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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.
Heidi
B. Dietrich
617-905-3946
Email
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