Deep In Debt? We Have A Bailout For You!

Till Debt Do Us Part: America’s Worsening Debt Problem

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I believe that you have a right to more options out there than what mainstream media and conventional wisdom has sold you most, if not, all of your lifetime. And to be honest, I actually disagree with about 90 percent of what they advise and say, so I will be adding my “two cents” in between. However, I always leave it up to you to find out which info is better for you and your financial situation.

This probably comes as a shock to no one, but Americans have a debt problem. The 2015 American Household Credit Card Debt Study released from NerdWallet earlier this year showed that the average U.S. household was carrying $15,355 in credit card debt and $129,579 in total debt. Cumulative student loan debt also totals in excess of $1.2 trillion dollars. For the average American that’s a burdensome amount to pay off over one’s lifetime.

First off, if you don’t like that statistic then stop being “average”. And although it is true that “most” Americans are in debt, there are two kinds of debt “liability”, and “asset” debt. So not ALL debt is bad. Also, just because “most” Americans are in debt, doesn’t mean you have to be part of the “I’m drowning in debt” crowd forever. Remember, misery loves company. And after you read this, I’ll show you a way where you don’t have to feel guilty serving up “for the rest of us” appetizers with that company anymore.

Till debt do us part
However, a newly released survey from CreditCards.com paints an even more dreadful sight than many may not have imagined. More than one-in-five (21%) people polled by CreditCards.com predicted that they would never be out of debt, up from 18% last year. This is particularly concerning because the U.S. unemployment rate is at the lowest level in seven years, implying that the economy is healthy and the consumer is, to some extent, thriving.

On the other hand, if there is a minor ray of sunshine it’s that 22% of respondents this year noted that they were debt-free, which is up eight percentage points from last year. Overall, the average American anticipates being debt-free by age 54.

CreditCards.com’s survey also found that age and income can play an interesting role on debt levels and perception. Not surprisingly, millennials have the most optimistic view of getting out of debt, likely because they have decades to do so before they retire.

Here’s two flaws here; 1) statistics are based on yesterday’s news. 2) financial advise is always talking about tomorrow. To me both are boring. Even though it’s important to look at history to learn from it, it’s not healthy to look at everyone else history based on “stats”, because 9 times out of 10 it has nothing to do with YOU. And who wants to think about retirement when you’re living it up now? It’s an antique advise taking the fun out of you splurging now and enjoying life. Plus, if you love what you do….I mean REALLY love what you do, why would you want to retire from it anyway? This part let’s me know that most people “saving” for retirement hate what they do today, and hoping for tomorrow while letting today and now (present moment) pass them by. Retirement is over-rated. Old grumpy and boring people think about retirement. And if you, or someone you know who’s still fun to be around, living their lives to the fullest and say you’re/they’re retired, then you’re/they’re NOT RETIRED. They just started living again.

So stop looking at “statistics” and LIVE!!!!

Image source: StockMonkeys.com via Flickr.

What was shocking was that low-income earners (people earning $30,000 or less per year) were the most likely to say they’re free of debt, whereas upper-income earners netting at least $75,000 in income per year were the most likely to be in debt. Of course, the inverse was true when it came to paying off debt: upper-income earners were more confident of getting out of debt, whereas low-income earners are more likely to feel trapped by their debt. It’s possible that higher wage earners’ easier access to banking services explains this divergence.

Some of those words are bold for a reason. I came from a low income family, and one thing that was important to us was cold hard cash. Credit cards was off limits, and so we were never, or rarely in debt. However, I understand upper income earners’ situation. Based on human nature…not statistics…the more we make, the higher our expenses. Just like if a person get a cold there’s a chance their nose will run, wonder if they have a statistic for that too. However, with a higher pay do come with a more financial confidence, and paying off debt is one of them. Also, with a higher income gives you a greater chance to shake hands with your banker. It’s just business.

Lastly, CreditCards.com notes that the holidays can put added pressure on consumers’ wallets. The National Retail Federation expects the average shopper to spend $805 on holiday items in 2015, up $70 from a decade ago. Consumers may attempt to stick to a strict spending limit, but the allure of sales can be a dangling carrot that some can’t ignore.

