Credit reports are a funny thing that even the most seasoned of financial experts have trouble understanding. With all of the “myths” and “misconceptions” about credit scores swirling around it can be difficult to decipher myth from the real truth.

Recently my friend went to a car dealership in search of a new vehicle to replace their old vehicle. Unfortunately, they didn’t have the money saved up to purchase the vehicle (I advised paying cash makes the most financial senseJ), and were going to have to finance the vehicle.

When applying for any loan or line of credit you are subjected to a credit pull to determine your credit worthiness. After the credit pull was complete and the score was in plain sight my friend was shocked to find their score was much lower than they expected. Not only was this car loan going to cost them more but their “lower” score was going to affect their insurance payments and maybe even their chances for employment.

They had many questions for me as they had fallen victim to believing the many myths about credit and had no idea they were causing the damage they did through actions they thought were innocent.

So let’s debunk some of these myths to clear up a few of the misconceptions about credit scores so you can get your credit score in tip top shape.

Myth vs. Reality

The BBB recently published a video by the NFCC, The Many Urban Myths About Money and Credit where some of the most common myths about credit reports are debunked.

Here are the top 5 myths:

1. “Bankruptcy Wipes the Slate Clean, Leaving me Debt Free”

2. “As Long as I’m paying something toward my debt, I’ll remain in good standing”

3. “I don’t have any credit problems. so there is no reason for me to check my credit report”

4. “When cosigning a loan, I am not responsible for the debt”

5. “The credit card companies know what I can handle”

My friend had actually believed 2 of these 5 myths; myths 3 and 4. They admitted to not having checked their credit for at least 2 years. There is no reason not to check your credit at least once a year, it’s free!

They had also gone through a divorce about 2 years ago and unfortunately had no idea the accounts they were cosigners for were affecting their credit. Their ex had let the accounts go delinquent causing a major drop in their score as they were equally responsible for the debt.

Many of us actually believe these myths and hurt ourselves by not understanding how credit scores really work.

5 More Myths for Thought

1. The amount of money I make affects my credit score. Debunk: While your income may be a factor in being approved for a loan, your income is not considered as a factor in your score. When computing your credit score, credit bureaus only look at things such as your payment history and how much debt you owe; personal information like your gender, age, and location can’t legally be considered.

2. Checking your credit will lower your score. Debunk: The Fair Credit Reporting Act, entitles you to one copy of your credit report a year from each of the three major credit bureaus. You can check once a month or more if you want (it’s not necessary) and it won’t adversely affect your score.

3. When you get married so does your credit. Debunk: Marriage does not mean married credit scores, each of you has your own profile. However, your spouse’s credit habits can affect your credit score, specifically activities like paying bills on time.

4. If you co-sign on a loan, your credit score is not affected. Debunk: When you co-sign for a loan, you are equally liable (along with the primary borrower) to repay it. This debt will appear on your credit report and will have the same ramifications as if it were your name alone. The bottom line is know who you are co-signing with. If the other person pays late, that late payment will show up on your credit profile as well.

5. If you don’t use it you lose it, your credit that is. Debunk: Your credit score is based on active accounts, but that doesn’t mean inactive accounts that are still open just disappear. Those accounts are still part of your “available” credit.

My friend got their “crash course” in credit report myths vs. truths after their disheartening experience at the car dealership. Knowledge is power, so get to know your credit report!

Have you ever been blindsided by your credit report?

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The economy has taken its toll on just about everyone, both consumers and business. In fact either you or someone close to you has likely fallen victim to a foreclosure, layoff, or downsizing. When you fill up at the pump you wonder when a gallon of gas and a gallon of milk began to cost the same amount.

As you ponder the rising costs of just about everything you buy you also begin to see your so called financial future disappear right before your eyes as the big banks you trusted with your life savings slowly swindle your retirement savings right before your very eyes. Yes I am talking about those hidden fees and costs we just can’t avoid.

Hidden fees and surcharges, pack their punch as the average American pays at least $942 each year in hidden fees according to research conducted by the Ponemon Institute. And that number continues to rise as consumers are passed on fees by businesses and industries that have taken financial hits themselves.

So how can you be prepared for battle when it comes to hidden fees and the unsuspecting corners they emerge from? Let’s find out so we can fight back!

Credit card companies & banks

Credit card companies and banks are probably the worse when it comes to hidden fees. The new Consumer Financial Protection Bureau requires banks to offer customers a one-page fee disclosure box, as credit card companies are now required to do thanks to the Card Act.

So what fees should you be looking for? For credit cards:

• Cash advance fees
• Late payment fees
• Balance transfer fees
• Card replacement
• Annual fees
• Phone payments

For banks:

• Overdrafts
• Stop-payments
• Minimum balance requirements
• Wire transfers
• Checks

Credit card and bank fees have become both more common and more expensive in recent years, even as new regulations have sought to keep institutions from taking advantage of consumers. In fact, some of the newest, sneakiest charges are a direct result of government regulation. Examples include increased maintenance fees and mobile phone deposits.

Same price…less product

Yes it is true you are paying the same, but getting less. Consumer Reports found that companies have reduced package sizes by as much as 20 percent.

Check out incredibleshrinkinggrocceries.com for the latest examples of what you are paying more for, but getting less of.

To combat the hidden expenses in your grocery cart pay attention to the per-unit price, and buy in bulk whenever possible.

Hidden Airline Fees

If you have done any traveling over the past few years you can’t help but notice the extra fees you must budget for when taking a trip.  Here are just a few fees that may take you by surprise:

• A fee for every bag you bring.
• Re-booking fees.
• Want extra legroom-you’ll pay extra for that.
• Headphones for the in air movie-that’ll cost you.
• Long trip? Want a blanket? A pillow? You guessed it you’ll pay extra for them too.

Dining Out  

Going out for dinner is always a highlight for me. I don’t have to cook and best of all there is no cleanup-I love a much needed break every now and then. But is it worth it? I budget for these nights of freedom and the hidden fees make it almost impossible to actually enjoy nights out without feeling anxiety about blowing my budget. Here are just a few to watch out for:

• The plate share fee. Why should I pay more to eat a healthy size portion vs. the monster size that is served?
• Special order requests.  My family has various dietary needs; diabetes and celiac disease. So we often need to make special requests-yes some restaurants charge extra for that.

Cell Phone Bills

This is one of the industries that really take advantage of consumers. According to Billshrink.com, “80 percent of Americans overpay on their cell-phone service by more than $800 million a year, or $300 a person on average.”

Are you kidding me? That is silent robbery. After reading this I called my cell phone company and was able to reduce my bill by $75 a month. Yes I had been paying $75 a month more than I should have been for over 3 years. Here are a few of those hidden fees that make your bill so high:

• Not bundling your features.
• Being in the wrong monthly plan.
• Paying for overages-texts and calls.
• Internet or data packages mandatory for smartphones.
• Early termination fees.
• Directory assistance calls.

Consumer Reports says that one of the biggest ways cell phone companies rip consumers off is by encouraging them to sign up for plans that leave them with large quantities of unused minutes.

According to a 2011 investigation by the Senate Commerce Committee, “cell phone companies have also been known to charge customers for services that they do not yet offer and allow third-party companies to attach mystery costs to customers’ bills – a practice called “cramming” that has cost consumers at least $2 billion since the 1990s.”

So buyer beware ask questions, demand answers, and don’t just agree to “mystery” fees.

As you can see it all adds up; a few dollars in a restaurant, a few more on your flight, and a cell phone bill that costs more than your car payment. The best way to combat hidden fees is to uncover them–be an informed consumer.

What are your tricks for dealing with hidden fees?

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“Mommy please can we get one of those inflatable Santa’s?” This is the plea I have heard from my eight year old son since we began to decorate (with our already purchased) holiday decorations the day after Thanksgiving. My answer remains constant, “Not right now buddy, we don’t need an inflatable Santa.” 

Unfortunately millions of Americans apparently do feel they need inflatable Santa’s, two Christmas trees, and thousands of twinkle lights to adorn their homes so they can feel the magic of the holidays. 

