Thoughts on Debt

Usury by definition is the loaning of money at exorbitant interest rates.  This is a term that is condemned by both the Torah and the Koran, so why is it that it is our primary theme in American culture? Many people would say it is so that we can own a home, a car, and so forth, but if you think about all the debt in this country and the fact that our government is the primary benefactor of the interest we pay, there may be something to the fact that maybe we are just convinced that we need to live in debt.  Look at the facts:

Credit card debt with interest rates hovering at about 24 percent used to be a crime, but since our government entered the picture, there are no real corporate crimes anymore.  And as wages shrink and prices soar, American’s will use more and more credit to hang on to their “I want it now” lifestyles.

College tuition debt, the new growth area in the debt industry. In most Western nations college education is free or nearly free.  This type of debt gets the youngest adults in our society started off in debt before they even can get a reasonable job.  Why is it that in other countries, they can get an education for nearly nothing, but here in the US the government who runs the colleges for the most part is benefiting 2 fold from these monies.  First they benefit from the money that is paid for the schooling, and then they benefit from lending you the money to go to school, how is this legal?

Medical debt, the latest twist in the health care story in America. While health care is a right and is publicly financed in most countries, in the U.S. 42 percent of Americans either have no health care coverage, or have pay-nothing private insurance scams.  Again, who is getting the money we pay for medical care? Oh, that’s right it is our government.

Mortgage debt. Need that dream house, the little place with the white picket fence. No problem all you have to do is make payments of half your income to a mortgage company for 30 years.  Now they have even made arrangements for poor people to get in on the act with sub prime loans and buy it now pay it later loans, this way they can be in debt like everyone else.

National debt, my favorite. A small percentage of people, through both good fortune and wise decision-making, avoid the debt trap. But not to worry, everyone pays taxes — well, everyone below a certain income.  Now that is us paying off our country’s debt, well all the welfare spending money, tax breaks for the rich, and military spending money, has to come from somewhere right.  Don’t worry you are paying that off and currently each one of us owes the Federal Government about $32,000 each to pay off their “deficit” which that is right comes out of our pockets too.

Thank goodness our government has us to take money from on a regular basis, otherwise they might go broke.

As a society, we tend to ignore and turn away from things that we don’t like.  Avoiding conflict and problems has been a theme in this country for a long time.  We don’t mean to do it, but somehow we think that if we turn our back to our problems that they will magically disappear.  This is not the case, especially when you are in debt.  The best thing that you can do with debt is to confront the issues head on.  Many people who can’t pay their bills, avoid debt collectors and credit card company phone calls and letters and just hide.  It can sometimes be difficult to deal with these people, especially because when they call they can be very rude at times, and most people actually wish they could pay back their debts and so usually the debt collectors get mean and the people feel bad.  You MUST face the company, even if it is by letter, and you must create a plan in your own mind for repayment.  Even if you send them $20.00 a month.  Now most companies will tell you this type of payment arrangement is unacceptable, some however, will work with you to bring it to resolve.  In any case, you need to devise a plan to repay it.

Now there are, for your information, some debts that it is not wise to make payment on.  These would be the debts that have already exceeded their 7 years on your credit report.  The reason I am telling you this is because one payment on those debts, and they move their way right back to your credit report again.  Once you make even the smallest payment on them, they will become active and will be back on the report.  Some debts unfortunately when they have exceeded their life on the credit report and still don’t get paid, are better left unpaid. These are the ones that will hurt your credit score if paid. Working to clean up your credit is not always an easy task, however some companies will give you a discounted pay off and will pull the item from your report in exchange for a payment, so don’t hesitate to ask for this.  They can do it for you.

Be sure to face your creditors head on.  Talk to them and try to work with them.  Problems if avoided will only get worse over time, so be sure to address the problems and see what you can do to resolve the issues before they get any larger.

Many people remain uninformed about credit card debt and about credit cards in general. When asked about their debt, 35% of American’s said they carry balances on credit cards, and about 5% said they didn’t know. (How do you not know?) Maybe it is just that they don’t want to admit it. Studies by the Federal Reserve and data release by credit card companies indicate that the percentage of households with credit card balances in this country is at least in the mid 40’s. It could be even higher with the economy on the down swing.

