“Fear Can Cost You Money”, quote

Fear Can Cost You Money

by Robert Kiyosaki

Tuesday, January 9, 2007

Wall Street recently paid out billions in bonuses to its employees. Those bonuses came from investors who believe investing is risky. In other words, there’s a giant industry built around investor fears. The more fear, the bigger the bonuses.A recent Time magazine article called “How Americans Are Living Dangerously” makes a number of good points on this reality. I’ll look at a few of them.

Illusory Control

We misjudge risk if we feel we have some control over it, even if it’s an illusory sense of control. The article uses the example of people who drive rather than fly.

Even though the risks of death are higher driving than flying, many people would rather drive simply because they feel they have more control driving. The facts are that only a few hundred people die a year flying and 44,000 are killed a year driving. After Sept. 11, 2001, many people took to the roads rather than the skies. Not surprisingly, between October and December 2001, there were a 1,000 more deaths.

Today, many people feel they have more control if they have money in savings. Thus the saying, “Safe as money in the bank.” But the fact is that savers are the biggest losers of all.Between 1996 and 2006, the purchasing power of the dollar dropped by 50 percent compared to gold. In 1996, gold was approximately $275 an ounce; by 2006 it was over $600 an ounce. In 1996, oil was approximately $10 a barrel ; in 2006 it was over $60 dollars a barrel. Compare the price of real estate in your area between the same 10 years and you’ll notice that the purchasing power of your dollar has slipped.

The point is, in spite of the facts, many people feel safer with money in the bank because they feel they have more control over it. They don’t have control over the price of gold, oil, or real estate, so they think investing in these assets is risky.

The Biggest Risks of All

The second point the Time article makes is that when we’re afraid, we tend to ignore the statistics and listen to our emotions. As I mentioned above, you’re over 500 times more likely to die in a car than in an airplane. Yet cars are not the biggest of all killers.

Of the 2.5 million deaths annually in the United States , the No. 1 killer is heart disease. In 2003, there were 685,089 deaths due to heart attack. Auto accidents caused 44,000 deaths. Only 17,732 deaths by murder and 1 death by shark attack occurred in the same year.

Despite these statistics, more people are afraid of sharks and murderers than driving up to a fast food restaurant and saying, “Super-size it.”

French fries kill more people than guns and sharks, yet nobody’s afraid of french fries.

The same is true in the investment world. Since many people believe investing is risky, they go for the second-riskiest investment, mutual funds. As my rich dad used to say, “Mutual funds are like french fries. They may fill you up, but they aren’t good for you in the long run.

”John C. Bogle, founder of the Vanguard Funds, states in his book The Battle for the Soul of Capitalism, “When we have strong managers, weak directors, and passive owners, it’s only a matter of time until the looting begins.”

Bogle has spoken out this way because the mutual funds industry is legally looting money from investors.

To put it another way, since most people think investing is risky and full of sharks, they’ve turned their money over to some of the biggest sharks in the world — the managers of mutual funds.

One of the reasons people think investing is risky is because there’s an entire industry that wants you to believe so. Trading on your fears is very profitable.

This leads to point number three in the Time piece. The magazine quotes the findings of a study in which a panel of 20 communications and finance experts were asked about the risk of human-to-human transmission of avian (bird) flu. These experts said the risk was 60 percent. When the same question was asked of medical experts, their answer was 10 percent.

The point is that you need to be critical of experts. Is the person you seek advice from able to give you a credible answer?

Qualified and Unqualified AdviceThere are three experts who are often not qualified to give you sound investment advice. They are:

·  Non-investors I’m always surprised by the number of people who take investment advice from non-investors — people such as friends, family, and co-workers. A few years ago, I found a spectacular little condominium for sale for $50,000 in Phoenix, Ariz. All I had to do was put down $6,000 and assume the loan.

At the time, it was worth about $95,000. Today the units in the same complex sell for $195,000. Best of all, the monthly rent at the time was approximately $1,000 a month and today rents are around $1,500.

