There’s a psychology to debt you must understand to make a change in your life. We’ve been bombarded with the notion of debt and we have responded collecting credit cards by the dozen.
The more you use credit cards the more likely you are to spend more money than you have. The psychology of debt changes you from cash and makes you into a debt-aholic.
J.C. Penny, the founder, didn’t take credit cards or any kind of credit for years. He believed that you should “owe no one” and wouldn’t allow debt for any purchase at his store.
The inventor of the first bank issued credit card was John Biggins of the Flatbush National Bank of Brooklyn in New York, in 1946. In 1950 Diners Club issued their credit card in the US and was intended to pay restaurant bills.
By the 1960s more companies offered credit cards. In the mid 1970s the US Congress began regulating the credit card company. In the late 1990s the Supreme Court lifted restrictions on late payments. Deregulation also allowed very high interest rates to be charged.
As consumers began to accept borrowing into every facet of our lives it began a cycle of debt we haven’t recovered from. It’s interesting that Sears and Ford Motor Company tried to prevent sales on credit. They felt it was better to purchase using cash.
Eventually debt was accepted as a way of life and that is the psychology we live in today.
Next time we’ll talk about breaking the psychology of debt and going from
DEBT to CASH
David…
Friday, March 28, 2008
WARNING: Avoid debt counselors like the flu
We haven’t spoken much about debt counseling and a few Big Banks out there who try to suck you into debt consolidation by either one unsecured loan or using your home through a refinance or second mortgage.
My advice is to start running (AWAY) from these guys.
I know what you’re thinking. These guys are offering you an easy solution to the problem of to much debt. They say that all your problems will be wiped away in one shot! Many times they’ll offer to lower your overall interest rate and sometimes be able to deduct your interest from federal taxes.
Here’s why they are full of it and you could go bankrupt listening to their advice.
I’ll address the idea of borrowing more first. In my kit, From Debt to Cash, I talk about how you cannot borrow your way out of debt. It may sound like common sense, but it’s true. How can you borrow your way out of debt?
You can’t! You cannot borrow more money and get out of debt. The only way to get out of debt is to pay off your debt.
Here’s one problem with loan consolidations (and by the way there are a myriad of problems with this) you’ll end up with one payment. Well, one big payment is not necessarily the best way to go.
Let’s say you have 10 credit cards you’re trying to pay off. If you consolidate into one payment and have an emergency come up you may not be able to make your consolidate one payment because it’ll be pretty high.
If, however, you stick with multiple bills they are likely to be smaller. If you use my $15 dollar a day strategy you’ll be able to pay more toward one of the 10 bills until you pay off one bill at a time. In other words, there’s room for staggering bills if you need to.
Also, with the reserve fund you’ll have under my plan you’ll be able to use it (ONLY IF IT’S A LEGITIMATE EMERGENCY). If you consolidate all your bills and have an emergency what do you do?
I’ll concede the point that if you can write off your interest payments on your taxes that isn’t a bad thing. But, you’re taking short term debt that you can pay off in a year, 2 years, or under 5 years and turn it into 30 YEARS of payments that will cost you more in the long-run.
Finally, debt counseling usually involves these folks negotiating some of your debt down so they can get paid (yes they are working and will get paid for the work). The problem with debt counseling is it will be noted on your credit report. This isn’t good for several reasons.
First Lenders and the Big Banks look at your credit report and they’re not dummies. They can tell that the creditors on your credit report didn’t get all of their money. Believe it or not they view bankruptcy better then credit counseling because with bankruptcy the problem’s been solved.
Credit counseling prolongs the problem.
Also credit counseling hurts your credit score. You’re better off having 10 accounts than one account showing on your credit report. It’s a little complicated to explain why this is the case but it has to do with complex computer credit scoring models.
In fact it’s better to have 10 accounts showing on your credit then one and its better to have room to borrow on all of those accounts than just one account (see my kit, From Debt to Cash to understand why this is).
Ignore the credit counselor like the flu and use my strategies posted on this blog or get my kit, From Debt to Cash.
A toast to debt free living.
David…
My advice is to start running (AWAY) from these guys.
I know what you’re thinking. These guys are offering you an easy solution to the problem of to much debt. They say that all your problems will be wiped away in one shot! Many times they’ll offer to lower your overall interest rate and sometimes be able to deduct your interest from federal taxes.
Here’s why they are full of it and you could go bankrupt listening to their advice.
I’ll address the idea of borrowing more first. In my kit, From Debt to Cash, I talk about how you cannot borrow your way out of debt. It may sound like common sense, but it’s true. How can you borrow your way out of debt?
You can’t! You cannot borrow more money and get out of debt. The only way to get out of debt is to pay off your debt.
