Overcoming
Debt:
The Way to Solvency
Personal
Debt is Skyrocketing
With
the exception of a small rise in middle-class wages in the
late 1990s, real wages have simply not kept pace with inflation.
In fact, the median income of average households has fallen
steadily for five years in a row. Despite these facts, consumption
continues to increase. How can this be? The answer, unfortunately,
is that people are incurring an increasing amount of personal
debt. We’re talking here about the 95% of us who are
not wealthy, who are not saving enough for retirement, and
who are bombarded constantly to buy, buy, buy.
It’s
true that the nation’s economy is growing—how
many times have you heard politicians point that out, while
you wonder why you’re still so far in debt? What they
fail to mention is that the economic expansion is largely
the result of people overextending themselves, using credit
to buy such necessities as food and clothing, and even taking
cash advances on credit cards to pay mortgage payments.
A Federal Reserve study showed that 43% of US families spend
more than they earn. The only way to do that is to use credit.
And it's pretty obvious that if you use credit to spend
more than you earn, you are going to be in debt.
The
credit card industry collected 43 billion dollars
in late-payment, over-limit, and balance-transfer fees in
2004. The major advertising ploy used by all the credit
card companies sounds like a scene out of Brave New World—“You
like it. You deserve it. Buy it.” It’s easy to
fall into their supposedly people-friendly trap. But the
truth is, they exist for one reason only, and that is to
make money from you.
“Uh-oh,
the mail is here.”
With
the typical American family now owing $19,000 on non-mortgage
debts, it’s no wonder that mail deliveries have become
something to dread. Which bill is due or overdue? How much
are the finance charges on credit card A, B, C, D...and
on and on. (The average family has 13 credit, debit and
store cards.) Sandwiched between the bills are offers from
other credit card companies—or even the same ones you’ve
already got. “Transfer your balances! No interest for
six months!” Many people go this route as a way out.
It can buy you some time, but it doesn’t work forever.
The proverbial piper must eventually be paid—and when
that time comes, it will be worse than ever.
“But
I always make the minimum payment!”
Making
just the minimum payments on your credit cards will keep
your credit picture in focus as far as the credit reporting
agencies are concerned. “Pays required amount. Pays
on time.” Sounds good, doesn’t it?
Actually,
you’d be playing right into the hands of your creditors.
The less you pay on your balance, the more interest
they make. Let’s say you have a balance of $6000 on
a credit card and you STOP using it today. If your interest
rate is 17.5%, a pretty average percentage, and you pay
the minimum payment of $90 every month, it will take you
almost 20 years to pay off the balance. You will
have paid $21,240 on that $6000 balance. They made $15,240
in interest—and maybe additional amounts in annual
fees.
Think
about what you could do with $15,240! Wouldn’t
you rather be tucking that money into an IRA or a college
fund?
Medical
Expenses Are Enough to Make You Sick
A 2006 study conducted by the Center for American Progress
showed that most older Americans who find themselves in
debt do so because of the high cost of healthcare and prescription
medications. In fact, anyone of any age with a serious illness
or debilitating injuries suffered by any family member can
soon find themselves in deep financial trouble. Even if
you have health insurance, there are deductibles, co-pays,
supplies and drugs that aren't covered. With today’s
astronomical healthcare costs, a policy’s maximum lifetime
payout can be reached with alarming speed. When they stop
paying, and care is still needed, where do you turn? A medical
emergency can be devastating to any but the wealthy.
When
Keeping Up With the Joneses Is a Bad Idea
In recent years, low mortgage rates and steadily rising
real estate costs made home ownership seem like an excellent
investment. While that is still true, some people find themselves
in trouble now if they financed their home with an A.R.M.
(adjustable rate mortgage) or an interest-only loan. When
the federal reserve began raising interest rates, ARMs started
resetting, increasing mortgage payments by as much as 25%.
If you took an interest-only loan to buy a dream house just
before the housing bubble burst, prepare yourself for disaster.
With prices declining, there’s a high possibility that
if you can’t make your payments, you will have to sell
the home for less than you owe—maybe a lot less.
“Wait!
There must be a way out.”
You
could take an equity loans on your house—assuming you
have enough equity to make it worthwhile, and that you can
handle the equity loan payoff. Although you could try a
credit counseling agency, and IRS inquiry in May, 2006,
revealed that the 41 so-called credit counselors they examined
were of virtually no benefit to consumers. Investigations
into other agencies are on-going.
“I can always go bankrupt.”
Recent
changes in federal bankruptcy law have made the procedure
so expensive that people in dire financial straits cannot
even afford the filing fees. While people often think that
declaring bankruptcy means you can toss out your bills and
just pay cash until your credit rating improves, the new
laws demand a payback percentage to creditors. Credit counseling
is now mandatory, although the chances are you will find
yourself paying a bogus “credit counselor” for
nothing more than a checkmark on your bankruptcy record
that you’ve completed the counseling.
”Is
There a Reasonable Solution?”
Yes.
Think about it. If you need more money to pay your debts,
then you simply need to make more money. This doesn’t
mean you need to go out and search for a new job in a crazy
job market. It simply means that you need another income
source to add to those you already have.
Ideally,
you need to find a way to bring in extra income without
undue stress on yourself and your family. You should still
have some down time for relaxation. If this sounds impossible,
there is good news: It can be done. Thousands of
other people have already proven it.
If
you're determined to get out of debt, a home-based business
is a viable method for generating a genuine second income.
It’s a far cry from working for peanuts at a night
job in a retail store, warehouse, or fast-food joint. You’ll
save money on commute time and gas, and the only equipment
you’ll need is a computer and a telephone.
Your
first goal will probably be to heave a huge sigh of relief
as you realize your balances are declining and you’re
getting ahead. Like many others, you may discover that you
were always cut out for running your own business and increasing
your personal wealth more every day. Your second job could
become so rewarding that you will decide to make it your
only job. Imagine working from the comfort of your home,
interacting with people who started out just like you and
are now making fortunes.
The
way to financial solvency—even wealth— is open
now.
If
you're ready to pop that steadily swelling debt balloon—ready
to shape your future the way you’ve dreamed it could
be—you can begin right now.
Simply fill out the form and we’ll send you free,
no-obligation information.