A friend from Portland , Ore. , asked if I would let her purchase it. My wife, Kim, and I agreed, thinking at the time that this unit would be a great start for our friend. A few months went by and we asked her how the purchase was coming along. She said, “Oh, I forgot to tell you. I didn’t buy the unit.” When we asked her why, she said, “My neighbor Marge said it was too risky.”

“How many investment properties does Marge own?”  “None.”

Clearly, taking advice from someone who doesn’t know what they’re talking about is the real risk.

·  Perceived experts, such as financial planners or stock or real estate brokers 

Most people take financial advice from salespeople, not rich people. Most stockbrokers are not rich nor do they invest in what they sell. The numbers are even worse for real estate brokers.

·  Investors themselvesI’ve shown several great investments to an investor friend of mine. To this date, he hasn’t purchased anything I’ve recommended. That’s because he can always find something wrong with the investment. Instead of looking at what’s good about them, he looks for what’s wrong and then talks himself out of taking action.

This is one reason why I invest as part of a team, so that I can consult with other investors rather than talk myself out of great deals.

The Time article made it clear that fear is normal. We all experience fear; I admit that I’ve let it hold me back. I probably would’ve been a lot richer a lot sooner if I flew more and drove less.

The important thing to remember is to pay attention to what we worry about — and what we should be worrying about.

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Robert Kiyosaki is the author of “Rich Dad”“

”Your Rich Dad Journey…

You’ll be among friends on your Journey with Rich Dad, kindred spirits who share your passion for knowledge and your goals for the future. The Rich Dad community is a diverse and empowered global network of families and individuals committed to a better life. At the very least, the heightened financial literacy advocated in the Rich Dad messages can help individuals make better choices in how they earn and spend money; At its best it will elevate individuals to levels of financial independence that they had only imagined. ”  – Robert Kiyosaki – 

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Interestingly, fear is also keeping people from doing something about their credit card debt. Instead of getting into a program that can help them get rid of the debt in 12-36 months they like their “comfort zone” and keep staying in it until they find themselves in a much more difficult situation to handle, possibly even bankruptcy. 

Aila Noake

Debt Relief Consultant

www.MyIntegrityDebtOptions.com

Patients Paying With Credit

Medical costs over burdening many citizens

Medical costs and many people without health insurance are driving consumers into paying their medical expenses by credit cards.

The following article shows how people, particularly with long term illnesses, are forced to use credit cards to purchase even their high priced medications. – And who benefits from that? None other than the already multi billion dollar rich pharmaceutical companies!

Study finds patients paying with credit

By Matthew Gruchow
Published by ArgusLeader.com, February 16, 2007

Elaine Hicks settles into a comfortable chair and sets her light brown wooden cane aside. Multiple sclerosis has made moving more difficult over the years. “I can get up in the morning and feel good, and then by noon not be able to walk,” she said. “It’s an unpredictable disease.“

For Hicks, 60, the physical effect of her disease is compounded by a financial burden. She is forced to put the cost of her medications on a credit card in order to pay for what Medicare and her limited income won’t cover. “The majority of it goes on the credit card,” Hicks, of Sioux Falls, said. “I do know that I couldn’t just write a check for all of these expenses.”

Hicks is one of a growing number of people for whom medical expenses account for a large part of their credit card debt, according to a new study.

Medical expenses contributed to credit card debt for 29 percent of low- and middle-income households in 2005, according a study by Demos, a nonpartisan public policy group, and The Access Project, a health care community action organization. Overall 20 percent of indebted households reported “having a major medical expense in the previous three years and that medical expenses contributed to their current level of credit card debt.”

“If something happens to you, and you’ve got a big health care bill and maybe insurance that’s not comprehensive, then you’re looking at a lot of money that you’re on the hook for,” said Cindy Zeldin, co-author of the study. “And if you can’t afford it, then what else are you going to do?“

What’s more, a study by the Center for American Progress released last month showed that “the financial security of middle class families further deteriorated in 2005.” From 2004 to 2005, the sharpest increase in economic risks facing middle class families came from rising medical costs, as the percentage of families with enough money to weather a medical emergency continued to drop.