Here’s one problem with loan consolidations (and by the way there are a myriad of problems with this) you’ll end up with one payment. Well, one big payment is not necessarily the best way to go.
Let’s say you have 10 credit cards you’re trying to pay off. If you consolidate into one payment and have an emergency come up you may not be able to make your consolidate one payment because it’ll be pretty high.
If, however, you stick with multiple bills they are likely to be smaller. If you use my $15 dollar a day strategy you’ll be able to pay more toward one of the 10 bills until you pay off one bill at a time. In other words, there’s room for staggering bills if you need to.
Also, with the reserve fund you’ll have under my plan you’ll be able to use it (ONLY IF IT’S A LEGITIMATE EMERGENCY). If you consolidate all your bills and have an emergency what do you do?
I’ll concede the point that if you can write off your interest payments on your taxes that isn’t a bad thing. But, you’re taking short term debt that you can pay off in a year, 2 years, or under 5 years and turn it into 30 YEARS of payments that will cost you more in the long-run.
Finally, debt counseling usually involves these folks negotiating some of your debt down so they can get paid (yes they are working and will get paid for the work). The problem with debt counseling is it will be noted on your credit report. This isn’t good for several reasons.
First Lenders and the Big Banks look at your credit report and they’re not dummies. They can tell that the creditors on your credit report didn’t get all of their money. Believe it or not they view bankruptcy better then credit counseling because with bankruptcy the problem’s been solved.
Credit counseling prolongs the problem.
Also credit counseling hurts your credit score. You’re better off having 10 accounts than one account showing on your credit report. It’s a little complicated to explain why this is the case but it has to do with complex computer credit scoring models.
In fact it’s better to have 10 accounts showing on your credit then one and its better to have room to borrow on all of those accounts than just one account (see my kit, From Debt to Cash to understand why this is).
Ignore the credit counselor like the flu and use my strategies posted on this blog or get my kit, From Debt to Cash.
A toast to debt free living.
David…
Thursday, March 27, 2008
A recent survey found most people have no strategy
To manage their debt and some struggle to make monthly payments. Many of these folks plan to go deeper into debt for big-ticket purchases.
We’re never taught how to manage our money in school. Even worse, our parents are no help and we tend to follow their lead of not knowing any better. One thing you rarely hear me go off about is budgeting. I’m not a budgeter and if you follow my strategies for getting out of debt you don’t have to worry about budgeting.
Typical U.S. households carry $9,200 in credit card debt.
Lending Tree did a survey and found:
80% of respondents said they don’t plan to seek professional help to manage their finances or debt
30% said they’ll develop a plan on their own
13% said they have no intention of developing any kind of financial plan
33% of those concerned about their debt have a debt-to-income ratio of 50% or above, about 10% higher than the national average. Nearly 25% have a debt-to-income ratio exceeding 50%. Many financial planners say a debt-to-income ratio of about 33% is manageable.
19% of respondents concerned about debt said they plan to purchase a car in 2005 and 21% plan to make home improvements valued at more than $3,000
76% have outstanding balances on their credit cards or have personal loans, and 37% of those make only the minimum monthly payment.
Despite growing debt and lack of a budget, 40% of the respondents said they’re knowledgeable about personal finance
First and foremost. Your debt to income should bet a big fat ZERO! No debt is good debt. This survey shows how folks are struggling get by. The reason these folks are struggling to get by is because they have debt.
Let this be your wake-up call to get rid of the 80% percent attitude of living in debt and bondage. Instead, put yourself into the 20% crowd that doesn’t live beyond its means but below their means.
Get your strategy together through this blog and my kit, From Debt to Cash.
David…
We’re never taught how to manage our money in school. Even worse, our parents are no help and we tend to follow their lead of not knowing any better. One thing you rarely hear me go off about is budgeting. I’m not a budgeter and if you follow my strategies for getting out of debt you don’t have to worry about budgeting.
Typical U.S. households carry $9,200 in credit card debt.
Lending Tree did a survey and found:
80% of respondents said they don’t plan to seek professional help to manage their finances or debt
30% said they’ll develop a plan on their own
13% said they have no intention of developing any kind of financial plan
33% of those concerned about their debt have a debt-to-income ratio of 50% or above, about 10% higher than the national average. Nearly 25% have a debt-to-income ratio exceeding 50%. Many financial planners say a debt-to-income ratio of about 33% is manageable.
19% of respondents concerned about debt said they plan to purchase a car in 2005 and 21% plan to make home improvements valued at more than $3,000
76% have outstanding balances on their credit cards or have personal loans, and 37% of those make only the minimum monthly payment.