In a separate study, nearly 2/3 of more than 1,000 people said they carry a revolving balance on one or more of their credit cards. Another 8% said they didn’t know whether or not they did. And 15% of people with credit cards say that they have experienced at least some amount of difficulty in paying their minimum balances. They continue to do studies about consumer debt which still show that most consumers don’t really understand the whole thing. They have a limited understanding of reading their credit report, understanding their credit scores and in spite of this they say that consumer knowledge about credit is improving. For example, less than a third of Americans understand that a credit score is a number that estimates your likelihood of paying back a debt. A credit score is based on but is separate from your credit reports. The three major credit reporting agencies are Equifax, Experian and TransUnion and the best known credit score is the FICO . The best way to improve your credit score is to pay all your bills on time. The range is about 300-850 and the higher your score the better the credit you can get and the lower the interest rate available to you.

More than a third of American’s were unaware that insurance companies use credit scores to approve your coverage and to set your rate. Less than 3/5 knew that regularly maxing out a credit card, even if paying your bills on time will lower your credit score. In addition, 79% of American’s thought they could get their credit score free once a year, however that is your credit report, not your credit score. You generally have to pay about $15 for your credit score number.

Most people don’t realize that they need to be checking their reports for accuracy every year, and they should check their credit score every few years and before they apply for a mortgage or other large line of credit. Washington Mutual estimates consumers can reduce finance charges by $105 a year on average by raising their scores 30 points.

Knowledge is power and knowing more about credit, how it works, and how we can make it work for us, is an important part of the system. Getting information now about credit, debt, credit score and other credit information, can help us improve our credit score and keep it in good standing. This can open up some major opportunities for you. Just remember it is never too late to start improving your credit rating.

Credit cards can be a very helpful tool, but they can also be one of the biggest financial pitfalls if you are not careful.  There are some things that you need to know when applying and using credit cards.  The following are some tips to using your credit cards wisely.

1.  Make sure you are aware of changes in rates and rules.

2.  Pay your balance monthly, even if it means taking out a personal loan.

3. Apply for a card with a credit union instead of a bank, they have less fees and lower interest usually.

4. Don’t use credit cards when traveling abroad.  Conversion fees are steep, instead use an ATM machine to access your bank account or use traveler’s checks.

These are just some wise tips in using your credit cards, however, there is a whole other realm of credit card use that you must be aware of.  This is when the credit card companies change rules mid stream or offer low rates to draw in your business and then raise them without you being aware.  Some recent reports show that consumers have been fooled by some of these “tricks” and so these are the things that you need to be aware of.

YOUR RATES ARE RAISED WITHOUT YOUR WARNING

You are going along and paying your bill on time but you have a late payment on another card, or your credit score drops for some reason and the credit card company raises your rate on all of your cards.  Even if you come close to your credit limit, this can cause your rate to increase even if you haven’t exceeded it.  If this happens your credit card company is required to let you know so be sure to read all the correspondence from them carefully and keep a close eye on that bill.  No one needs surprises like this, and it is perfectly legal.

YOUR DUE DATE CHANGES

On late payment can allow them to raise your interest rate higher then you probably even think is possible.  Due to this, some banks unknowingly will change the due date on your bill, so that your payment is due sooner than you originally thought, causing your payment to arrive late and giving them license to raise your interest rate.  Again, look at that bill very carefully as this is another completely legal practice.

EXTRA CHARGES AND PENALTIES

Know how much extra your credit card company will charge you for cash advances and balance transfers before doing them.  Large fees can be associated with these types of transactions and once you do them, you will be stuck with the bill.

MISLEADING INTRODUCTORY RATES

You will receive credit card offers for low interest credit cards, and you think this is great and you transfer your balances or run up the card and then you find out that the interest rate shoots up to about 30% after the first month.  Be sure to read the fine print and keep in mind that if an offer seems too good to be true, it probably is.

MANDATORY ARBITRATION

Keep in mind that about 75% of credit cards have clauses that say disputes must be resolved in private forums, so when issues arrive you can’t take them to court.  Even if those issues are ones of identity theft or things that are out of your control.  Studies have shown that if you take a company into arbitration you will lose since in arbitration the credit card companies win on the average of 96% to 99% of their cases against consumers.

In short, be sure to think twice before buying on credit, and be even more rigorous about reading your credit card statements and applications.  These are the keys to keeping your money in your hands.

Most American’s are carrying a lot more debt than they can afford.  Credit card debt in the US has reached a record high - Nearly $1 trillion, according to the latest figures from the Federal Reserve Board.  The average American household’s debt from credit cards has risen from $2966 in 1990 to $9840 in 2007.

As getting loans becomes more difficult and the cost of groceries and medical bills is on the rise, more and more people are turning toward plastic instead of cash to meet many of their basic needs.  For many of us easy credit has lead to spending well beyond our means.