In Sioux Falls, the number of patients using credit or debit cards to pay their bills is on the rise, said Cindy Morrison, vice president of public policy for Sanford Health.

“The whole world of business transactions and payments have really changed for everyone with these cards,” she said. “We are seeing an increase in people using a card, but we don’t know whether that is a credit or debit card.”

In 2005 and 2006, of the entire system’s patient accounts, 9 percent were past due, which is more than 120 days old, Morrison said. The average balance on those accounts was about $1,500.

At Avera McKennan Hospital, accounts at 120 days was 18.7 percent.

$200 per month
Hicks was diagnosed with MS at age 51, and the fatigue and other complications of her disease forced her out of her work as a paralegal. Now, on an income supported only by disability and Social Security checks, she uses her credit card to pay for medications.

“I just have those checks. I can’t do anything about my income,” she said. “I just have to do it this way.”

Last year, Medicare helped pay for her medication. Then, in August, she fell into the so-called “doughnut hole,” where Medicare coverage for prescriptions ceases entirely until medication expenses reach a certain limit, at which time coverage begins again at 95 percent. For the rest of the year, Hicks paid $400-$500 a month for medication.

This year, even with her Medicare coverage, she puts about $200 a month on her Wells Fargo credit card, at 19 percent interest, to cover medication costs. She estimates her total credit card debt at $4,000, which includes the purchase of a motorized scooter to help her with daily activities such as retrieving the mail.While she currently is able to pay her bills, as the interest accrues, Hicks said she knows she’ll probably get behind financially.

Growing up in a generation that looked at credit card spending as taboo, Hicks said having to use a credit card stung her pride.But, she said, “I feel very fortunate to have that card.”

Making arrangements
There are alternatives for some. As soon as a patient knows there will be a balance on his or her account after insurance pays its portion, the patient should make payment arrangements with the hospital, said Lorri Halverson, director of Consumer Credit Counseling Services in Sioux Falls.

Medical bills can go to collection agencies just like any other debt, she said.

“There’s a belief out there that so long as you pay them something, they have to take it, and they can’t send you to collections,” Halverson said. “That’s incorrect.”

“We definitely try to work with people in any way we can, for as long as we can,” said Kenyon Gleason, spokesman for Avera McKennan.

Of patients that needed financial assistance, 99.5 percent of those who applied through Sanford received it, Morrison said.For fiscal year 2006, which ended April 30, Sanford Medical Center, formerly Sioux Valley, approved more than $3.87 million in “charity care,” debt that is forgiven for patients who have no other means of paying their bills, according to Sanford data.

Avera health system’s charity care was more than $12.35 million, Gleason said.

Credit card companies themselves also offer better rates for medical expenses.

The Citi Health Card, for example, lets consumers pay for “planned and elected procedures that are not covered by insurance,” such as LASIK eye surgery, said Samuel Wang, a Citi spokesman.

The card program offers three different payment options: a no-interest payment plan for a specified duration of months, a budget plan at about 12.96 percent interest and then a regular revolving credit plan with a variable interest rate of 20.98 percent, Wang said.

“The first two plans comprise 98 percent of the customer base for the product,” he said.

Plan well
Good planning is the best way to keep credit card debt from growing, Halverson said. Some costs of routine care could be worked into a person’s budget, she said. An example would be setting aside money each month toward a yearly physical.

“If you don’t have benefits, you still need to go in for a yearly physical. You need to plan for it differently than if you had insurance,” Halverson said.

But saving for those sorts of costs is difficult on a fixed income, Hicks said. When she turns 65, she will lose her disability payments, further complicating paying her medical costs, including her medications. She said she sometimes doesn’t take the full dose in order to keep the medication from running out too soon.

“So, I don’t know what I’m going to do then,” she said. “I hope my credit card holds out until that point, but then I won’t be able to pay anything on it at that point.”

Aila Noake
Debt Relief Consultant
www.MyIntegrityDebtOptions.com 

America’s Plastic Crisis

Article published Saturday, February 10, 2007

With welcome words of warning to the credit card industry, the new Democratic political regime on Capitol Hill indicated that it will be far more sympathetic to the plight of consumers than their Republican predecessors in Washington.

