Are you tired of being in debt yet? I don’t need to hear your answer to know it’s a resounding Yes! If debt has you concerned, you are definitely not alone. According to the Federal Reserve Board, U.S. consumer debt was at about $2.2 trillion in December of 2005.
Did you notice the number I just gave you? Most of you probably read $2.2 trillion and didn’t even give it a second thought. I did the same thing the first time I read it. After all, what does a number like that mean to the average person working their butt off at a job for $35,000 or less a year? Not much. Well keep reading because I am about to paint a small picture for you. I want you to get at least a basic idea of how much debt Americans are in.
If I gave you a modest sum of money to spend on a daily basis, say $1 million, how long do you think it would take you to spend $2.2 trillion? Are you ready for this? It would take you approximately 6,027 years! So if I gave you and everyone else in your family $1 million a day to spend for the rest of your lives, you still couldn’t spend it all.
Let’s look at this from another point of view. There are approximately 300 million people in America. That includes every man, woman, and child. If we gave every American an even share of that $2.2 trillion debt, we’d each owe $7,333. Not a pretty picture.
American Consumer Debt – Just a Thought
09-03-2010 by adminFacts About Debt Counseling
by admin
Current statistics show that most transactions in the United States are based on credit. Many people think that it is a convenient way to shop, but it can be detrimental to your financial health with interest rates as high as 29.99%. With these kind of interest rates, it is a wonder people have the financial burden they have.
Once people get into financial hardship they often seek the advice of others. One way to get help is through debt counseling. Debt counseling is something that should be done before people go out and get credit, but unfortunately many wait until they are already in trouble. Debt counseling will not only teach people how to manage their debts but prevent them from further driving their debt upwards.
When a person gets counseled for their debts, they focus on the client being aware of their expenses and income. Many people are not aware they are living beyond their means. If you are spending more than you are earning in a given reporting period (for example, a month) and this happens continually, then you are living beyond your means. The money has to come from somewhere, it usually comes in the form of credit cards and personal loans. Many people even get home equity loans, endangering their home, to pay off credit cards and personal loans. The problem with this is so many go out and charge the credit cards up again, driving them further in debt. The client must learn to live within his means and delay the gratification of having something they want. Debt counseling also teaches the client about their credit score and the importance of it. Your credit score can effect you in many different ways. Many employers check your credit, so it could potentially keep you from getting that perfect job you always wanted.
Debt counselors will also teach the client about the entire credit card process. They will show them how minimum payments are calculated, interest, late fees and other charges. Many people do not fully understand how credit cards work thus getting them in increasing mounting trouble. Many people do not know their balance let alone the amount of the credit card they are actually paying off each month. If a cardholder is late, over limit and late fees can mount, causing the balance to balloon. When you get debt counseling, they teach you about your minimum payments and how the interest rate is calculated. They will calculate the best card to pay off first. Sometimes they will focus on the one with the smaller interest rate and work from there. As the one with the lowest interest rate gets paid off, then the next one will be paid and so forth.
You can have all the debt counseling in the world, but if you do not know how to manage your money, big trouble can be your reward. Debt counseling can teach you to control your expenses and keep inventory of the details of your financial situation. They will teach you to be aware of your expenses and your credit limit with the key being not to accumulate new debt specified credit limit. Once you go over your credit limit, it is very difficult to catch up after all the fees are added into the balance.
Debt counselors will teach you to use cash instead of your credit cards. With cash, over limit, late fees and interest will not be a worry. When you pay with cash, there is not extra baggage you need to worry about. A good idea is to keep a certain percentage of your paycheck out each pay period for basic expenses. When you spend the money, it is gone. Do not use plastic to supplement your income. It will only end up in a financial mess.
Debt counseling can really be helpful to the client. They teach about credit card interest rates, how to efficiently get them paid off and more. Though debt counseling is helpful, it would be wise to start the counseling before you start your financial life.
Shocking Facts – What Debt Settlement Companies Don’t Tell You
25-02-2010 by admin
If you’re thinking about using a debt consolidation or debt settlement service to help you get out of debt faster and save money on your monthly payments, make sure you do your homework before choosing a company. There are definitely shams and scams out there.
First let me say that debt consolidation is *not* the same as debt settlement/negotiation, which most people don’t realize.
Debt settlement companies charge hundreds of dollars as an initial “admin fee” to set up your account, plus a monthly service fee. The fees vary depending on the company and the amount of your debts.
Such companies take your money every month, but don’t make monthly payments to your creditors! Instead, they put it in a trust account, negotiate your debts with your creditors, then make a lump-sum payment when there’s enough in your account to pay a creditor in full.
That can take *years* depending on the amount of debt you have with each creditor. Meanwhile, you can be sued by your creditors and your wages can be garnished! (Or just don’t make payments to your creditors. You’ll end up in the same spot without paying someone to help you get there!)
Settlement companies don’t ask your creditors to stop all interest, late fees and overlimit fees from accruing. That means while the negotiations are ongoing, your bills will continue to grow! So if you’re sued and a judgement is brought against you, you’ll owe more money than before!