The debt crisis in this country however, is created less by our spending and more as a result of an industry devoid of regulations and checks and balances.  For too many years, the credit card industry has been allowed to run rampant with charges and additional fees well beyond what is reasonable.

Consumer complaints and pleas for help may be having an effect.  Both the Federal Reserve and Congress have proposed new rules that have broad support.  Unfortunately, action has not yet been taken, but it is on the horizon.

The real problem is that the credit card companies make the most money on those of us who can’t afford what we spend.  This is why if you pay your bill in full every month, the credit card companies have a term for you and surprisingly they think of you as a “deadbeat”.  They deliberately target those who can not afford to pay their bills.  As a matter of fact, if you are having trouble paying your credit card bills, then you will more than likely receive some extra credit card offers in the mail.  They all want you to borrow from them.

We can hope that the legislation will soon be coming down the pike to give these big companies what they truly deserve and perhaps bring some relief to us all.

We are all feeling very helpless against the powers that be that are pulling our purse strings these days.  There are things that we need to do to take back some of the power from these piggies.  I am not saying that there has not been a cost increase in the production and delivery of the foods we love.  I am however saying that the price of gas has been backing off a little, but a block of cheese, 16oz of mozzerella cheese has risen about $3.00 a block, this is double its price only 3 months ago.  I can assure you that the cost to produce this block of cheese has not gone up $3.00 and therefore we need to be careful not to let these companies take advantage of us.  We need to take some proactive steps to stand up for ourselves here.  After all, you better believe that the price of cheese will come down after pound after pound goes bad on the store shelf.  Yes, it will mean compromising a little, but it is worth it to take a stand.  We can do something about it, we still have the power of the dollar and if we start exercising that power, we can make a difference.

It is time to move from debt to debt free and the best way to do this is to live like it was the 1900’s all over again.  Grow your own food, cook it, can it, freeze it.  That is right, we can bake bread, we can go to bed when the sun goes down and we can live without a credit card.  You may not eat what you want, watch what you want or go where you want, but you can actually live much, much more frugally than you have been.  I know this sounds like the extreme, but the truth is just like any other lifestyle change there is a period of adaptation, and it will feel a little odd for a while, but we can make the changes necessary for survival and we must or we won’t make it.

The cost of everything is going up and up and I think with each rise in the inflation rate, my blood pressure goes up another point.  All this financial stress must be putting a real strain on some very stressed out American’s.  After all, at least half of America is on some type of anti-depressant or mood altering drug, and this was before the current financial crisis.  Although we would like to think that we are immune to all the hub bub that we hear through out the day, let’s face it, this is a very stressful time and we are all feeling it.

It is tough to go to work everyday, knowing at the end of the week when you have filled up your tank and have bought groceries, there won’t be a dime left over for anything extra.  We all are feeling the pressure and those of us with children are really feeling it.  With back to school time fast approaching, the inability to stretch the dollar is amazingly obvious.  Trying to buy those little extras that make back to school time so much fun, have long since past.  Now it is a strictly necessity world, where if you don’t need it, then you just don’t buy it.  It really is that simple.

Ask most counselors what one of the biggest factors is for stress and they will tell you unequivocally it is money.  It causes stress in marriages and causes divorces and it also causes rage, frustration and uncontrollable anger.  This is why cases of divorce and child abuse are more often sighted in poor or middle class families, rich families show less tendency towards there particular family problems.  The main reason is money.  Lack of money and inability to survive attacks at our core instincts and rips us apart.  It allows those more primitive reaction mechanisms to kick in and fight or flight to take over.

Personally, I worry about how the difficult economic times are going to wear on the structure of our families.  I am afraid to see how these problems will effect the nations children.

Well, we have already arrived at the time and place that we should have been saving for all these years, and here we sit with costs of everyday items rising daily and without a savings it seems near impossible to pay the bills much less save some money.  I am here to tell you it is completely possible to save money, but it does take work and a conscious mindset towards savings.

The first thing that you must commit to is that the money that you save on this and that must be put aside.  You can not take that money and spend it on extras, extras are out.  All the money that you save must be put away for a later need.

1.  Find a bank with interest and little or no fees, and don’t keep too many accounts open this can cost you more.  I have recently found that credit unions offer many more benefits from banks without losing a step.  My local credit union charges less in fees and also supplies me with more interest than any account I have seen of late.  This is savings + interest and is worth looking into.  Also there are banks that offer incentive programs with either cash back or one’s that will match your savings money or something.  Looking into your options is just one way to put a few extra dollars in your pocket.