But soothing words are not enough. The financial services lobby is so powerful that it will take a strong bipartisan effort among lawmakers to roll back the industry’s unconscionably high interest rates and fees, which in many cases would make a mafia loan shark blush with shame.

Americans – many of them spending unwisely, others struggling to stay afloat financially – have rolled up outstanding credit-card debt of $750 billion to $800 billion – roughly $2,500 for every man, woman, and child.

Just paying off a hefty monthly credit card balance is tough enough for most people, but increasingly oppressive interest rates, coupled with fees and penalties hidden in a sea of fine print, have made the prospect of being debt-free a pipe dream.

There is little reason to doubt the assertion before a Senate committee recently by Elizabeth Warren, a Harvard University law professor, that the rules need to be changed to rein in card issuers who use “tricks and traps” to snare borrowers in an endless cycle of debt. “Once they are trapped,” Ms. Warren said, “they are bled with 29 percent interest rates, late fees, over-limit fees, double cycle billing, disappearing grace periods, $15 phone payment charges, and every other possible way to run up the bills and keep the customer paying and paying and paying.”

One particularly ruthless but legal tactic is for an issuer to summarily jack a borrower’s interest rate to the maximum when the consumer is simply late on a payment to another creditor – known as “universal default.”

Indeed, with regulations stacked so far in favor of the lenders, credit card debt is fast becoming the modern version of indentured servitude. Even if strapped borrowers never charge another item, escalating fees can make it impossible for those who make the minimum payment each month to ever pay off their full bill.

That’s why business is so good for credit cards that entice consumers to consolidate their debts into “one small monthly payment.” Some credit card officials who testified before the Senate panel said they don’t employ the “universal default” tactic to make more money, but too many do.

Similarly unpersuasive were arguments that issuers only offer credit cards to those who can handle the debt. If that were the case, jobless college students would not be bombarded with applications, and neither would the mailboxes of millions of low-income Americans.

While credit card users have, in many cases, only themselves to blame, the industry should not be allowed to take undue advantage with excessive interest rates and surprise fees.

The “tricks and traps” we’re all familiar with should be banished and the fine print made plain and understandable. This is the mission Congress needs to undertake to solve the credit-card crisis before the bubble bursts.                 <>  <> <> 

Aila Noake
Debt Relief Consultant
http://www.MyIntegrityDebtOptions.com

 

Debt Settlement May Be an Option Worth Looking Into

This article by Doug Middleton presents more proof of the fact that credit card companies deliberately offer their product to the ones who would be the weakest at paying them back.

“It has become a regular practice of credit card issuers to prey on consumers who are most vulnerable.

For instance, my own son receives 3-5 credit card offers each day. Guess what – he’s a full-time college student with little or no income. Is he vulnerable? Sure he is – just like all of the other college students receiving these offers.

College students are notorious for being broke, and the credit card companies making these offers know this. As a result, many young adults find themselves deep in debt long before they’ve even had the chance to receive their diplomas.

College students aren’t the only people to fall victim to creditors who seek out those who are most vulnerable.

Many credit card issuers extend invitations to individuals whose credit scores are much less than perfect. This is because creditors can charge outrageous interest rates and fees to those who are desperate, thus earning astronomical profits.

As a matter of fact, in 2006 credit card issuers earned more than $90 billion in interest alone. Wait – it gets better; in addition to profits earned from interest, credit card companies also earned more than $50 billion from the fees they charged.

Chances are you may be a victim of such credit offers. If so, you’ve probably realized that your debt is out of control, and you can no longer meet your monthly financial obligations.

Fortunately, there are options and solutions to assist you in becoming debt free.

If you’re reluctant to file bankruptcy, debt settlement may be an option worth looking into.

Debt settlement is for people who are on the brink of bankruptcy, and find that they have very little choice due to the fact that they simply can’t go another month wondering how they’ll pay all of their bills.

You see, debt settlement is a process that allows you to “settle” your debts with your creditors for less than the full balance (usually 50% or less), and has been the solution for many people who otherwise would have had no choice but to file for bankruptcy.