And shoddy companies, which there are alot of, don’t tell you *any* of this up front. I call it “getting permission by omission” because they simply don’t tell you how their program works *before* you sign an agreement with them. Or after, for that matter. But if you ask the right questions, eventually you’ll figure it out. (Or when the crap hits the fan. Whichever comes first.)
Let me give you an example of how debt settlement works.
Let’s say you have $20,000 in unsecured credit card debt. You owe $10,000 to one credit card company, $6,000 to another and $4,000 to a third. You agree to a 5 year plan where you pay $250 a month to the settlement company. (After all, $250 a month for 60 months is only $15,000, so you’re saving $5,000 and you’ll be debt-free in 5 years, right?)
The admin fee will cost you $750. Your first 3 monthly payments go towards that and nothing gets put into your trust account until your 4th month.
The settlement company keeps $50 of your $250 payment each month for the service fee. That means $200 a month is being added to your trust account.
Most debt settlement companies claim to be able to negotiate your debt for about 50% of what you owe. So let’s use the lowest credit card debt as an example.
If you owe $4,000 and your creditor agrees to accept $2,000 as payment in full, it will take 10 months at $200 per month to have enough in your trust account to pay off just that one credit card.
But remember, your first 3 payments to the settlement company only paid the admin fee. That means your first credit card settlement is 14 months *after* you started sending them money.
So what’s the problem? It’s simple. Your creditor won’t agree to accept half of your actual debt unless, or until, it can be paid in full. Otherwise, you’re expected to make your normal monthly payments.
Since you don’t have $2,000 in your trust account, and you won’t have it until more than a year after you stopped paying your creditor directly, they’ll probably take you to court and request that your wages be garnished long before you have that $2,000 built up.
And what about your other creditors? Well, they’ll be waiting even longer to get their money from the settlement company. The $6,000 debt will take 15 *more* months to pay off, assuming your creditor waits that long and agrees to 50%. And that $10,000 bill? You do the math.
On the other hand, if you signed up for a 3 year plan with the settlement company, your debts would be paid off sooner. But, the question is, will your creditors wait that long? Probably not.
The facts are, you can negotiate with your creditors yourself. Most will agree to take a smaller monthly payment from you and stop all interest and fees from accruing. And, of course, you’ll save thousands of dollars in fees to a settlement company.
Before signing up for any service, please be sure you check out the company thoroughly. And don’t let the words “non-profit” fool you either. Alot of debt settlement companies claim to be non-profit.
Going back to the example above, if you pay them $15,000 over a 5 year time frame and they settle your debts at half of what you owed, they’ll make $5,000 from you. I’d call that a profit, especially since they might not have actually helped you in any way.
Most companies will allow you to cancel your account and get a refund of what you’ve paid, less the non-refundable admin fee and the monthly service fees. If you feel you’ve been mislead about their program, don’t hesitate to argue til the cows come home. File a complaint with the Better Business Bureau or hire an attorney if you feel you’re getting nowhere.
You can visit the Better Business Bureau’s website ( http://www.bbb.org ) and find reports on hundreds of companies. Here’s a small listing of companies that have poor reputations with the BBB:
National Consumer Debt Council LLC – Irvine, CA (A.K.A. NCDC, United Consumer Law Group)
Financial Rescue Services – Burbank, CA
Debt Legal Services – Anaheim, CA
American Debt Relief – Los Angeles, CA (A.K.A. A M Debt, American Debts Relief, Debt Relief)
Please be very cautious when choosing a debt help company and ask lots of questions before agreeing to anything. If you find they’re evading your questions, run fast and run far. There are reputable companies out there, so keep looking until you find one.
Clear Debt – Get Out of Financial Trouble
18-02-2010 by admin
Given that so many of us have such an intimate relationship with debt it would seem logical to assume that human beings were experts in debt management. This of course couldn’t be further from the truth. Even though many of us face regular adverse financial situations from the moment we leave school until retirement we are hopelessly inept at dealing with the consequences of debt.
To help eradicate this gap in our money management knowledge it is important that we each take it upon ourselves to gain an understanding of debt. Get out of debt information is readily available these days due to the high number of people with money problems, make sure you educate yourself in debt management so that you can get yourself to a place where you no longer have to worry about your financial situation.
To get you started, here are 3 tips to follow to help you get your finances under control:
1. Spend Less Than You Earn – If you can live by this simply rule you will not only get out of debt but you’ll never find yourself in this situation again. Start by making a budget to discover how much you spend each month and how this compares to your household income.
2. Get Rid Of Your Credit Cards – Plastic is only fantastic if you can discipline yourself to pay off the balance in full each month. If you can’t its probably because credit cards make it too easy for you to spend without thinking about the consequences, in that case its time to cut them up.
3. Be Aware Of Your Spending Tendencies – Wandering through life with a credit card in your hand unaware of your spending habits is a recipe for financial disaster. Teaching yourself financial awareness will greatly improve your debt situation very quickly.
Debt Management is not difficult, and with a little study you will become your own financial expert capable of dealing with all your own money problems.