According to a Bloomberg report, “This year U.S. consumers will spend $6 billion on decorations, the most in at least seven years, according to the National Retail Federation, which began tracking the data in 2005.” 

Why the Increased Spending on Holiday Décor? 

Different strokes for different folks I guess. We all spend money for different reasons; to make us feel better, out of necessity, or because we feel compelled to have a coveted item. 

The holidays are a time when many of us, despite what may be happening in our lives feel more sentimental than usual and this can lead to increased spending with money we don’t have.  

This is why CareOne Debt Relief Services  see’s a decline in new enrollments and a surge of posts in their community with customers stating, “I can’t make my payment this month, can I skip it?” 

No one wants to part with their credit cards over the holidays because they feel that they need them to purchase holiday gifts, decorations, and items for holiday gatherings. By participating in a Debt Management Plan the goal is to stop using your credit cards and pay off the balances, not get into more debt. This is why most customers’ credit card accounts are closed and CareOne recommends they include all of their accounts in their plan; to avoid the temptation at times likes this. 

Skipping payments even around the holidays is not recommended as CareOne states, “You are only delaying your progress and run the risk of losing benefits you may have been provided by creditors.” Even with that risk many customers forgo their December payments in an effort to make their holidays merry and bright with increased spending on credit.

For those trying to get out of debt on their own the same concept holds true. They pay only the minimums on their cards, skip payments, or open up additional accounts around the holidays. 

Saving for the Holidays 

A concept that has seemed to lose its luster over the years are Christmas club accounts offered through local banks. When I was younger I remember hitting the bank with my mom when she received her weekly paycheck and watching her whip out her Christmas club book for the teller to stamp. The amount she applied to the account each week was small, but it added up to magical Christmas’s for my brother and I.  

As I have said in a few previous posts my dad’s motto when it comes to spending has always been, “If you can’t afford to pay cash, you don’t need it.” While my mom no longer does the Christmas club thing she carefully saves each month of the year for holiday presents. While not considered rich by today’s standards my parent’s have absolutely no debt and don’t intend on incurring any. 

Holiday Magic Doesn’t Have to Cost a Thing 

I know my son wants an inflatable Santa for our yard, but I am just not willing to blow my budget to see him smile. Instead I have several activities planned for the upcoming weeks that are sure to make his face light up:

• A drive through a local neighborhood, that goes all out with their outdoor light displays. 
• A holiday movie marathon in our pj’s while stringing popcorn and sipping hot chocolate.
• An afternoon of holiday baking done with (almost free) ingredients I have been purchasing with coupons and sales.
• A visit to see Santa at a local nursery complete with free games and activities for the kids. 

While most of these events are specific to my geographic location, there are many similar activities available all across the country. Do your homework, ask around and see what kind of magic you can dig up for your family.  

For me the holidays are a special time and nostalgic, but I won’t let my emotions snuff out my financial goal to live debt free! 

How do you feel about inflatable Santa’s and using credit to fund the magic of the holidays?

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“You’ve got to build your credit” they’d say, and the reason is usually based on the myth that says in order to be financially responsible you must build your score. I despise this myth most of all because from what I see, it has ruined more lives than it has helped.

Think about it.

18 year old after 18 year old has inserted themselves into the murky waters of worshiping their credit score in order to “have stuff”. You don’t have to be a genius to look around and figure out that this has not worked. Instead, what it HAS ACCOMPLISHED is put good people who meant well in debt. Don’t get me wrong I’m not removing the personal responsibility aspect of ones choices from this argument. What I am saying is that a system designed to judge your financial responsibility on the irresponsible decision to borrow money for anything and everything is the most ridiculous thing I’ve ever seen.

Nowadays, people borrow money for EVERYTHING, and do so because they believe that they HAVE TO in order to have a good credit score! It has literally changed how people manage their finances and that is NOT a good thing!

Instead of work hard and save, it has created the mentality to work hard and pay and pay and pay for the rest of your natural life UNTIL YOU DIE!! It has created an era of financial irresponsibility, has it not?

I’ve got news for you and it’s going to sound familiar to Tyler Durden’s advice in the hit classic movie Fight Club.

YOU ARE NOT YOUR CREDIT SCORE!

The last time I checked my credit score (last year), my report basically concluded that there wasn’t enough information to base a score. I check it every year for free to make sure there are no fraudulent discrepancies.

I finally got around to checking my information this year, and as you can see by the fact that we’re already half way through the year, it is not a priority of mine. My credit score can be zero or it can be a million — I truly don’t care! I haven’t borrowed a single penny since the end of 2007 and decided at that moment that I would no longer be making my financial decisions based on my STUPID credit score.

I make the best decision for me and my family when handling our money and no score is going to change that.

My TransUnion Credit Score is 701!

I have zero negative or unsatisfactory accounts, one satisfactory account shown below, and that’s it. There is nothing else to report or base a score on. Frankly I’m puzzled as to how my score could possibly be 701. The bottom line for me is that it doesn’t matter because I truly don’t care. I have no desire to borrow money ever again for anything which literally cancels out any need to do anything based on this score.

There are so many people out there that will literally want to FIGHT YOU if you express any disdain for the importance of a credit score. You’ll often hear things like:

• You can’t rent a car! Not true, but even if it was — so what. I have a paid for car and if I have to find other options I will. I refuse to get a credit card to build credit just so I can rent a stupid car.
• You can’t get certain jobs! There are much fewer jobs that base anything on your credit score than there are that don’t.
• You can’t rent an apartment! Sure there are some “commercial properties” out there that won’t but there are SO MANY more landlords that can view a savings account statement and determine someones ability to pay.
• You can’t buy a house! Whateveeeerr! There’s still something called manual underwriting. Also, if you think the only way you can own a home is by having a mortgage then you are sadly selling yourself short — in my humble opinion.

With some of the most common myths aside, my recent report seems to suggest that you don’t have to borrow money to even have a credit score. I certainly don’t know how this will change as the years go by, but again, it will not affect how me and my family make our financial decisions.

According to ZenDough, where I was directed to receive my free score (based on a 14 day trial I plan on cancelling tomorrow), if I master the six principles that will impact my VantageScore, I will “likely” achieve my goals.

Those principles are more likely to contribute to my staying in debt if I were to base my financial life on using them.

Here’s how I see it.

Your payment history will tell you how well you have done making someone else wealthy. Your credit balance will show you how depressed you should be. Your recent credit will only prove you still don’t get it. Your utilization will indicate your ability to open new credit cards or other lines of credit — because you can never have enough debt. (note sarcasm) The depth of credit will tell you how long you have hindered your ability to make better financial decisions. And your available credit will show you how much debt you’ll eventually be in if you continue borrowing money — because with your “credit score” mindset — if you experience a major financial emergency, you’ll likely utilize it all.

Those aren’t principles in my book — they’re pitfalls.

My advice to you would be to do the right thing with your money regardless of whether or not your score will rise or fall. If you have to go into debt in order to keep the credit score ball rolling then it might be time to re-evaluate the real purpose of that score.

Is it intended to help you financially, or is it more accurately a way for you to make someone else very, very wealthy? Do you really want payments for the rest of your life — all for a stupid score?

You decide. I already have.

Photo Credit: Memory_Freak

An Enslaved Debtor complete with bondage. (A person in a suit or dress, with mini cars, school books, shopping bags, bank statements and Starbucks coffee cups glued to it, while sporting the provocative shackle and handcuff accessories.)

Seriously though…

How special is your Halloween celebration? Do you go ALL OUT, or do you save your greenbacks for some Christmas shopping?

According to a survey by National Retail Federation (NRF), Americans are expected to spend 5.8 BILLION dollars this Halloween. That’s not even close to what will be spent on Christmas, but this number surprises me because of the status of the economy. This number suggests that the average American will spend about $66. Just over $10 more per household than last year.

A question I wish they had answered is how much will the average American spend on credit cards? Halloween is not a reason to play Russian roulette with your finances, if you are already unprepared, especially in these uncertain times.

