-SSR]

It goes without saying that you shouldn't consider what randoms on the internet say to be financial advice. You should get professional help to look at your specific circumstances and help you out.

But with that said: what do you think are some effective strategies for people to manage their money? One of the big problems we have is, in my view, that a great many people don't really know very much about what to do with money in practice. They make bad choices that lead to them losing it, or missing out on returns or interest they could have had. And because these things compound over decades, by the time retirement rolls around, very few people are even close to having done as well as they could have.

Obviously I'm not asking you to share any personal circumstances, and if you do so, please don't be too specific. But what do you think are the best things people can do to give themselves the best chance to reach their financial goals.

For example, here's one I like (and just to be clear, I'm not the one who came up with this):

• Every payday (or slightly longer, depending on fees to buy index funds), take whatever part of your income you can spare, i.e. you don't think you'll need to spend within the next couple of years or so.
• About 100-{your age} per cent of that new money goes into a low-cost stock market index-tracking fund, with as much diversification as you can get.
• The remainder goes into a low-cost bond market index fund.
• You don't sell anything unless you really need to access the money.

It's very simple, and over the long term will leave you in a pretty good place relative to your income. The idea is that you don't know what stock or bond markets are going to do ... but you do know what fees are going to be. So you minimise the fees, and lock in an about-average market return using the index funds. And by not reacting to short-term moves you take a lot of our inherent monkey brain biases out.

The reason I like this is because it is so easy that anyone could do it. But maybe you think this is too easy. Maybe you think one can do better by doing something else?

You should get professional help to look at your specific circumstances and help you out.

This.

[Trollgaard]

I will work till the day I die, so I don't care about managing money- there's always more to be had. Just don't spend more than you make, and be careful when you do have to use credit.

[Vetalia]

Not necessarily. I once tried to expand my cash flow management scheme across multiple credit cards with zero balance transfer fees. Things got out of hand, but I did pull the plug rather quickly. One is enough.

I leveraged balance transfers back in 2014 to pay down my debt but these days it won't work.

Sociopath or not, employment is a business transaction, and nothing more. If you can find a better deal (be it more money for your labor or fewer sociopaths), take it.

Absolutely, my only regrets are not being more prudent and realistic back then and letting myself get into that debt trouble, (and buying into the "team player" bullshit combined with the asshole boss)...the follies of youth.

Your description is also exactly how I describe my relationship with my current employer and why I left my last job for more money. It's a business transaction and nothing more. My new job offered me a lot more money and better benefits so I bailed...cut the crying and whining bullshit about how great I was when I resigned, you would have fired my ass with no qualms if you needed to when times are tough, you just liked gleaning off my work while underpaying me. Offer me more money and more benefits and I'll come back.

[Vetalia]

I will work till the day I die, so I don't care about managing money- there's always more to be had. Just don't spend more than you make, and be careful when you do have to use credit.

Damn, Trollgaard...that's a name I haven't seen in a while! How are you man?

[Autonomous Cleaner Bot Cleaners]

Your description is also exactly how I describe my relationship with my current employer and why I left my last job for more money. It's a business transaction and nothing more. My new job offered me a lot more money and better benefits so I bailed...cut the crying and whining shit about how great I was when I resigned, you would have fired my ass with no qualms if you were short on cash and needed to make payroll.

I left on good terms with my last boss, but the situation was largely the same. I was part time with no benefits (which was beyond my immediate boss' control), and someone else offered full time with 100% benefits. So I informed my boss' boss that their services were no longer required.

It's not personal, but I've got the tax man and landlord knocking, so...

[Vetalia]

I left on good terms with my last boss, but the situation was largely the same. I was part time with no benefits (which was beyond my immediate boss' control), and someone else offered full time with 100% benefits. So I informed my boss' boss that their services were no longer required.

It's not personal, but I've got the tax man and landlord knocking, so...

I left on exceptional terms, and I really did like working with everyone in the office, but they simply couldn't pay me what I deserved to make in my field. I gave them a full month's notice too, to transition my client work and help out during the transition.

The best thing you can ever do for your career when leaving a job as a professional employee is give your employer advance notice you're leaving. Disregard all the bargaining and counteroffer bullshit they will inevitably throw up to try to keep you on board and press forward. Once you've decided to move on, it's time to move on.

Accepting a counter-offer is a death trap that will screw you unbelievably down the line...quit and leave gracefully.

[The Alma Mater]

A credit card is perfectly safe so long as overall spending does not exceed income.

A credit card is a loan. Loaning money when it is not needed is always stupid.

[Autonomous Cleaner Bot Cleaners]

A credit card is a loan. Loaning money when it is not needed is always stupid.

Taking a loan without sufficient assets/income to cover the liability is probably not wise, no.