Despite growing debt and lack of a budget, 40% of the respondents said they’re knowledgeable about personal finance
First and foremost. Your debt to income should bet a big fat ZERO! No debt is good debt. This survey shows how folks are struggling get by. The reason these folks are struggling to get by is because they have debt.
Let this be your wake-up call to get rid of the 80% percent attitude of living in debt and bondage. Instead, put yourself into the 20% crowd that doesn’t live beyond its means but below their means.
Get your strategy together through this blog and my kit, From Debt to Cash.
David…
Wednesday, March 26, 2008
A real world success story
I’ve been working with a couple on paying off their bills and something magical happened today that I can only describe as FANTASTIC.
It had been 3 months now of paying down bills and my couple has endured several set-backs. The first set back was spending money saved through moving in with family.
It spurred me to write about NO PAIN NO GAIN. If it’s to easy and if you don’t have to suffer you generally take it for granted and don’t make the necessary changes in your life to get you on the right track of Debt Free Living.
I’ve often said that you have to get mad. You have to get sick and tired of being in hock up to your keaster. It’s that aggravation that’ll make you want to change your behavior and go from Debt to Cash.
The magical thing about this couple is all of a sudden after three months it finally sunk in and they actually have made some changes. Those changes have sunk in to the point that it is second nature now for these two to pay cash instead of credit.
The other amazing thing that happened to this couple is they came into some money (unexpected). Instead of blowing the money on a vacation or shopping they actually used the money to pay off more debt and they are ahead of schedule.
You can do it too. All you have to do is continue to pay down your debt and quit using credit cards. Go from debt to cash in every part of your life.
David…
It had been 3 months now of paying down bills and my couple has endured several set-backs. The first set back was spending money saved through moving in with family.
It spurred me to write about NO PAIN NO GAIN. If it’s to easy and if you don’t have to suffer you generally take it for granted and don’t make the necessary changes in your life to get you on the right track of Debt Free Living.
I’ve often said that you have to get mad. You have to get sick and tired of being in hock up to your keaster. It’s that aggravation that’ll make you want to change your behavior and go from Debt to Cash.
The magical thing about this couple is all of a sudden after three months it finally sunk in and they actually have made some changes. Those changes have sunk in to the point that it is second nature now for these two to pay cash instead of credit.
The other amazing thing that happened to this couple is they came into some money (unexpected). Instead of blowing the money on a vacation or shopping they actually used the money to pay off more debt and they are ahead of schedule.
You can do it too. All you have to do is continue to pay down your debt and quit using credit cards. Go from debt to cash in every part of your life.
David…
Tuesday, March 25, 2008
How To Master The Art-And-Science
Of debt free living and it begins by changing your mindset From Debt To Cash.
The formula is easy and the system is literally a step-by-step system that’ll get you from debt to cash.
Send me a note for your FREE guide to going from Debt to Cash.
Debt free living is by far the best thing that’ll ever happen to you. Debt free living allows you to live a more simple way in a complicated world. A world less complicated amounts to less stress, better relationships, and more money for you.
In my kit, From Debt to Cash, I lay out a complete and amazing system that takes you from debt to cash. The amazing thing is it works.
This blog’s designed to motivate and noodge you along. As I’ve said in previous posts we all need a little encouragement. No one and I mean no one want’s you to be debt free. When you really think about it all the encouragement you’ve ever gotten has been from the Big Banks and Finance Companies encouraging you to go into debt up to your eyeballs.
Your family, friends, and neighbors are probably all members of the 80% percent club. And the 80% percent club is a group of folks that continue to do what the crowd does. It’s all like a herd mentality. Why would you like to be like everyone else?
If you can’t find a mentor in the 20% percent club then whatever the 80% percent crowd is doing, DO THE OPPOSITE.
Or, get my kit and continue to read these posts. I’m a member of the 20% percent minority. We think differently, live differently, and enjoy life differently all because we’re willing to do what the majority either won’t do or can’t do.
Make your plan, do your plan, and get it done. Go for it! Become debt free now. You can do it. Now…Just do it!
David…
The formula is easy and the system is literally a step-by-step system that’ll get you from debt to cash.
Send me a note for your FREE guide to going from Debt to Cash.
Debt free living is by far the best thing that’ll ever happen to you. Debt free living allows you to live a more simple way in a complicated world. A world less complicated amounts to less stress, better relationships, and more money for you.
In my kit, From Debt to Cash, I lay out a complete and amazing system that takes you from debt to cash. The amazing thing is it works.
This blog’s designed to motivate and noodge you along. As I’ve said in previous posts we all need a little encouragement. No one and I mean no one want’s you to be debt free. When you really think about it all the encouragement you’ve ever gotten has been from the Big Banks and Finance Companies encouraging you to go into debt up to your eyeballs.