If you have the money fine, but don’t run out there and put $66 on a credit card if you’ve got mounting debt and no savings put aside. Your behavior prior to now shows what’s likely to occur, despite your very best efforts to follow through.

How many times have you said you were going to pay something off at the end of the month but then you didn’t?

I’ve said it a gazillion times myself, and I was completely convinced every single time that I was not joking this time. My point is this.

Got DEBT, spend cash! Although I have stopped using credit cards completely, I’m not saying you should stop using them forever — just for now. Just until you get your financial behavior under control.

Under control doesn’t mean simply paying down the balance. It means paying off ALL of your debt and giving yourself an emergency buffer. (a real one with at least 3-6 months of expenses.)

Then, and only then — should you choose to do so– could you start using those credit cards again. At this point, hopefully, you’re a much different person in terms of using them responsibly. Right?

Costly Costumes?

What ever happened to a little face paint and some good old-fashioned homemade ingenuity?

Call me old-fashioned, but I remember having lots of fun getting painted up, and trying to be as clever as possible creating the costume. Even if those days are long gone, you should still consider taking a more frugal route.

I’d rather make someone’s Christmas by having a little extra money to give them for Brad and J’s Annual Christmas Stimulus giveaway, than spending a bunch of money playing dress up! (Oh yeah, it’s that time of year again, and this year J. MONEY – AND – I – ARE – GOING – TO – ROCK – YOUR – SOCKS – OFF!!)

Back to this Halloween thing.

Isaac wants to be Superman this year, and Noah will be the most adorable skunk I have ever seen. The skunk costume cost my wife less than five dollars at a yard sale, and for Superman we are looking at about $20. $25 plus a few bags of candy to pass out and we’re set.

Maybe I should really consider going as an enslaved debtor. That’s pretty scary if you ask me. (The hair on my neck just stood up.)

OR I could go as the Enemy of Debt comic character, but I’m not too sure about the spandex requirement.

READERS: How much are you planning to spend this Halloween? Will it be paid for with cash or credit?

One of the very first things that stood out to me was one simple phrase. It’s a phrase that sounded so familiar, but it took a minute to realize from where I’d heard it.

The phrase “You are not your credit score!” reminded me so much of Tyler Durden’s philosophy in the movie Fight Club. I was also rather impressed with what Joe Nicassio was quoted as saying.

If we’re going to fix one thing in this country, we need to find a better way to judge people’s characters than just a number on paper.”

I have said many times that I thought it was unfortunate that we are judged on our financial responsibility solely based on how much we borrow and pay back. Someone like me, who has decided never to borrow money ever again, still has the ability to be financially responsible, which brings me to the next quote from the book.

“It is strange thing that the man who pays cash for all he gets cannot get credit while a man who runs bills habitually can get about all the credit he wants.”

Chris and Geoff point out some of the things that end up causing a low self-esteem credit score.

• Divorce
• Health Problems
• Bad Mortgages
• Too Much Debt
• Job Loss
• Poor Money Management

No matter what got you into your current situation this book strives to help you figure things out without feeling the need to pop anti-depressants like candy. Sometimes people just make mistakes. I never had the intention of not paying my creditors on time, but when you are ill-prepared and life happens, you are sometimes left with very little choice in the matter.

There are many ways living with bad credit can affect your quality of life if you are unsure of your options, but these guys do a good job of spelling those options out for you, chapter by chapter. Things such as banking, getting certain jobs, housing, starting a business, and not to mention how to avoid bad credit scams.

One of the things that I really enjoyed about this book, was when I got to the end, I realized that they covered the psychology of living with bad credit. Not only do they discuss the problems but they also point out possible solutions, especially since someone with bad credit may not be in a position to afford seeing a therapist.

Sometimes the results of someone with bad credit does not turn out all to well. Depression, suicide, substance abuse, among other things can turn a bad situation into a worse one. Just like it is better to deal with your money open and honestly, it is also important to deal with the side effects of such issues.

Life is sometimes full of disappointment and even when we feel we do not deserve what happens to us, there are always ways around them to find that better place in life. Some argue that your credit is important, but I do not believe it is AS important as we have been led to believe. Bad credit happens to the best of us, so now you must learn how to cope with it and turn your situation around for the better. This book does a great job of helping you do just that.

NEXT BOOK REVIEW: Outstanding by John G. Miller

WARNING:

The following was said to be the Top 10 Best Reasons To Get A Pay Day Loan.  Some of them are considered, by some, to be perfectly legitimate reasons but I disagree with them ALL.  Talk about predatory?  You’d actually have more fun being mauled by a bear!  The only difference is one you actually volunteer for, and the other you run from.  On a serious note, a pay day loan is the worst way to borrow money, and being mauled by a bear really sucks too!

DO NOT Take Warning Lightly, But Let’s Have Some Fun!

1 – Automobile Loan Repayment (DUMB!)

“Excited at the idea of buying your very first car? With rates the way they are, maybe you are getting a great rate of interest on your auto loan and are afraid that if you make a payment late your auto lender might reconsider your status as a safe borrower.”

“A payday loan can give you access to the money you need to make sure your car payment is prompt.”

Me: Can’t you just feel the enthusiasm in his first sentence?  You bet he’s excited, you are funding his retirement.  You would be better off going to your boss and asking for a pay advance to be deducted on payday.  You will pay no interest and likely avoid getting an advance for more than you can pay back come payday.  This is just one way.

2 – Emergency Automobile Repairs (DUMB!)

“You have always been a sensible driver and you have excellent insurance coverage, so you weren’t really worried about that minor fender bender the other day. I mean, your insurance will cover it, right? The answer is that it probably will, but you didn’t plan on having to pay that $1,000 deductible, did you?”

“Getting a payday loan will allow you to be able to pay the deductible now and get your car back on the road much faster than if you had to wait for your next paycheck.”

Me: First of all, if you have a $1,000 deductible without an emergency fund in place, you need to lower it to $500.  Secondly, you’d be better off sucking it up and catching a ride, or possibly riding the bus.  What?  Maybe next time you’ll be prepared for the rain by getting an emergency fund in place.  We often think that we should eliminate the pain of our STUPID mistakes, but feeling the pain is how we learn.  You know the saying no pain no gain right?

3 – Last-Minute Travel (DUMB!)

“Airline and train tickets can be expensive, especially if you have to buy them at the last minute. If you are caught off guard by the need to travel for whatever reason; a wedding, graduation or to welcome a new-born baby, you should know that will have to act quickly to get a decent rate on your tickets.”

“By getting a payday loan, you can take advantage of lower rates for buying your tickets in advance, even if you might not have the money in the bank right now.”

Me: How are you caught off guard by a wedding, a graduation, or a new born baby?  These are usually planned and if they’re not, then you needed more time to plan to be able to go.  I’ve never heard anyone say, “QUICK, I need a loan, someone I care about is graduating TOMORROW!”

4 – Avoiding Late Fees (REALLY DUMB!)

“Frequently credit card companies will charge inflated fees for late payments. In some cases those fees can be as high as $30 or more.”

“Using a payday loan is only a good idea in these situations when the payday loan fees are less than the fees charged by your credit card company.”

Me: So getting a payday loan that charges interest is better than paying the stupid tax, which is the $30 late fee?  Do a budget to get a clear picture of what your financial picture looks like.  That should eliminate any need to shake hands with a loan shark.

5 – Credit Card and Overdraft Debt (REALLY DUMB!)

“More and more people are considering an unsecured short term loan such as a payday advance as a quick way to pay off high-interest credit card debt that is threatening their credit history.”

“By using a payday loan to pay off outstanding debts you can keep your creditors happy and your credit score stable, so long as you are able to repay your payday lender in the allotted time frame. Payday loans can also be a reasonable consideration if you are caught in a situation where bank overdrafts and returned check fees are adding up and you are unable to get out of the situation between pay periods.“

Me: Not sure I know anything else that charges more interest than pay day loan companies, do you?  These things have been known to reach well above 500%!!  STOP thinking that by moving your debt around you are doing something.  Just become a gazelle and pay it off!