2. If you often use credit cards, stop.  Consolidate your cards and pay them down or off.  I know this sounds like spending money, but it will save you a lot in costly interest and fees and leave you with less debt which is always good.  Shop around for the best rates you can find, these companies want your business and have the ability to offer you some really great deals.

3. Use coupons for everything.  There are coupons for oil changes, department store discounts, and restaurants and fast food.  Be sure to clip and save all coupons in an organized fashion.  These can really add up especially when they can be combined with sales and discount items.

4. Change all the bulbs in your home to energy saving bulbs.  Especially in the winter this savings will really add up.  Don’t pay retail for your bulbs, go online and find a deal.  You can get 13W bulbs for about $1.50 each so shop around.  This is a big savings over the $4.00 per bulb that they are going for at Walmart.

5. Find more energy efficient ways to heat and cool your home.  Wood is an excellent source of heat and if you have a fireplace on your house it can serve as a good source of supplemental heat.

6. Walk instead of driving.  If you are going somewhere local you can save on fuel costs and get some exercise.  As long as the weather is good take the kids or the dog.  Good bonding time as well.

7. Don’t over mow the yard.  With the cost of fuel being so high, allow the grass to be a little bit longer, and when you cut it, cut it really short to stretch out the time between mows.

You can find other money saving tips on the Consumer Federation of America website.  Just be sure to calculate out your savings and put that money aside.  You will be glad you did, it will add up.

For the past 30 years American’s on average saved about 7% of their salaries. In 2006, the average savings was at -1% and now in 2008 the average American saves about .5% of their annual income. There are several thoughts on the reasons for this trend.

Some people think that it is because the Boomers and Generation X just overspend, however looking more closely at the trend there was a huge increase in family income between 1947 and 1973, sometimes even doubling which left Boomers with a huge amount of disposable income. Now with the rising inflation rate and the lack of savings everyone needs to be concerned. This trend could hit hard.

In the years of the great depression, people knew how to make the most out of every dollar. To conserve and to save was the norm and the better you could do it, the better your family would make out. When these people hit the above time frame, they made a killing. Most went from having a very low income and stretching every dime to making a lot of money, and they kept many of their frugal ways while doing that. They continued to live modestly and put aside plenty of money for savings and investing and they have done well for themselves. Future generations have not learned the value of frugal living due to the fact that entered the world during a time of abundance and there has always been plenty of “stuff” for them, so they do not have the values of saving and conserving that their ancestors exhibited, and therefore as we enter this difficult economic time, no one is really prepared for it financially. They have just been living day to day, knowing that tomorrow will bring more money, but now with the financial slow down, it is truly time to take the examples from our forefathers and put ourselves into a save and conserve mode, and when and if the economy improves, we should still live modestly and continue to save for our futures.

This time of financial difficulty can prove to be a learning experience for us all. Live modestly, conserve where you can, and save every dime that you have available to you. Times are tough but the tough people will see this through.

Everyone is talking about the prices of everything going up and up.  Most people blame it on Bush, blame it on the war, Sadaam Husien, all the arab nations, etc.  Well, a recent report says that while we are all struggling trying to be able to afford to put gas in our tank and food in our stomaches, Exxon is making a whopping $1500.00 per second.  Why is this? The problem is that everyone is using the war as an excuse to get more money out of us and put it in their pockets.  The part that I really find perplexing is where is our government in all this? Why are they not stepping forward and putting a reasonable cap on the amounts that companies especially food and oil companies can make off of us during this period of time.  Why aren’t they standing up for us in our time of need? The answer in my opinion can only be one of conspiracy.  They must be getting something from the companies either monetarily or otherwise which is worth more to them then the American public.  This whole situation is a travesty and just another way to keep the public focus away from what they are doing.  After all, if we are all so busy trying to figure out how we are going to be able to pay for things, then we can’t be looking at what they are doing, right?

I mean isn’t it lovely that during this financial crunch our government is going to start reducing their employees to a four day work week, so they don’t have to pay so much in transportation and gas.  I think that is a wonderful idea, but if this is the solution then why not reduce all companies to a four day work week.  Why not reduce school to 4 days per week? After all, not only would this save everyone money in the long run, but it would also save on the amount of gas and oil used in this country and therefore would reduce the demand, especially when you think about all the people who have really long commutes.  And wouldn’t it be helpful to have an extra day off a week? Well, I wouldn’t get your sights set on that, unless of course you are one of the elite few who get paid by the federal government.