If you want to avoid bankruptcy because you don’t want your financial difficulties to be made a matter of public record, and you want to avoid a bankruptcy filing from appearing on your credit report for the next 7-10 years, debt settlement may be the right solution for you.

Prior to deciding to enroll in a debt settlement program, however, do your homework. Be sure that you’re a good candidate for debt settlement, and that you’re well aware of the entire process – from beginning to end.

If you should decide to hire a company to assist you in negotiating with your creditors it’s important to hire a company you trust and with whom you feel comfortable.

If you speak with a representative of a debt settlement firm who seems more interested in taking your money than helping you resolve your finances, move on.

I wish you all the best in your endeavor to become free of debt.”

Aila Noake
Debt Relief Consultant
http://www.MyIntegrityDebtOptions.com
 

Alternatives to Bankruptcy for Debt Relief

Since the bankruptcy laws changed, people have been looking for alternatives to their debt situations. There are very few alternatives, that are any good, and the ones that are, are far better than bankruptcy itself.

The challenge there is that for the consumer to find them when they need them is difficult, because they are not advertised in the mainstream. And often, when these options are virtually unheard of, people are very skeptical and find it hard to believe that such alternatives exist.

Here is a good article on such alternatives. 

(Newswire Today) — Hoschton GA, United States, 2006-03-18 

Americans carrying too much credit card debt have had the Bankruptcy option swept away. Many are now turning to a little known alternative; discharge 100% of their debt without bankruptcy, consolidation, or refinancing.

Thanks to the new bankruptcy reform laws, many Americans who are overburdened by their credit card debt will no longer qualify for Chapter 7 bankruptcy protection.

However, consumers need to know that an alternative exists for people to walk away from 100% of that debt. The process that is used to discharge debt is based off of U.S. Supreme Courts decisions, Title 15 United State Code (USC) section 1692, the Fair Debt Collections Practices Act, section 1601, the Fair Credit Billing Act, the Uniform Commercial Code (UCC), section 203, and numerous Banking and Lending laws.

There are many cases that have already been decided on when it comes to the issues of money, credit, and banking.

The collection of interest on credit issued by a bank or a credit card company is in direct violation of all usury laws.

In addition, the United States Supreme Court has ruled time and again against the legal authority for banking institutions to lend credit. Both Federal and state laws allow banks to lend money, but banks do not have the authority to loan credit.

Even with the reform, some bankruptcy protection is still in place. However, consumers must obtain credit counseling from an approved agency within six months prior to filing for bankruptcy. Also, the consumer may still be required to repay most of their debt.

In addition, being enrolled in credit counseling will show up as a negative on a consumer’s credit report, as damaging to credit as a bankruptcy.

Jim Vrana of The True Debt Advisor states, “A large percentage of people with debt trouble were not irresponsible with their credit cards, but have had some type of crisis in their lives.”

He adds, “This program is giving people a fresh start on their financial lives. A ‘do-over’ you might call it. Without the credit-sting or shame of bankruptcy.”

Billed as The True Debt Advisor, Jim Vrana’s mission is to educate and empower people to overcome their financial challenges.

The time-tested legal procedures used to eliminate credit card debt has been used by thousands of people with tremendous success. It is truly the alternative to bankruptcy, credit counseling, and debt consolidation.

The program is applicable to all major credit cards and revolving unsecured signature loans.

*  *  *

We know if the average person wanted to find all the laws for themselves, it would take them at least 18 months to just locate most of the laws used in this process.

This is where Debt Relief Specialists really shine. Not only do they have the laws, they know these laws inside and out. They’ve been researching, studying and applying them for 7 years!

Aila Noake
Debt Relief Consultant
www.MyIntegrityDebtOptions.com

Credit Card Industry is Finally Being Scrutinized

It is surprising that someone is actually paying attention to the credit card industry and its practices of mistreating their customers.

The fact that credit card companies have been taking for granted consumers’ ignorance of contract law has been dismissed for too long by authorities that could have done something about it.