6 – Home Repair and Improvement (REALLY DUMB!)

“In most cases, home owners will use the equity they have built up in their home over the years to finance much needed home repairs or improvements. For those who might not have enough home equity to make that possible, a payday loan might be just what you need to make emergency repairs to your appliances, your windows, or even your roof.”

Me: If you want to repair or improve your home you need to sit down with your spouse, discuss your options, and formulate a coherent plan that involves saving money.  You certainly should not sell your soul to the payday loan guy to improve your house.  How about improving your finances first?

7 – Wedding Expenses (REALLY DUMB!)

“Weddings are not cheap. Perhaps you are the parents of the bride and as such you are expected to foot the bill for your daughter’s big day. Or maybe this is not your first time at the altar and you’re paying for everything yourself. In either situation you might consider an unsecured loan as a way of meeting your immediate financial obligations so you are able to rest easy knowing that the wedding day is paid for.”

Me: I don’t know what this obvious commissioned salesman is talking about because weddings can be cheap.  They only need to be as extravagant as the wallet paying the bill.  Weddings can be nice on the cheap!  If you are getting married and paying for it yourselves then you should have already figured costs.  If you need more time to have just the wedding you were hoping for then pick a date that allows you to reach your financial goals.

8 – You Have Bad Credit or Bankruptcy (DUMB!)

“Most of the time, people with bad credit simply cannot qualify for a loan from a traditional lender, but that does not mean they won’t incur unexpected expenses, does it? The beauty of payday loans is that the vast majority of these lenders don’t even run a credit check!”

Me: If you have bad credit and are bankrupt, you need not be digging the hole any deeper.  In fact, if you have filed bankruptcy and are finding you need a payday loan then it is proof that the bankruptcy DIDN’T fix the problem.  You don’t need a payday loan, you need to modify your behavior.  You need a plan.  You need to grab the bull by the horns and get serious!

9 – Got a Hot Date? (The DUMBEST reason I have ever heard!)

“You have been asking someone out for weeks and you weren’t anticipating them to say yes on the one week when all you have left in your wallet is unpaid bills and lint. A payday advance can save the day and give you the money you need to make a great first impression.”

Me: What a laugh I just had!  If you are asking anyone out on a date knowing you don’t have any money your problems are bigger than you think.  Plus if you have no money then it’s not the first impression you should be worried about, it’s the second and the third and the fourth…you get the point.  Question: If you didn’t have the discipline to save in the weeks leading up to the final yes, why are you convinced that you will suddenly change after the first date?  Just wondering.

10 – The Cost of Living (Second DUMBEST reason I’ve ever heard!)

“Let’s face it — there are always emergencies coming up that make it next to impossible to make ends meet between paychecks. No list of reasons to take out an unsecured loan is going to be comprehensive, because the only one who knows your situation is you. Your reasons for taking out a cash advance are your own. Just make certain that before you take out an unsecured loan you know you will have the means to pay it back when it comes due; otherwise you may just end up putting a very temporary bandage on a larger financial wound. Don’t let that wound get infected!”

Me: Usually when a salesman says let’s face it, you should assume that the next thing out of their mouth is a lie! Let’s face it says, there are no other options.  This is a lie!  To cover “the cost of living” you should look for a second job, or a better first one, and sometimes both.  You don’t need to supplement your income by getting a payday loan.  If your income isn’t covering your expenses then a payday loan will do nothing but continue the cycle.

The Bottom Line!

Plan your future.  Yep, it is that simple.  Make better decisions with your money and you will have some to save , invest, and give!  Don’t take my word for it, see for yourself.

Remember the best defense is a great offense!

The Get Rich Quick Method via Pay Day Loan Theory Debunked!

Here’s how the payday loan cycle works.  You go get a payday loan when life happens, because how in the world are you supposed to make it until next week when you get paid?  You decide to get a cash advance from next weeks check, and now you have to wait 3 weeks until you get paid again.   On payday you have a partial paycheck that has to stretch for a full pay period.  Guess what?  Life is going to happen to you because you are BROKE.  When it does, you rush to the payday lender to get more ‘help’.

This is no great offense!! If you get one you’ll find that it’s not exactly a defense either.

It’s a cycle that soon becomes hard to break.  DON’T DO IT! Find another way.  Be creative, but don’t sign your check over.  Do EVERYTHING you can to avoid getting one.  Don’t allow someone else to become mega rich off of your mistakes.  Plan!  Be proactive!  Be DEBT FREE!

How many times was the word payday used…jeez?

The Spin-Off

First I just want to thank everyone for participating in yesterdays discussion.  I enjoyed it so much and am pleased to see that all of you did too.  SO THANK YOU!  To be honest yesterdays post started as just another Christmas Gift idea article.  Then it transformed into what you enjoyed so much, so I left out the original idea to shorten the post.

People go absolutely insane come Christmas.  They let guilt, popular opinion, and the need to impress others take over their wallets.  They say things like, “I have to get them something, they might buy me something”, and go and spend money they probably can’t afford to spend all because of guilt or to make that impression.  People justify spending hundreds of dollars on their kids because they only live once, and they deserve a good Christmas.  What’s your definition of a good Christmas?

I don’t know about you but Christmas doesn’t mean those things to me.  Maybe it used to, I’m just saying.  It doesn’t anymore.  I think Christmas is bigger than what it has become.  Whether you are a Christian like me or not, Christmas is about family and friends and love and kindness.  I am much more impressed by something that someone spent hours trying to perfect, didn’t curse them financially, and came from their heart in the process.  I’m impressed by those that put down all of the shiny jewelry and expensive electronics, and decide to help a single mother or surprise a unsuspecting orphan.  I’d rather spend my money at Christmas like that.  At Christmas, we don’t go ALL OUT buying gifts, but we love to give, so we do.

Shawanda from youhavemorethanyouthink.org, and myself, see this issue close to the same.

People don’t need more stuff! They need more time, more love, and more effort!  For the record I am not a scrooge as I may get accused of being, I enjoy gifts like anyone else.  I just enjoy one kind of gift more than the other, and don’t see the point in diving head first into a hole to make someone believe I love them.  I do enjoy making the kids smile, but you can do that with a fourth or less of what you usually spend now, can’t you?

With that in mind, perhaps you can consider some alternatives to the normal pride-fest that some falsely refer to as Christmas.  Like I said you don’t have to be a Christian to understand that Christmas is about more than material possessions.  Even some Christians miss the point as well.  And while I am pointing fingers, let me point one right back at myself, because I have sometimes forgotten as well.  I am just saying, it is something we should think about more often before going and burying ourself in debt to make an impression.

If you still want to buy everyone in your family a Christmas present go right ahead, but what if you could help them REMOVE something from their life, instead of add something? There are a range of things that you can do depending on how wealthy you are to help someone you love have a great Christmas.

You could:

1. Invite them over for a nice Christmas dinner
2. Pay off one or more of their debts
3. Pay their electric bill for that month
4. Pay their mortgage payment (if you’re wealthy why not?)
5. Pay their car payment
6. Give something that matters

Now I realize their are people out there that would probably get offended if you tried to pay their mortgage.  It is true, but there are lots of people who won’t.  There are lots of people that are in need and that could use the helping hand.

You could try something new and see how crafty you can be with a potato stamp and fabric paint.  Think I am joking?  Not a chance, click on the link to see the list Money Funk has put together for having a frugally fun Christmas.  If you have kids you can come up with all kinds of inexpensive ways to show you care about your loved ones.  I know this- potatoes are cheap, but the memories they can create are priceless.  I have heard Dave Ramsey put it like this.  Give somebody something that they would want to grab if there house was on fire. If your house is on fire are you gonna grab the 60-inch Plasma, or the homemade picture that your 13 year old neice made you 5 years ago?

Good morning everyone!