Your family, friends, and neighbors are probably all members of the 80% percent club. And the 80% percent club is a group of folks that continue to do what the crowd does. It’s all like a herd mentality. Why would you like to be like everyone else?
If you can’t find a mentor in the 20% percent club then whatever the 80% percent crowd is doing, DO THE OPPOSITE.
Or, get my kit and continue to read these posts. I’m a member of the 20% percent minority. We think differently, live differently, and enjoy life differently all because we’re willing to do what the majority either won’t do or can’t do.
Make your plan, do your plan, and get it done. Go for it! Become debt free now. You can do it. Now…Just do it!
David…
Monday, March 24, 2008
Insurance, Investments, & Retirement
This question comes up every now and than so I thought I’d address it right now. First we’ll talk about insurance. There are various opinions on insurance and what the proper coverage should be.
It’s my belief that you should insure for catastrophe. If you insure for every possible loss you could find yourself cash poor and over insured. On the other hand, if you insure for catastrophe you’ll be covered for the big things. For example, if you lost your car today could you recover financially?
Catastrophe insurance allows for you to survive the big stuff while not sweating the small stuff. One way to not sweat the small stuff is to raise your deductable. Raising your deductable is a great way to lower you insurance premium while covering yourself for the big losses. (All you have to do is to bank the deductable for the emergency)
Investments are real important after you pay off all your debt. Here’s a simple rule of thumb with investments. Let’s say you want a return of 7% and you can get it in a certain type of investment. If you still owe credit card debt odds are it will cost you more to keep the debt than to pay it off first. Once paid off than research a quality investment (credit cards average nearly 15% interest) for the return you’re looking for.
Pay off all your debt first it’s the best investment you’ll ever make.
Retirement is the biggest challenge yet. There are several variables to consider when saving for retirement such as investment return and inflation. First, many experts say you should have 70% plus of your annual salary for income when retired (your debt is the most important).
Here’s a simple formula. If you own everything you’ve got you will not need 70% of your annual salary to retire. Many folks discover they don’t need nearly as much money saved as they first thought for several reasons.
Take a sheet of paper and write down your mortgage payment, car payment, fixed debts, and credit card payments. Add all those monthly numbers and add 25% to the total (this allows for tax and it’s a rough guesstimate)
Let’s say your mortgage is $1200, car $350, and fixed debt $200, and credit card payments $175. 25% added to the total is $481.25. The total of $2,406.25 is how much you’d have to gross just to make your debt. Now, add your total living expenses.
If you own everything you have you’ll be able to live on your living expenses. It’s a big difference financially and the reason why you won’t need 70% of your annual salary to retire.
If nothing else all the above should be a lot of incentive to pay off your debt now.
David…
It’s my belief that you should insure for catastrophe. If you insure for every possible loss you could find yourself cash poor and over insured. On the other hand, if you insure for catastrophe you’ll be covered for the big things. For example, if you lost your car today could you recover financially?
Catastrophe insurance allows for you to survive the big stuff while not sweating the small stuff. One way to not sweat the small stuff is to raise your deductable. Raising your deductable is a great way to lower you insurance premium while covering yourself for the big losses. (All you have to do is to bank the deductable for the emergency)
Investments are real important after you pay off all your debt. Here’s a simple rule of thumb with investments. Let’s say you want a return of 7% and you can get it in a certain type of investment. If you still owe credit card debt odds are it will cost you more to keep the debt than to pay it off first. Once paid off than research a quality investment (credit cards average nearly 15% interest) for the return you’re looking for.
Pay off all your debt first it’s the best investment you’ll ever make.
Retirement is the biggest challenge yet. There are several variables to consider when saving for retirement such as investment return and inflation. First, many experts say you should have 70% plus of your annual salary for income when retired (your debt is the most important).
Here’s a simple formula. If you own everything you’ve got you will not need 70% of your annual salary to retire. Many folks discover they don’t need nearly as much money saved as they first thought for several reasons.
Take a sheet of paper and write down your mortgage payment, car payment, fixed debts, and credit card payments. Add all those monthly numbers and add 25% to the total (this allows for tax and it’s a rough guesstimate)
Let’s say your mortgage is $1200, car $350, and fixed debt $200, and credit card payments $175. 25% added to the total is $481.25. The total of $2,406.25 is how much you’d have to gross just to make your debt. Now, add your total living expenses.
If you own everything you have you’ll be able to live on your living expenses. It’s a big difference financially and the reason why you won’t need 70% of your annual salary to retire.
If nothing else all the above should be a lot of incentive to pay off your debt now.
David…
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