Thoughts on Debt

Well, the government has been on this band wagon for years.  They have been looking to rid themselves of the payday loan industry claiming that they are ripping people off.  Don’t get me wrong they do charge exorbitant rates on their loans, there is no doubt that this is true, however I can’t help but wonder if they really are just angry because that is money that they are losing each year, and they don’t want the competition.  Think about it, you can pay $15.00 per hundred to borrow from a payday loan place, or you can possibly bounce a check and be charged $35.00 so really is that so unreasonable.  Plus many of the people who choose to take out payday advances are people who can’t get approved for government loans with lower interest rates, so what are they really losing, if they aren’t providing services to these people.

Now many states have completely banned payday loans making them illegal, but many more states are trying not to completely do away with them, but merely limit the terms, interest rates, and number of loans a person can take out.  One such reform in the state of VA has a lot of payday loan companies scrambling to find new services to provide and new ways to get around the coming laws.  With many people paying them millions in interest every year, they are not sure how they will make it, and many people are worried because a new database will not allow you to have more than one loan at a time.  The concerns are great, but the best advice I can give to you is if you currently hold a payday loan, find out about the changes in your area, and be sure to get the facts.  It is a good idea to begin paying your loan or loans back now, so that you don’t get stuck after the first of the year.  Some companies will change the game in 2009 and others may have to close their doors completely, so be sure you get out of this system before it is too late!

Okay, so we realize that the banks in this country are going under, but how will that effect the average consumer.  Well, it will mean that the whole credit system will need to be revamped and this may or may not be a good thing depending on who you are.  The credit card and loan companies don’t have any more money left to lend and are in the process of actually recalling the credit that they have overextended to everyone.  If you don’t have all your credit used, the bank may close down the credit lines that you have available to you right now.  For some people, this is devastating, while others are taking clear advantage of the system and maxing out all their credit turning it to cash for use later.  Only one problem, you are putting that money where? Of course in the bank, so what you are really doing is giving them the money back anyway.  Now that is not a problem until everyone doesn’t pay back their debts.  Then the banks will be left without money and whose money do you think they are going to use? Of course, your money (which essentially is really their money).

The problem is now, people are realizing that unless they have exemplary credit and no outstanding balances, they won’t be getting any new lines of credit.  This means that they won’t pay back what they have outstanding now because the banks really have no recourse, and there is no more money coming.  Debt collectors are getting desperate, since they really can’t collect on outstanding balances owed and they are going to have to cut enormous deals to get people to pay.  After all, most people are thinking the country just fronted them huge amounts of money, why should we pay them again? The only problem with this, is that our country will never have any type of credit card or loan system again, because if this one can’t be saved and things only get worse, people will only be able to buy what they can afford, and at the wages we are making people it ain’t much.  I personally think that is the way it should have been all along, but the banks and credit card companies decided to get greedy, leaving just about everyone in a hole that they can’t get out of.

In understanding the title of this blog one of the most important things to understand currently is that this maniac is spending through this country’s money for what will require about a 50 year payback period. Now, it is not bad enough to say that we are still spending endless amounts of money on this war which to say the least is never ending in a country whose name we don’t even pronounce correctly. Don’t get me wrong, I realize that these people might have needed our help in the beginning (the verdict is really still out on this fact) but the war is basically killing the economy in this country and still we are fighting it and at home people are struggling just to survive. As if the war was not bankrupting us enough, Bush is now running around and bailing out all the big finance companies to make it look in the numbers that we have money that we really don’t have. He currently has a bill in Congress to allocate $700 billion more dollars to failing companies over the next two years. Well, that’s great people but didn’t anyone tell him his term is up in about 3 months. Realize that he is spending money that we don’t have, and where is it going to come from…US. That’s right we are going to be paying off all this debt because, let’s face it, we can’t spend money that we don’t have right? Is anyone really seeing this besides me? I don’t know but I wish when I was running a little short that I could just print up some more money and go spend it with no financial backing. Oh, that’s right, we can’t just print money that is illegal. Well, I guess it isn’t if you are the President of the US then it is okay to make more money if you need it. Don’t we have enough debt already. Making these companies look better is just making our economy worse. Don’t buy into it, you can’t fix this country’s problems by spending more money we don’t have. Don’t worry though, the bread lines won’t be forming until after George W. Bush leaves office, this way he will still look like the good guy and the poor President who takes over is going to be sunk by Bush’s two year plan to bankrupt us. Keep saving those pennies people, we are gonna need them.

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.

Granted the US economy is not doing well, but if you are suffering because you have accumulated too much debt and you have not had any mitigating circumstances such as illness or death, then it is time to set yourself straight and accept some personal responsibility. Unfortunately many people may not like to hear this, but most debt comes from overspending and reckless spending. Some people can’t help but have the newest and latest things on the market, even if they can’t really afford them. Many people are trying to keep up with the neighbors, the designer clothes, and the new cars, without having the income to support doing so.