It’s Monday and I hope everyone had a fantastic weekend!  Some of you who follow me closely know I am ending the summer semester in my public speaking class today.  In fact, I have to squeeze together a persuasive speech to give to my class tonight.  Usually I am in the final stages of writing my speech, but this one is different.  I was hit with a curve ball when I got extremely sick over the weekend.  I work weekends, and didn’t want to call out of work, so the time I spent at home was where I should of been all along…in bed!  I currently have an A+ in the class so I am not worried, but I surely do not want to under perform to bring that grade down.  My final paper is due on Wednesday as well so this is going to be a tough week for me.

With a little “gazelle intensity“ I think I can pull it off so wish me luck!  I was pleased to find out that an article I submitted to The Best Of Money Carnival this week was chosen to appear as one of the top ten selections.  The Best Of Money Carnival: Bento Food Art Edition was hosted by The Digerati Life.  Please head over and check it out, I know you will enjoy it, especially if you like colorful food art! 

I will do my best to publish some great stuff for all of my wonderful subscribers this week, but they may come a little later in the week.  I would also like to share with you that this week, on August 7th, I will be extremely happy to be celebrating my 5 year anniversary with my beautiful wife.  I would say that she is pretty lucky to have such a passionate debt free blogger as her husband, but the truth is I am the lucky one.  Every day that I wake up I am glad she is there beside me.  She is a wonderful wife and an even better mother.  In October, we will be joined by another little Enemy Of Debt, and we can’t wait to meet him.  Two boys raising a ruckus should keep things interesting to say the least.  Again…wish me luck!

If you are new here today, why don’t you take a look around and please subscribe.  If you are battling with debt of your own I hope you will find a little bit of hope here to get you moving in the right direction.  One thing I know is that no matter how bad you think your situation is, YOU CAN DO IT!  Now is the best time to start!  Eliminate that debt and find out why financial peace is the best kind of peace to have.  Saddle up.

If you have any questions, I respond to ALL submissions.  Please feel free to contact me and I will do my best to answer your question in a timely manner.  Have a great week!

LIVE DEBT FREE!

We all know that no matter who is in charge, Republican or Democrat, the Government wastes gobs and gobs of money!   I personally think that one of the requirements, besides lying , to be eligible to hold public office in this country, is to be able to spend billions of dollars in the blink of an eye.  (And that’s to be done before the first morning cup of coffee kicks in.)  I said this wasn’t a political blog, I never said I didn’t have an opinion.

For those of us who do not have the luxury of owning a state-of-the-art cash printing press in order to simply wish money into existence, we need real solutions. Just like with the Government, if I had a machine to print new wasteful spending sprees, the money would be worthless.  Oh but the fun I could have though?  Monopoly play money anyone?

If your Uncle was a drunk, and you needed to be at the most important interview of your life, would you give him that responsibility?

No, and here’s why.  He may never show up, but even if he does…he’s DRUNK!

Am I the only one that hates standing in line at the DMV?  Let’s face it, when the Government touches something the bureaucracy prohibits efficiency.  Proof of this, besides ALL of the bankrupt programs currently in queue, is two of the latest failed/failing programs.  The Cash For Clunkers debacle and the Mortgage Modification program.  The Cash For Clunkers program which just started one week ago from today, has already been axed.  Personally I think providing incentive for us to go into debt, while we are facing a volatile economy, is not a very good idea.  Not to mention the fact that giving away up to $4,500 per person is grossly unsustainable.

Next we have the Mortgage Modification program.  The Wall Steet Journal reported that this program is flailing along.  Part of the problem is all of the red tape.  The program is designed to help individuals modify their loan to something, oh I don’t know, better than ‘this sucks’.  The problem is that in some cases people have been told that they have to be already behind, and for others the process took so long that they were behind by the time it was complete.

Kind of reminds me how the medicaid system works.  A friend of mine had a baby, got promoted, only to find out that her medicaid would be stopped because her income went up.  Meanwhile, she has a baby that has medical needs, and was scheduled to receive insurance from her company in three months, but couldn’t dare go three months with no insurance.  She quit her Assistant Manager position!  It would seem that Government programs are designed to keep people in the same spot, instead of help them stand up on there feet, which is what the programs usually claim to do.  If the program really wanted to help her, she would have been given coverage until the new stuff kicked in.  Am I the only one that thinks this is backwards?

What if you walked or ran, got a cab, took a bus, asked a reliable friend, rode your bike, or decided to parasail  to your interview?

Besides allowing myself the opportunity to vent about a Government that seems to think spending our way out of a financial rut is the best way, my point is this.  Why would you want to rely on THAT?  Why would you want anything to do with any program Washington invents to save the day, but instead usually just prolongs the pain?  You have one choice or many choices.  WAIT OR CREATE! You can find a way out, or you can hope to be rescued until you become hopeless, the choice is yours.

Personal responsibility means that you aren’t standing still.  It means you are taking action, which allows you to power your way through the maze.  It gives you the strength to create a path when all other pathways seem to be blocked.  It empowers you and accomplishment fills the air.  It taps you on the shoulder and reminds you that even if you fail, you have the ability to pick yourself back up again.

Taking responsibility for our self straps us securely in the driver’s seat.  It gives us the keys to start the engine, to speed in any direction we choose.  If we crash, it’s okay, cause it’s not the only car in the lot.  It says, go get in another car, JUST KEEP GOING!!  It screams that others may slow you down, or even total your car, but it forces you to keep charging forward.  What if you tried something else?  If it worked would you continue to do it?

What If You…

• had an emergency fund?
• tracked your spending?
• spent less than you made?
• got out of debt?
• didn’t have a bigger house than you could afford?
• didn’t spend all your extra money shopping?
• had paid for cars?
• didn’t “need” everything?
• had a smaller television?
• didn’t have satellite service?
• didn’t eat out as much?
• weren’t taxed into oblivion?

You Could Afford To…

• save aggressively!
• buy health insurance!
• retire with dignity!
• build wealth!
• send your kids to college debt free!
• out give Washington!
• buy your own used, reliable cash car(s)!
• go back to college!
• start your dream business!
• walk with your head held high! (not arrogantly but proudly)
• be recession proof!

Don’t get mad at me, I’m just saying.  Stop me when I lie!

No one owes you anything, as much as YOU owe yourself everything.  Don’t sell yourself short. Realize your potential and avoid sitting around waiting for your drunk Uncle to get you where you need to go.  Search for options and the first thing you should do is get out of debt!  Unlock your potential!  I’m in your face because I believe in you more than I believe in Washington! Actually, I believe in you more than Washington believes in you!

Do you disagree?  Leave a comment as long as you are respectful and courteous.  I am friends to all people with many beliefs.  This is just my opinion, not the end of the world.  This is as political as I will get here on Enemy of Debt, and even that doesn’t happen often.

“When you do nothing, you feel overwhelmed and powerless. But when you get involved, you feel the sense of hope and accomplishment that comes from knowing you are working to make things better.”

As some of my most loyal readers know, I eat, sleep, bath, and drink personal finance.  It’s sometimes all I talk about, definitely all I think about, and I seriously love blogging about it!  I absolutely NEVER EVER pass up an opportunity to discuss with someone the benefits of debt freedom.  My co-workers and friends, even the ones that aren’t completely on board, seem to know deep down inside they should be at least more concerned with their financial habits.  My General Manager is rocking the debt snowball with excitement, and others are getting to know the budgeting process, and everyone I work with has received AT LEAST one FPU Dumping Debt audio lesson that I order in mass quantities to pass out freely.  It may as well become a part of the training!  You get hired, fill out your new-hire paperwork, get your uniforms, and then go see Brad. I love it!

The other night I was finishing up some end of the night chores, and one of my managers asked me a question about credit.  Now I was a little surprised, because he asked me what was the best way to establish credit.  Now either his ability to phase out the crazy man talking about how STUPID debt is, is supernatural, OR he just bought the myth that you MUST establish credit and figured there was no way I could be against that.  Either way he was about to get an ear full.  I quickly pointed out the fact that it was a myth, explained why, and let him know exactly what he would need to do when the time came to buy a house.  For those of you on the edge of your seat right now, the process is called manual underwriting.  It’s where your ability to obtain a mortgage is based on real life factors, rather than a 3 digit slave number.  Yes, I said slave number.  You may want to disagree with that, but think about it-the borrower is slave to the lender.  For the record, I am completely on board with the 100% down plan, but just as Dave Ramsey has realized, some or most people are not willing to make that leap and feel they must get a mortgage.