What is "needed" however, is probably more complicated. As I explained, since my cash flow is divided across two pay checks per month, so I do not have sufficient cash on hand to pay my bills exactly when due. A short term loan at zero percent (cause I have more than one paycheck to pay against the statement period, and thus can clear the liability inside the grace period) to smooth cash flow works perfectly well. Having more cash on hand per paycheck ( to spend on food, or to go in savings to earn dividends, or to go into an investment account to earn retired me even more) is, maybe, not that stupid.

[Saiwania]

A credit card is a loan. Loaning money when it is not needed is always stupid.

You get more financial benefit from having a good credit score or credit history and you get rewards/cash back. Provided a credit card is only ever used for purchases that someone would be making anyways, such as on groceries- why not build up a credit history or score that'd make getting loans or lower interest and etc. easier and more likely? The only thing that ever has to be done to not be afraid of credit, is paying everything off on time and following set rules/guidelines that result in good credit. Such as getting the highest credit limit you can whilst keeping the utilization below 10% at any given time.

[Autonomous Cleaner Bot Cleaners]

A credit card is a loan. Loaning money when it is not needed is always stupid.

You get more financial benefit from having a good credit score or credit history and you get rewards/cash back. Provided a credit card is only ever used for purchases that someone would be making anyways, such as on groceries- why not build up a credit history or score that'd make getting loans or lower interest and etc. easier and more likely? The only thing that ever has to be done to not be afraid of credit, is paying everything off on time and following set rules/guidelines that result in good credit. Such as getting the highest credit limit you can whilst keeping the utilization below 10% at any given time.

To be fair to the credit skeptics, I would agree generally that credit scores are probably mostly voodoo, and I wouldn't use a credit card simply to improve a score (excepting the sort of asset-secured accounts one might use to REbuild credit, I suppose, but that's a special case). Over a decade plus, I've put tens of thousands of dollars across multiple credit cards, but paid not even six bucks in interest in that whole time because I'm that consistently on time. ONE month I left a zero balance on one statement balance -- I owed nothing at all -- and my credit score went down.

I have zero defaults, zero lates, and a less than perfect score...

Don't worry about the score. Budget, live within your income, do not use credit on anything that won't produce a return in the longer run, and you'll be fine.

(And I wouldn't use a credit card on day-to-day sundries like groceries. The rewards/rebates features are especially there to encourage you to overspend on impulses, and this rack up a big interest paying bill. Use cash or debit instead.)

(And you should be checking your credit report at least yearly to monitor for fraudulent activity. In the US, you can get a free one from all three bureaus once a year; stagger them to get a free report every four months.)

[Ethel mermania]

First, check your quotes above. I'm not Neu Leonstein

At any rate, I'd think that the wisdom of moving a credit card balance to a personal loan would depend on the health of your credit to begin with. If I've spent willy nilly and fallen behind of payments and completely hosed my credit, the rate I'd qualify for on a personal loan probably won't be any better. On the other hand, if I've used a credit card as an emergency stop gap in some situation, but otherwise have good credit, I might be able to transfer the balance over to a personal loan at a lower rate and/or longer term...?

The ideal way to handle an emergency is with insurance and/or emergency savings, probably in any case.

Yep, I did it again...14 years on NS and I still mangle quotes.

But you hit on a key point - the personal loans are typically at rates not exactly great to begin with but are low enough to get you to take one vs. the rate on the credit cards. I went through this process when paying off what ultimately amounted to around $30k of credit card/personal loan debt several years ago; the bank offered me a personal loan at 8% APR to pay off the credit cards, I took that, and then racked up the cards again leaving me worse off than I was before. That's by design, as pretty much unless you declare full bankruptcy and go through that ordeal or will never earn reportable income again, they'll be able to garnish your future income to repay the debt even if you default. The entire point is to get you as indebted as possible to maximize their income.

I guess I'd have to crunch some numbers over a specific example; just generally, whenever I see "net gain" used in a sentence describing a depreciating asset/consumptive expense, I start to get itchy. Especially when I'm paying any interest at all.

My approach is qualitative. I realistically can't rely on public transportation for my job, let alone the time it would take were I to do so when I could use it so the value of my car is not just the cash flow but also these other factors.

As a result - I buy new, highly reliable, well made cars with high fuel efficiency and no "features" to minimize the cost, and take the shortest loan term possible for my finances to ensure I will have multiple years of ownership with no debt payments. If I can get an interest rate lower than inflation as a result, even better as the cost will actually decrease over time in real terms.

Unfortunately, I'm a slave to an employer (even if self-employed) until investment income will cover monthly expenses through end of life. It's going to be a while yet...