This actually coincide with my report on consumerism and big business. If you don’t have self control, and ready to spend like drunken sailors, you’ll find yourself in financial distress. understand that credit cards are issued by banks that are looking forward to you spending. That’s their business model, and that’s how they make money. When you spend, they make money. You don’t pay, you pay interest. You agree with the terms and conditions when you hold that card. So of course they’re going to entice you with sells, who wouldn’t? The beauty of the free market is, you’re not forced to buy it. But if you volunteer to swipe it, you’d have to pay it. And if you don’t pay it, you’d have to wipe it—tears that is. JK

The 1-2-3 of staying out of debt
it’s important to keep in mind that there is no perfect formula for getting out of debt once you’re in debt, because everyone’s financial situation is different. However, following some basic suggestions could make a substantial impact on how quickly you reduce or pay off your debt.

Now this IS good advise only to consumer debt.

1. Budget! Budget! Budget!
First of all, consumers should be working with a monthly budget. The idea of living your life off a budget isn’t exactly exciting, I’ll give you that. However, if you don’t understand your cash flow there’s a very good chance you’ll either never achieve your goal of getting out of debt, never hit your retirement number, or worst of all, fail to achieve both goals. Formulating a budget will give you an intricate understanding of your cash flow and allow you to optimally divert your income to paying off debt and saving for retirement.

Even Fortune 500 companies have to budget for their shareholders. It’s basically keeping track of your numbers so there’s no confusion. However, there’s the “saving for retirement” word again…ugh!

Here’s the “other option” part. No one ever talks about starting a part time business at least. One of my pet peeves with so-call “financial advise” is basically telling people how to do the same damn thing over again for the past umpteen hundred years. However most “financial advisors” work for the very financial firms and banks that make “bank” keeping your money in their bank. So not blaming the “financial gurus”, it’s just the advise sound like a broken record and my ears are bleeding…isn’t yours?

What they fail to tell you is to explore one of the things that built America into a economic super power in the first place; start a freakin’ business! Yes, they exist, and it’s usually cheaper than you think. IF they’re so focused on telling YOU how to “save for retirement”, maybe they need to find something they love to do for a living so that word will leave a bad taste in their mouth too…or bad feeling to their fingers.

Starting a business is rewarding. However it’s also risky. But so is retirement, because not trying to sound all pessimistic and morbid here but tomorrow isn’t promised to you or me. And the market can be pretty tricky if you don’t know what you’re doing or have the proper financial education. That’s why I say live for NOW. I do believe budgeting is extremely important to anyone and any organization. However I believe that you can find ways to pay off your “liability debt” quicker when you have another side income from a part time business on anything you love to do.

Also, your budget doesn’t have to be etched in stone. Although it’s designed to keep your spending and saving on track, there’s no reason why a budget can’t be adjusted as your income changes.

I agree with that.

2. Be an informed student
Secondly, for young readers and/or parents with children, consider your potential return on investment if attending college. The rate of inflation for college costs is vastly outpacing wage growth. Between 1985 and 2012 the Consumer Price Index rose by 115%. College tuition and fee costs? They jumped by close to 500%!

Ugh, there’s the past again. There’s a way to avoid all that cost…er…investment. Unless you (the student) REALLY want to go to college.

Image source: Flickr user Nazareth College.

The above data isn’t meant to suggest you shouldn’t attend college. In fact, a survey from Pew Research Center in February 2014 suggests that millennials ages 25 to 32 with a minimum four-year degree were earning a median of $17,500 more per year than a comparably aged millennial with only a high school diploma. If anything, college is becoming even more essential for socioeconomic advancement.

Now I reeeaaaaaaallly have to disagree with this one. Especially the financial part. I’ll tell you why;

I’m a businessman with several successful businesses doing extremely well. I have really great connections with some very influential leaders in both the private and public sector. I’ve studied history, questioned it, and used my own judgement to come to my own conclusions while welcoming opposing point of views from others. I’ve learned two different languages with less than a $2k investment, and I can pinpoint every single state in the United States including their capitals. I have to because I’m a businessman. My education?

I’m a proud 8th grade dropout and never graduated from anywhere except job corp (and I’ve heard all of the job corp jokes). I got my education (for free) at my local libraries. The most I ever spent was $16 on an overdue book on–wait for it–economics. And I invested $10 on the most important book on personal finance in my opinion Rich Dad, Poor Dad by Robert Kiyosaki. I used the Internet to do research on the one topic that was important to me; business. As a matter of fact, over half of professionals in their respective fields that work for me are also dropouts. And over half of my business partners are college and high school dropouts. Most of our employees who we pay? College graduates.