Anyway, we talked and talked about money and the perils of debt!  Maybe he was convinced, and maybe he wasn’t, who knows?  One thing I have learned about talking to people about this is that someone convinced against their will, is of the same opinion. If I reach them I am grateful, but if I don’t, at least I know that the seed was planted to possibly be harvested in the future.  I must of at least made a dent because what he said next floored me.  He told me he had to help his parents get out of debt.  First of all, this young man is 20 years old, and second anyone who is willing to sacrifice their own time and money to help someone else climb out of a hole, that they themselves didn’t dig, is a selfless individual.  My initial question to him was why did HE have to do it?  He simply said that they lost all hope.  I’ll say that again.  They lost all hope! They all but gave up and debt was the reason.  Doesn’t it make sense?  No matter who you are, when looking at a pile of debt that seems to be mounting by the second, you just want to run.  You want to run far, far away!  The truth is you can’t run from debt now, it’s too late.  You have to face it and beat it!  The time to run is in the beginning before you start.  That’s when you run!  Dealing with it will make you and your marriage stronger, and do wonders for your financial peace!  So decide to deal with it.

I asked him how much debt they had.  He wasn’t sure but he said it was less than $100,000, and possibly less than $50,000.  I smiled and told him that I knew of the PERFECT plan and that there was hope after all.  I went to my now legendary Honda CRX and pulled three Dumping Debt audio lessons from my stash.  One for him, one for his mom and dad, and one for whoever else they wanted to share it with.  I wrote on the wrappers Dave’s website, my website, and Dave’s book, The Total Money Makeover.  I told him that if his mom read that book and listened to that CD, she would most likely see hope again.  To be clear, the answer is not really the book though, the answer is YOU!  Dave Ramsey is just REALLY GOOD at getting you to realize that.  It’s not a magic book!  It’s not a quick fix!  It’s really more of a plan to use once you realize you are in control.  Having steps to follow makes it seem less overwhelming.  I promise you it works, but don’t take my word for it, go read it yourself!

Do you feel this way?  No matter how much debt you have, IT WILL STEAL YOUR HOPE! It will make you consider painful things like bankruptcy, divorce, and in some cases suicide!  It will make you settle for the bondage it causes!  It will make you feel like there is no other way.  It will cause you to start justifying your bondage by saying things like, “everyone else is doing it”!!  Everyone else IS doing it, and everyone else is BROKE TOO!  When you have no hope, you do not see a way out in order to take action!!  I am here to tell you that there is hope!  I am here to tell you to take action!  Take action and stop the bleeding.  Stop borrowing more money.  Do a budget and cut the waste from your life so that you can actually have a life.  You can do it and I know for a fact that you can!  WE DID!  I know of countless others who have done it too!  You are no different!  Take action and stop accepting the status quo,because you deserve better than that!  You deserve freedom and as soon as you realize that the weight of your burden will suddenly feel lighter.  You will be able to see the light at the end of the tunnel, and that light will motivate you!

Have you lost hope?  If so, you have nothing to lose by considering my suggestions.  Get the book!  Read it and then come here to stay motivated!!  New To EOD? What do you think about the almighty FICO score?  Do you worship at that alter, or have you too, decided to be free?

Dawn and I have been going back and forth for days now.  I wanted to share with you the difference between her and I, mainly by pointing out why I think she is wrong in her thinking.  Her thinking is how most people look at it, and what I am trying to do here at EOD is to show people that there is another way that provides more options.  I believe that more options translates into a higher success rate.  A lot of people limit themselves by not realizing their options.  I think Dawn dwells on the problem instead of providing a solution.  I do not doubt her well intentions, I just think she’s wrong.  If she believes this and she writes about money, then I know others do as well.

A Perfect Example Of Victim Thinking And Limiting Yourself

Dawn: “I’m sorry, but if you have the misfortune of just a high school diploma, the kind of work you can get may be just at checkout at Walmart. People at that income level do indeed live paycheck to paycheck and it is rather hard to pay the rent, utilities, etc. without going into debt, especially if you live in an expensive state like I do, here in CT.”

“But i think that people who see the crisis we’re in today as a one-dimensional problem solely caused by individuals who wrack up debt, often because they have no other choice, have blinders on.”

“NO OTHER CHOICE?” That is the very reason we disagree.  She thinks that people have no other choices and should accept the notion, that’s just how things are.  Limiting yourself by telling yourself that you have no options, will give you exactly that…NO OPTIONS! What you believe, is what you achieve!!

“Misfortune of just a High School Diploma?”  I consider a college education to be valuable and an advantage but it is certainly not the only way one can become successful! It is this line of thinking that keeps someone believing that they can’t do something when really they can! What you believe, is what you achieve!!

Me: “My point was this. If I can do something OTHER than live on minimum wage and I have only a high school diploma, then others can do the same. I am not special! Instead of accepting my struggle I have decided to be proactive in how my life turns out. It’s really that simple. People can educate themselves about anything using the internet and resources from the library to help make their way. Anything is possible and that includes living without debt.”

Me And The Victim Mentality Do Not Get Along

Dawn: “Lax bank regulation played a big role in the mess we’re in and bankers, having the training and lending knowledge, understood the risks better than lower income people trying to get ahead. The banks were out for profit only and by looking the other way, made it possible for people who could ill afford to purchase a home to in fact do so. If the banks said “no,” we wouldn’t be where we are today.”

Here we go blaming others again! Obviously Dawn wasn’t paying attention when Washington put pressure on mortgage lenders to give loans to people that shouldn’t have got them.  Also, she is suggesting that people blindly sign their name without understanding or knowing what it is that they are signing. Rule number 1: Understand anything and everything that you put your name on, OR do not complain about the end result of you not knowing!  If you understand that rule then you understand why it is not someone else’s fault that YOU signed your name!

Me: “You believe you are helping people and I respect that. You are encouraging the problem by telling them that what they have been doing is NOT their fault, and I am saying maybe it’s time for people to start examining their habits, and try something else. You want to place blame and I want to empower people to take control of their finances. I like my way because I know my way works and your way just continues the problem. The victim mentality is a form of slavery and I am trying to free the slaves from their own peril.

Who Is Really The One That Is Single-Mindlessly Focused?

Dawn: “Brad, I really think that you and I are on the same page…we both want people to take responsibility for their financial well being. Its not something that’s often taught in schools.

The difference, I think, is that I also work to inform people of various other forces at work that are often beyond the ability of the average person to control. I’m talking about various government regulations (or the lack thereof), global economic events and just plain bad luck. You seem to be single-mindlessly focused on personal responsibility without acknowledging that sometimes, despite the very best effort and intentions, $*%# happens.”

I wrapped up the conversation with this:

Me: “You are right Dawn, I personally think it is a waste of time to try and figure out who was at fault. The bottom line for me is that when people look at their situation and say how can I make it better, instead of who caused it, I think they can be more productive towards defeating the enemies that cause the bad luck and other various forms of excuses that you named off. SO WHAT if the Government does or doesn’t have regulations concerning credit cards…don’t use credit cards and empower yourself to live without the crutch that has become credit. You seem to be overlooking the fact that if you have a plan then those things that happen, don’t really affect you all that much.

I personally believe that you are making people less active in winning because you are too concerned with having them focus on everything being out of their control, instead of allowing them to see HOW to climb those obstacles. People don’t want to know that there are obstacles, they already know that, they want to know how to overcome them!

Now for why I consider myself to be an expert in this area. I USED to do what you do! I USED to look at the supposed problems! I USED to focus on why things were happening to me! It wasn’t until I started reading more from Dave Ramsey, Dan Miller, Brian Tracy, and John G. Miller that I realized I was wasting my time, AND when I began to ask myself different questions. You should really read a book called QBQ- The Question Behind The Question, because I believe you focus on asking the wrong questions.