If you have money, and you work, then you need to try to live within your means. Sometimes that isn’t fun, but it is very freeing to know that you have very little money going out every month, and it is extremely rewarding to watch your savings and 401K accounts grow. There is something so peaceful about not owing everybody and their cousin money, and about not having bills piling up while you are riding around in your new car. With the economy struggling you need to tighten your belt even further, which may mean putting off that vacation you have been saving for or reducing it to a smaller one. You must be smart, and at this stage of the game if you are wallowing in debt, you need to start up a plan to get it to a manageable amount quickly. That may mean cutting out the luxuries, saving money on your current bills, cutting coupons, or even taking on a second job. You need to begin getting those bills paid off and living within your means before things get even worse.

No one is really sure how long the prices on necessities are going to be rising for, but they do all agree that we are nowhere near the end yet. It is time to scrape every penny together and save it. Don’t spend without worry, that could be money that you will need to live on next year. Save at every opportunity and the payoff will be great.

Is it any wonder why so many people in this country are in debt? If you think about it we live in a country that is always in debt, but ironically their debt never seems to count against them in the same way our debt counts against us. Why is that? When we spend more money than we have or than we can afford, we run the risk of losing everything, yet somehow our government overspends and they just call it a “deficit“. Why are they allowed to function at a deficit, but we are not? If you think about it, where do they get the money from when they are spending more than they have? Do they borrow it or just print up more money?

I would really like to just be able to say I am functioning at a deficit this week and move on, but unfortunately no one would think that was acceptable if I said it. Aren’t they really setting a tone for American’s to spend more than they have? I assure you that in other countries the credit card debt is nowhere near what it is in this country, although the trend is showing an increase in debt internationally as well.

As American’s this is a definite time to learn from our mistakes and start taking down our debt. Let’s face it you can live without a new TV or a new car, but can you really live without food and shelter? We need to stop putting things on our credit cards that we really can’t afford and start paying cash. I really think that this is the wave of the future in this country, as I just can’t see how credit card companies are going to continue to lend us money if we continue to not make good on our debts.

Debt is on the minds of many with the rising cost of groceries and gasoline, where will we find the money to go on if the cost of everything continues to rise at the rate it is? How can we avoid debt in the face of this financial crisis? Well, as Suze Orman says, you may not like the answer, but I am going to give it to you straight. The only way to avoid getting yourself into a financial crunch is to CUT BACK. You must do whatever you can at this point to reduce yourself to the bare minimum of expenses. Things like bottled water and coffee from the coffee shop, I am afraid are some of the first things to go. You can brew your own coffee at home and save a bundle. You can get yourself a to-go pitcher from Brita and use that to get filtered water anytime, anywhere. If you can avoid it, don’t put anything on your credit cards, as a matter of fact, try to stop using all but one card and be sure that you are making significant payments on it each month, hopefully paying off most if not all of the balance, not just the minimum payment. Buy a used car instead of a new one, this will save you a bundle. Shop sales, use discounts, use coupons, do whatever you can to put aside some money for yourself. The more you can keep in your pocket and hang on to the better chance you have of riding out these tough financial times. Now is not the time to take elaborate vacations or buy lots of new toys, now is a time of nesting and saving. The trend shows that these tough economic times are not on their way out anytime soon. They are only just beginning and we must be prepared for what comes next. It is time to trade in your gas guzzler for a moped and to start to use a few more store brands. Shop the sales and cut coupons. These discounts if used right can provide you with significant savings. If you can get an item that is on sale with a good coupon you can save a few dollars per item, and this kind of savings especially in a big family can really add up.

It may be tough at first and a little bit shocking to the system, however, over time you will be ahead of game and will be glad that you took these steps to cut back sooner rather than later.

If you have entered this financial crunch with a bag full of debt in your hand, then you are probably starting to rip your hairs out by the roots.  It is frustrating enough to have the cost of everyday items rising daily, but in addition to that having debt that you are trying to pay down can feel like a ton of bricks on your chest.  Well, there are answers and options for you.  Of course you will want to do some tight budgeting to see what extras you can eliminate, the more money you can put towards paying off your debts right now the better.  Financial anaylists don’t think that this financial crunch is going anywhere soon, so working hard to pay off your debts now will pay off later.

If you have assets that you can borrow against, don’t.  Right now if you house is paid off, then just work to keep it that way.  Don’t over do, you don’t want to potentially lose your house to pay off your credit cards.  Better to keep the house and consolidate your credit card debt into one lower monthly payment.  Most debt consolidation companies can easily help you reduce the interest rates, and get you an affordable monthly payment.  Then you need to work hard to try and pay more than that minimum payment every month, and if that means that you need to cut back in other areas of your spending then do it, and if that means that you need to pick up a second job or sell off your old record collection, then do it.  The time to resolve your financial issues is now.  Don’t waste any more time getting yourself and your family on solid ground.  You need to do it now.

Also, if you are already in over your head, stop spending.  Not on the necessary items, but on all the unnecessary ones.  Take the time to shop more wisely.  It takes a little more time and patience to do this, but it is a definite rush when you get the item for the price you want or even less than that.  Shop online, use all available resources to save money.  Shop clearance racks, discount/wholesale outlets and big box stores.  Take that money that you save and put it back to your credit card or into a savings account.

Avoiding your debt, won’t make it go away, and spending more today will only worsen the problems later on.  Take action today, and have a clearer, easier financial future down the road.