Warning: “Credit card use could destroy your good credit rating, devastate you financially, wreck your marriage and adversely affect your relationship with relatives, friends and associates. Stress associated with use of these cards could seriously affect your health and even affect your weight.”
Some estimates state that over 50% of the American population is suffering from debt related stress and that in 2003 around 1 in 70 people will file for bankruptcy. Consumer debt has rocketed to over 1.7 Trillion dollars and is only getting worse. Things are going wrong and it's about time that people started to realize that things need to be done differently from the old idea, "charge it and worry about it later".
If you have run into financial difficulty or see it coming in the near future you need to start taking immediate action.
Don't wait until you're gasping for air before you decide to do something about your financial situation. The quicker you start taking action, the better off you will be in the future. You need to break free from the millions of people who are spending their lives living from paycheck to paycheck. Stop giving all of your hard earned money to the creditors with no appreciable effect on the balance owed.
The first thing to do is to get over the American belief that "It's OK to have debt." This is a hard lesson to learn for most people when they are faced with a continuous barrage of media hype telling them of the virtues of credit (debt). One of the first things to realize is that credit is not there to help you. It is not there to improve your life or make things better for you. It's there for one reason and one reason only, to make money for the banks and credit card companies.
Credit is a well designed and carefully laid trap that makes the credit card companies billions of dollars every year. Credit card companies do not make any money unless you are in debt and it's their intention that once you're in debt you stay there for the rest of your life. If you make only minimum payments on a typical card, it will usually take 30 years to pay off. Or looking at it another way; it will take you most of your working life. That's as long as you do not get any late fees, over limit fees or accumulate any additional charges on the card.
People are told that they must protect their credit rating at all costs and that their credit report is the most valuable document in their world. Ring any bells? If you get some bad marks on your report, that's it. You're in financial ruin. People do whatever it takes to ensure that their credit report is kept up to what they believe to be a "perfect" rating, including working 2 or even 3 jobs and having a non-existent home life, just to keep that electronic information — their report — looking good.
What most people don't realize is that they could have a bad credit rating regardless of what the creditors are telling you. One of the biggest lies put out by the creditors is that if you've been making regular monthly payments you have perfect credit. This ensures that you continue making those regular monthly payments, and they continue making their money, regardless of whether you have any money left over to eat or not. The fact is that if you have a higher than 30% debt to income ratio, your credit report probably already has some bad marks against it. The banks know that if you have a high debt load - at some point you will run into problems. Don't believe me? Try applying for another credit card. If you get turned down, you have bad credit, even though you're making those regular monthly payments on time.
What is that credit report used for? The only reason for your credit report is to lend you more money. It tells the creditors how much debt, pain and suffering they are willing to get you into. The only way to keep a perfect report is to borrow money, make minimum payments and make the creditors money. The more money you make them the better they will tell you your report looks, and the more money they will lend you. Your credit report is part of this carefully designed trap to keep you borrowing more money.
Consider credit (debt) cards as one of your worst enemies. Do not buy everyday items such as food, gas, and groceries on credit when you can use cash. Banks are in a "foaming-at-the-mouth" frenzy to sign as many people up as possible, even if their credit is bad or unknown. If you get offered credit cards by a bank, trash it after shredding it, refuse it or send it back. The more cards you have and use, the more trouble you can and will get into.
Work out a financial plan for you and your family. Most people have no idea how much money they have coming in compared to what they are spending. You can get a financial planning sheet from us, free, by just giving us a call. Start by working out your family's total income from all sources and include things like child support, etc. Next, list all your fixed expenses. These are the things that remain roughly the same every month, such as mortgage or rent payments, car payments, education and insurance. Items like food and utility bills, etc. should be included under this heading also by calculating a monthly average. List the variable expenses, such us recreation, clothing, entertainment and car maintenance. Include all the expenses that you can think of, even if they seem insignificant, like your morning cup of coffee from the cafe on your way to work, etc.
A good way to help figure out how much you are spending is to carry a pen and note pad around with you and note what you are spending your cash on throughout the week.
When this is done accurately, some discover that their expenses actually exceed their income. From here, you can start working on a game plan to cut down your expenses or increase your income and start living within a budget. Just knowing that you are not putting yourself further into debt every month will make you feel a lot more in control of the situation.
Prepare yourself to economize on spending and set a strict budget to follow. Tighten your belt and treat this like you are starting a diet, quitting smoking, or eliminating some other bad habit. Some people who have financial problems actually get the urge to go out and indulge themselves by spending money. Resist the impulse to go on a spending spree to soothe your worry.
Consider looking for an additional source of income (one that does not cost you money to start up) until you have gotten yourself out of debt. Consider changing jobs to a higher paying position. Don't make any big announcements at your current job. Look first. Get hired. Then make your announcements. Make sure that any money or investments that you have are safe and will not be devastated by a recession. If you have low interest investments or stocks that are not increasing in value at a higher rate of return than your cards' interest rates, it might be worth liquidating them to pay off your cards. One of the best investments you can normally make is paying off your debts. If you're making 5% on a CD and paying 19% on your Visa Card: what kind of financial logic is that?
Food costs for a family of four can easily burn up 25% of your monthly budget, costing you in excess of $550 to $650 per month. It might not seem much but simply cutting 10% of the $550 could add up to savings of over $700 per year.
Before you go shopping, make out a list of the items you are going to buy. Make a plan of what meals to cook for the family for the coming week. Take advantage of special promotions or coupons you can collect. Buy the generic brands and not the name brands. By watching food costs and being a careful shopper, you can stretch your budget. The same thing applies when buying other items. Buy your gas from the cheaper outlet, use the low grade instead of the high octane gas (most cars will not notice the difference). If you are leasing a car and can get out from under it with little or no financial liability, do it. Buy a good used two-year-old car for cash. Have it checked out by your mechanic first, of course.
When paying off credit card balances, pay minimum payments on all except one. Pick the card with the lowest balance. Concentrate on sending additional money to that one card. When you pay that one off, take the amount you had been paying on that card and add it to the payment you've been making all along on the next lowest card and pay that one off. You'll have a larger and larger amount to pay down on the remaining cards each time you pay one off.
Get creative! You can come up with many ways to cut down on your spending. Thousands of dollars can be saved throughout the year by simple methods that will not adversely affect your lifestyle. These new spending habits will help you pay off your creditors quicker. If you're in financial trouble, now is the time to take action. Like they say at Nike: Just Do It!
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