My life and direction changed completely once I started to think differently. I actually started defeating my obstacles instead of looking for who put them there. I now believe in myself and my ability to secure my own future, without relying on Washington or anyone else to put a rule in place that will protect me. What I learned is that there is hope and empowerment in realizing I do not have to accept your ideas and solutions.

With all of that said, I would like to respectfully say that we are hardly alike. Maybe you should re-examine which one of us is more “single-mindlessly focused”, since you are the one that is in the box, and I am the one outside of it telling people there are more options where I am.”

END

Lesson: Don’t limit yourself by accepting what you think you can’t do, go find out that you can do it!  What you believe, is what you achieve!!

Do you agree or disagree with me?  Let me know, and as I was with Dawn, please be respectful!  I would love to hear your opinion.

Can You Buy A House, Have A Car, Or Go To College Without Debt?

With a plan you can!  It seems like every time I write an article like this I lose a few subscribers.  That’s fine, I am fully aware that I will not please everyone.  This would be too easy if I could, and frankly I like the challenge. For some reason people seem to get angry about someone (me) telling them that it is ABSOLUTELY POSSIBLE to live life without accepting the chains and bondage that come with debt.  I could speculate all day long about why they get mad, but I’ll just keep it simple.  The truth hurts! It hurts in this case most likely because accepting my argument against debt means that change has to happen.  People don’t like change, or people that point out the things that need to be changed, so I guess this makes me the bad guy!

People have accepted for so long that they will always have a car payment, that they can’t have a house without a mortgage, and can’t go to school without a bunch of student loans.  This is so far from the truth, but since it has been implanted in our head as truth from a very early age, people refuse to accept any alternatives, especially if it means the word sacrifice comes into play.  As I’ve stated before, I was taught growing up that debt and building your credit score is the ONLY way to have certain things.  My dad sticks to this way of thinking and has said that I will never get people to give up their credit cards or car payments.  Never?  Leading only two 13 week Financial Peace University workshops, and writing for this blog says otherwise.

I get emails from co-workers, members of those FPU classes, as well as readers that glow with excitement over their newly paid off credit card, or that feeling of freedom they feel after paying their car off for good.  There is another way and if you continue to read EOD, you could be convinced of it too.  It’s called having a plan to get what you want, instead of getting what you want without having a plan!  It’s called saving to buy, instead of buying to slave! It’s called taking control of your finances by making better decisions!!  It’s also called personal responsibility.  We seem to hold the President responsible for his decisions, but why not ourselves?

Proof That This Dangerous Mindset Is Alive And Well

I was reading an excellent article from a fellow PF blogger today called, Top 10 Reasons That Living With Debt – BITES!.  Jeff over at My Super-Charged Life gave 10 reasons that to him, explain why living with debt should not be an option.  I happen to agree with him, but I am very aware that our way of thinking is not accepted as rational or even possible, in a culture of excessive consumerism and the “I need it now” way of thinking.  Dawn responded with this, and for the record I am not picking on her, I just feel that her comment is the wrong but normal way of looking at things.

“I agree with you, but there are certain things that most people could not pay cash for, namely, when buying a house, and also for college tuition.”

Could not?  Just because it isn’t very common doesn’t mean it isn’t possible to buy a home or pay for college without debt. The truth is that IF people had a better and more responsible financial plan then they very well could do those things with 100% cash down. (100% cash down refers to not going into debt to get something, NOT that you physically only spend cash.)  I admit that it’s not very popular, but what if it was?   If you look at the savings habits of MOST people you will see the reason it is not currently possible.  Isn’t it logical to believe if people saved more, and planned more, they could accomplish some of these “impossible” goals?

I am going to school debt free and my kids are going to be going to school debt free.  There are in fact people who either pay off their mortgage early, or pay for a house without a mortgage at all.  Don’t those two examples mean that it is possible?  If I can go to school debt free, and some have paid off their mortgage early, can’t you also save money to buy that house too?  It might mean that you will have to wait to get that dream house or that school takes a little longer to complete, but what is the rush?  Why does everything have to be done without patience and proper planning to get it?

I just wanted to point out that most people feel the same as Dawn but most people are broke and living paycheck to paycheck, and that is not me being mean, it’s statistically proven.  Maybe it is time for people to plan their future instead of running full steam ahead without knowing where the track leads.  Maybe it’s time for people to stop doing the same things over and over again and expecting different results.  There’s a thought!

“I believe that if you are disciplined about paying your credit cards off every month, short-term financing like that made possible by credit cards can be a convenience when you’d rather not carry large sums of cash in your pocket. Assuming your card charges no annual fee and you pay in full each month, you’re paying $0 for a short-term loan.”

I hear this ALL THE TIME, and quite honestly it is completely full of holes.  Not the short term use of credit, but the reason why it’s more convenient.  I believe that not carrying a balance is the most responsible way to use a credit card, but is it the only way?  Nope!  For a business that purchases goods and has 30 days to pay, I think it is useful, but for personal use I strongly disagree?  Why?  An account payable makes it so that you are not having to pay the delivery guy EVERY TIME he delivers goods to your business, but instead you just cut one check at the end of the month.  For a business it makes sense, but for personal use it does not.  I think that there is a better way that gives you peace of mind with less risk. Wait, hear me out!

Dawn says that it is convenient so that you don’t have to carry around large sums of cash.  Can’t a check card be used to do this very same thing? I am sure of it, and the truth is that you don’t carry with you the risk of having a CC balance should a major emergency happen to you, before paying the balance.  Like rewards? Get a check card that gives you rewards for using it.  Like having a buffer to cover expenses in between paychecks? Take a minute to determine how much you need every month to do this and save it, then replenish the fund instead of the credit card when you get paid.  Do you believe that you are more protected against fraud if you use a credit card? That is a lie too if you swipe your debit/check card as a credit purchase instead of a debit using your pin number.  Don’t believe me? Go to the Visa website and see for yourself!

“Personally, I steer clear of the mega-banks who threw us into a global monetary crisis and then accepted taxpayer-funded bailout monies. I prefer doing business with small community banks and a credit union.”

 

I believe this to be complete denial and a true sign of someone who doesn’t believe in personal responsibility.  Banks are not the reason for our global crisis we find ourselves in at the moment. It is first the people who signed their name on any dotted line’s fault, to accept debt to cover the spending that exceeded their income. If you want to blame someone for allowing that to happen you can blame Washington for forcing some of these same banks to give loans to a larger amount of people in the name of equality. I am not a fan of big banks either, more for customer service issues, but personal responsibility is something that should be considered before pointing the finger.

If people shared Jeff’s attitude about debt, as do I, then there would be no banks to blame in the first place. It’s just something to think about and the very reason I feel so passionately about spreading this very message to all who are willing to hear it. Not accepting debt as the answer gives you MORE options in life instead of chaining you down. I hope you can at least consider what I have said as a possible alternative to using debt to get stuff. The solution is in us and our plan, not in blaming others for our own mistakes.

Now I know that my opinion on this is going to ruffle some feathers because people have been led to believe that the banks are to blame, I just happen to disagree with that line of thinking.  Have there been banks that have deliberately taken advantage of consumers?  Absolutely, and without shame! Does that mean that you, the borrower is faultless?  Not a chance, because you signed the line and likely didn’t read the fine print that told you what was going to happen if you did this or that.  Yeah but…nothing, you could of said no to the slavery that is DEBT!  When you make a choice and it is wrong, that doesn’t give you the right to blame someone else.

My Answer Is:  MAKE A DIFFERENT CHOICE!