Start small and save up enough cash to cover a few months' expenses. It's not about making enough investment income to cover your expenses, it's having enough in the bank to tell a bad employer "fuck you" one day and walk off the job knowing you have many months of income saved up until you find a better one.

And *that* is the one thing I learned more than anything else; I dealt with a true asshole boss back in the day when I was in debt and it was pure misery. Now, I've got enough liquid assets saved up to cover me for many months and I know if I ever encountered that again I could simply tell them I'm tired of their shit and walk out the door free and clear. Incidentally, it also significantly increases your confidence in those situations so chances are it will actually enhance your career.

As an FYI, late model used cars are the best deal, something in the two to three year range preferably something off a low mileage lease.

I personally prefer new cars, because ... well.... I like new cars, but the value of the car drops steeply in the first 2 years more than any other time.

[The Alma Mater]

A credit card is a loan. Loaning money when it is not needed is always stupid.

You get more financial benefit from having a good credit score or credit history and you get rewards/cash back. Provided a credit card is only ever used for purchases that someone would be making anyways, such as on groceries- why not build up a credit history or score that'd make getting loans or lower interest and etc. easier and more likely? The only thing that ever has to be done to not be afraid of credit, is paying everything off on time and following set rules/guidelines that result in good credit. Such as getting the highest credit limit you can whilst keeping the utilization below 10% at any given time.

Because in most countries the concept of "credit score" does not exist; and in those countries having loans out is ALWAYS a detriment when trying to get new ones.
Hence why people have a buffer so that they do not need loans; except for mortgages and big unexpected expenses.

[Saiwania]

Because in most countries the concept of "credit score" does not exist; and in those countries having loans out is ALWAYS a detriment when trying to get new ones. Hence why people have a buffer so that they do not need loans; except for mortgages and big unexpected expenses.

Pray tell, how do lenders or creditors determine a person's creditworthiness without something like a credit score in those countries? If someone has a credit history that consistently shows that they pay bills on time, of course that person is going to be trusted with money more so than someone who doesn't have any credit history.

A person like Credit Shifu on Youtube qualifies for the tier 3 or 4 credit cards, simply put- because they're not a dumbass with regards to using credit and have built up their score to be 720 or higher over time. Once a score is past that point, a person doesn't need to worry about building credit anymore- people will give them money and they will get the best and lowest interest rates or the best perks. Credit is just another financial tool that can go good rather than badly under the right circumstances.

Who cares if the cash back/rewards is to entice more spending? Simply pay everything on time, and adhere to certain rules, and there is no negative consequence, except that you get that credit history and thus a chance for your score to go even higher or remain in good standing. It is free money in any case, that you'd miss out on if you don't use credit to at least some extent.

[WayneMosciegi]

Investing savings helps! Loans are far from new. But it is necessary to choose the right lender in order to get the best benefits. There are a lot of them now, which causes mistrust, but there's nothing to worry about. After all, we have a simple and, by the way, can be very profitable, urgently get a loan to paycheck! Those loans are now at the top of its popularity, it is a global trend. Which is quite normal. It's one of the easiest and most comfortable ways which makes it possible to borrow small amounts for a short period. Sometimes I need a small loan, in this case I compare lenders online.

[The Alma Mater]

Because in most countries the concept of "credit score" does not exist; and in those countries having loans out is ALWAYS a detriment when trying to get new ones. Hence why people have a buffer so that they do not need loans; except for mortgages and big unexpected expenses.

Pray tell, how do lenders or creditors determine a person's creditworthiness without something like a credit score in those countries?

Income vs already outstanding debt. The more debt you already have, the less you can get additionally. Simple.

[Nanatsu no Tsuki]

What we’ve been doing for the past few years and which has helped us a lot is investing with a private firm and slowly contributing to our 401Ks. We sit down, go through expenses and make a monthly budget.

That has worked for us with managing our money.

[Partybus]

Never use credit cards, they are a huge drain on income.
If you have credit card debt, pay it off and cut up the cards. It is like earning 23 percent. And ignore the fake come-ons with low introductory rates.
Do not save money. When I started my law practice in 74 rates were great. Now they are pathetic.
Do invest in a diversified fund, one that accepts small regular contributions. We did well with Investors Diversified Services. Now I use American Funds.
Invest in learning, not stuff. Stuff depreciates but learning always has value,

Give to worthy causes. Your conscience is also a good investment.

Your suggestion of paying off, and cutting up your cards is definitely an option (and not a bad one IMO), but I know more than one person that froze their credit cards in a block of ice in the freezer...If ever tempted to use them, by the time they thawed out, the feeling passed...of course in an emergency, there is always the microwave, but a melted card does no good anyhow.

*scratches chin* microwave safe credit cards? Patent pending