Not saying all that to impress you, but to impress upon you that there ARE options besides going to college, racking up more debt, and owing for the rest of your life while waiting for retirement. Also, I challenge the assumption that college is becoming an essential part of socioeconomic advantage; most college students I’ve interviewed for a job couldn’t identify all the states in the country (hence me mentioning naming every state), which is essential to know in our line of business. And most were forced into college, while I found that most who looked forward to advancing their education (post-high school) felt college would be an expensive distraction.

Again, if you desire to go to college then follow your heart, however I refuse to allow a cookie cutter “one-size-fits-all” advise of college interfere with your choice if you believe college is the ONLY way to get you to understand economics, or become financially ahead. College isn’t for everybody, I would know. Besides, your parents would have a lot of financial relief.

The solution? Consider going, or sending your children to, a lesser-expensive state college. Annual tuition costs don’t always correlate to a better return on investment. Or in layman’s terms, a $50,000 per year college tuition cost doesn’t guarantee you a job that will pay off your student loans. My suggestion would be to peruse the College ROI rankings from PayScale. My guess is you’ll see quite a few surprises in its rankings.

Return on ANY investment(s) depends on you, not statistics or anyone else. Yes, despite my earlier remarks on college, I do believe that college can give you access to key connections that could be essential to your career as life goes on. And yes, some companies could give you a much greater compensation package if you have a degree (some companies). If you know your desired career choice requires a certain level of degree, then go for it. However, I recommend talking to the desired company(ies) yourself and make yourself known. Let them know you’re hungry for success in their firm. Be an intern for free if you feel you have to, that’s how I started my career in business by working for my mentor for free in exchange for the most valuable education I’ve ever received when it came to business deals and negotiations. As a matter of fact, I feel it was more valuable than any money he could’ve paid me period. ROI don’t necessary have to mean how much money you paid in and how much you got back, however if you choose that route, I hope that internship will be one of the key experiences you can put in your lifetime career portfolio that can pay you much higher dividends that you’d enjoy making.

As a side note, The College Board also notes that scholarships lowered the annual tuition price paid by students in 2012-2013 by a whopping 65%, so make sure you’re doing everything possible to secure that free money.

I agree with this one. This is one of my tools I would call using OPM (other people’s money).

3. Be responsible and negotiate where you can
Lastly, consumers need to exercise good judgment when it comes to using credit and opening credit accounts. For example, opening a credit account to make an essential large purchase probably makes sense, especially if you don’t have the funds to complete the purchase. Opening a credit card to save $1 on a $10 purchase? Probably not such a smart or necessary move.

I actually had to do this once and it worked. I negotiated an increase in my credit card limit, and then I negotiated my interest rate decreased. Saved my business a lot of money.

Image source: Flickr user lemonjenny.

Consumers should also consider the advantages of opening essential credit accounts that offer 0% APR for extended periods of time. Having the opportunity to pay down debt with no interest accruing can be a major advantage, especially if you’re working with a budget that’s optimized your ability to pay down what you owe.

Also consider that your interest rate, in certain situations, may be negotiable. The worst thing a credit card company can tell you when requesting a rate decrease is “no,” so it never hurts to ask. This can be an especially important tool if you’re having trouble meeting your payments. Credit card companies would really prefer not to send your account to a collections agency, because it’ll have to split a portion of the collected money with the collection agency. Instead, it would much rather work out a payment plan with its distressed cardholders.

Always remember that you have options when it comes to keeping your debt under control and paying off your debt.

Overall, if you’re going to be in debt, let it work for you, not against you. It’s what I call “asset” versus “liability” debt. According to Rich Dad, Poor Dad by Robert Kiyosaki, “asset” is putting money in your pocket from other sources of income besides your job, and “liabilities” is taking money from your pocket. So a credit card can be both if you choose to be. At first, my credit cards went from being a “liability”, because I used it to buy none essential items, to an “asset” credit card because I switched the card’s spending into things that made me money outside of my job. In other words, my paycheck paid off the credit card, and I used my credit card to purchase tools and educational materials for my side business. Then, the business started making money “asset”, and paid off my credit card with OPM (customers buying my products). So doing that has helped me and my wife drastically reduce our overall credit card “liability” debt. Now, every transaction we do is an “asset” debt that makes us more money.

You can do that too. Wherever you are financially right at this very second, it’s easy to start any side business especially online. You’re here already, mind as well get started now….you have “liability” debt to pay off.

Source: foxbusiness.com

 

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