You can live without debt!  You can buy a house!  You can buy a car!  You can rent a car!  You can go on vacation!  You can do absolutely EVERYTHING that you can do with debt, WITHOUT IT!  The only thing you won’t have is a FICO score that says you LOVE to borrow money!  OOOOH SCARY!  No FICO score?  That’s not possible right?  Oh yes it is!  The only good argument I have ever heard about why someone would NEED a good FICO score is because of some jobs requiring it for employment.  Just because it is required doesn’t make it right.  First of all it is just plain wrong!  To expect someone to go into debt by borrowing money in order to do something that they can very easily do just the same as if they had no debt, is STUPID!!!!!

How Can You Get What You Want Without Debt?

It’s called having a plan!  Brian Tracy, a motivational speaker and a master at goal setting, teaches the 5 P’s.  Proper Planning Prevents Poor Performance!  Create a plan that will allow you to have the things you want, and what you want, you will have.  No Debt is needed!!  Create a plan for savings!  Create a plan for spending!  Most of all, create a plan for your future, as well as for your children’s future.  It’s amazing how much you can do when you realize that debt is holding you back!  Get rid of that debt and go do it, and remember these 8 words:  SAVE TO BUY, INSTEAD OF BUYING TO SLAVE!

Becoming Debt Free Is Priceless Indeed

I was reading an article yesterday titled, Debt-Free: Priceless, and the one and only comment on this article blew me away!  Seriously, the comment brought me to my knees, like kryptonite did Superman!  Back to the ice cave!

The article talked about what a Federal Bankruptcy Judge was doing to combat the destructive nature of credit card abuse, that possibly led people to his courtroom to declare themselves bankrupt.

“John C. Ninfo II, a federal bankruptcy judge, has founded the Credit Abuse Resistance Education (CARE) Program, www.careprogram.us, a national initiative to teach high school and college students about using credit properly — which, Ninfo argues, means sparingly to not at all.”  (My emphasis added)

 

As the article points out, Americans are dealing with $880 billion in credit card debt.  This is an astonishing number, and one that must be addressed, and now is as good a time as any!  The mindset of most Americans sadly reflect what the person who commented believes, which is why Americans have had a negative savings rate since 2005, and has steadily dropped ever since.

The Cynic floored me with this response:

“Let’s see: you have no money and your car is very low on gas, the house is low on food. I have a credit card. Of course, I am going to use it. You think? While Judge Ninfo is well intentioned, situations do and will come up where an individual must use a credit card. And if you’re unemployed, things get very interesting.”

Do YOU agree with the Cynic? Now my first thought was that the Cynic was probably a college student, but with the current amount of Americans dealing with large piles of debt, this could be anyone.  Now I couldn’t just read something like that without responding, even though whoever wrote it may never even see my response.  This is part of what I said:

“I think you have completely missed the point! The point is that you should AVOID allowing your situation to become as you described, by proper planning! That is what people need to learn again. You are more capable of handling bad times if you save for those little surprises life throws at you. I have not used a credit card in OVER a year and situations have come up, but we did not have to use a credit card because we have an emergency fund. We were prepared for those situations and that’s the difference.

I think what the judge is doing is magnificent, and from what I can see, the only thing I disagree with him on is, what order to pay off credit card debt. That is a very small issue though. The big picture is that someone is ready, able, and willing to educate people on how to be responsible with money. That is what we need, especially at a time when economic decline, has put people in those very situations that you describe in your response.”

Here are some interesting facts:

Savings Rate in 1933: -1.5% (Great Depression)
Savings Rate in 1982:   higher than 10%
Savings Rate in 1997:   4.5%
Savings Rate in 2005: -0.4%
Savings Rate in 2006: -1%
*as reported by CBS in 2006

These numbers have dropped as low as -2%, and have only recently started to climb as people have become worried about the future due to the downed economy.  Last year, J.D., a writer at Get Rich Slowly, wrote an outstanding article that digs a little deeper into the history and habits of Americans.  You should check it out!

If What You Have Been Doing Is Not Working, Do Something Different

The Cynics response is the best example of the problem!  His solution is to continue to do the same thing that he has been doing to get through life.  Handling things in this way will keep you living paycheck to paycheck! The solution is to bring the amount we save each year back up to a responsible level, NOT rely on credit cards to fill up our gas tank, or put food on our table! Instead, resolve to save AT LEAST $1,000 for emergencies, and let’s get back to the habits of folks in the 80′s!  If you properly plan now, you will not have to scramble later!  Use your emergency fund as your shovel to get you out of tough situations.  If you continue to use your credit cards you are only making your hole deeper and deeper.

TAKE ACTION NOW!

Save $1,000 to handle the small emergencies while you knock out your debt!  After you knock out your debt, build your emergency fund up more to handle the big stuff, like unemployment or unexpected hospitalization costs.  The Cynic is right about one thing, if you lose your job and you have no plan to handle it, things WILL get interesting!

What do you think?  Are you the cynic?  Do you know people who think like the Cynic?  How would you respond to this mindset?  Share your thoughts!

There are some that are so adamant about the fact that credit card companies are NOT bad, and do NOT take advantage of consumers.  I disagree, and I think that an article I came across from dailyfinance.com proves otherwise.  For the minority that have the discipline to not carry a balance, you will be okay, but for the rest of you who use credit cards to subsidize your income, you might want to consider cutting the cord!

The article states that, “credit card companies are insisting upon exercising their right to abuse their customers in the name of higher profits“.  Now I’m positive that is not how the companies themselves would word it, but I think it is dead on!  According to a survey of recent activity done on the top eight credit card companies, they have “implemented even more onerous practices, raised interest rates more aggressively and increased the number of fees that they can impose on their customers“.  The report said, this was done on an “any time, any reason” basis. {Shocker!}

I think that credit card companies have been taking advantage of consumers all along, so I am not surprised at all by this news.  One of the things that have irritated me in the past, has been the fact that these companies have had the right to raise your interest rates on credit cards that you have paid on time, just because you made a late payment on another card from another company.  My opinion is that even if you choose to play with these snakes, each card should be handled according to your payment history on THAT card!

What’s the reason for the sudden spikes in interest rates and increased fees?  The survey indicates that it is because the Federal Reserve announced new rule changes, to take affect in July of 2010.  The credit card companies that you think are out to give you FREE hats and air miles, have been fooling you all along, and now plan to maximize their profits on your behalf!  They have been sucking you dry and enjoying the nice life, while you have been slaving away just to make your minimum payments each month! What they give you is immaterial compared to what they take from you!  However, it is not only the credit card companies fault, some of the blame is yours.  You signed up for the card, and used it when you didn’t have the cash to back it up, they just gave you the opportunity to do so!

This is why I love when Dave Ramsey compares credit card companies to snakes!  It may take a while for you to get bit, but the longer you play with them, the more likely it is to happen.  It’s just a matter of time!!  Are you considering a possible “break-up” with your credit cards?  I hope so, but depending on your circumstances, you need to do it right.

The very first thing to do would be to STOP BORROWING MORE! Stop the bleeding before you dress the wound!  Now you should do EVERYTHING you can to get an Emergency Fund in place so when life happens, and it will, you will be able to handle it without accumulating more debt in the process.  How much should you save?  Dave Ramsey suggests that you save $1,000, unless you make under $20,000 a year, which would drop it to $500.  It’s really up to you, but whatever you decide, make it happen fast!  (e.g. Have a yard sale, cut spending, sell everything you can, get an extra job!)

The idea is that once you have an emergency fund you have created a buffer between you and life, and can then focus 100% of your attention to knocking out your debt via the Debt Snowball! (Baby Step 2) Your Debt Snowball is all of your debts except for your house, on a list from smallest amount owed to largest amount owed, regardless of interest rates.  (Psychologically you receive motivation by getting some quick wins.)  If you have a second mortgage, or a Heloc, if it is less than 50% of your annual income, you would add it to your Debt Snowball.  Otherwise you would handle it when you pay off your house which is in Baby Step 6.

Cut your liabilities by cutting your cards!  Get them out of your life and learn that it is possible to have a life without them!  You have been programmed to believe that you can’t do it, but I assure you many people have, and so can you!!  Now go do it, and experience the feeling of freedom and empowerment once and for all!!  Put your foot down, and scream ENOUGH IS ENOUGH!!!