Card industry executives now say that they back disclosure and that disclosure lacks clarity. – In my opinion not only clarity, but also proper disclosure of all the facts. Not quite the same as over-regulation, which allegedly they want to avoid.

There is defenitely serious reason to examine the card companies’ practices on extending credit to students and young people in general, as well as people who are already over extended. And, what about hiking up the interest rates and applying late fees for any possible reason they can come up with, to get the consumer to a point of no return.

There is plenty of reason to examine the practices of this industry before they do even more serious damage to the economy of this country.

“Dodd promises scrutiny on credit-card industry” is at least a move to the right direction.

By Robert Schroeder, MarketWatch

 Jan 25, 2007

WASHINGTON (MarketWatch) — Senate Banking Committee Chairman Christopher Dodd, D-Conn., served warning on the credit-card industry and banks on Thursday they’ll come under heightened scrutiny in the months ahead and that they should “cease and desist” any practices that harm consumers.

“Irrespective of the current legality of such practices, you should take a long, hard look at how you treat your customers,” Dodd said at the outset of a banking committee hearing about the card industry. He said he’s planning a series of hearings on industry practices including marketing and billing.

The credit-card hearing is the first to be held by the panel about consumer issues, which Democrats have promised to raise. Dodd said he wants to examine cards’ disclosure practices to make sure that consumers understand the deals they’re entering into with card issuers. He also said he wants to look at billing and default policies, as well as card interchange fees.

Card-industry executives defended their companies in testimony before the committee, saying they back disclosure but cautioning against over-regulation. “Better disclosures may not mean more disclosures,” said Carter Franke, the chief marketing officer for Chase Bank USA. Franke said in a written statement that the types of disclosures mandated by state and federal laws “have not led to greater clarity. “Our customers are telling us that today’s disclosure lacks sufficient clarity,” Franke said.

 Executives also addressed raising rates on consumers who pay late on other accounts, a practice known as “universal default.” “I want to be clear that we do not do any form of ‘universal default,’” said John Finneran, general counsel of Capital One Financial Corp. “This has been our long-standing policy.” Similarly, Franke of Chase Bank said a missed payment on a non-Chase card won’t result in an automatic re-pricing of a Chase account. Chase Bank is a unit of JPMorgan Chase & Co. (JPM)

U.S. consumer debt now stands at $2.4 trillion, according to the Federal Reserve. Of that, $872 billion is revolving debt, which is basically credit card debt. Read more.

Tougher rules sought

 Meanwhile, Democrats have a flurry of proposals for the card industry. Sen. Daniel Akaka, D-Hawaii, would require issuers to disclose the consequences of paying only the minimum balance. “Our bill makes clear the adverse consequences of uninformed choices, such as making only minimum payments, and provides opportunities to locate assistance to better manage credit-card debt,” Akaka said in a statement Thursday. Sen. Robert Menendez, D-NJ, and Dodd also have bills to curb industry practices. Among other rules, Menendez’s bill would prohibit card-issuers from altering terms and conditions on a credit-card agreement. Dodd’s proposal, would, among other things, raise the bar for marketing cards to students.

It’s unclear, however, how much Republican support such measures will garner. Sen. Richard Shelby, the banking panel’s top Republican, didn’t call for any new rules in his opening statement Thursday. He did, however, acknowledge “troubling practices” in the industry including extending more credit to known troubled borrowers.

 Travis Plunkett, legislative director for the Consumer Federation of America, told lawmakers they should tighten a number of rules on companies, including prohibiting issuers from applying interest rates retroactively to past purchases.

Plunkett added consumer groups support bills by Akaka and others. “There is clearly a need to examine many questionable practices in the industry including marketing, credit extension, the terms and conditions of credit card contracts and rising fees and interest rates,” Plunkett said in testimony.

Aila Noake
Debt Relief Consultant
www.MyIntegrityDebtOptions.com   

Your Free Credit Report and How to Opt Out of Credit Card Offers

How would you like not having all those unsolicited credit card offers to be adding to your trash mail any longer?

Good news, you have the right to opt out of receiving them. To do so, call 888-5-OPT-OUT or go to www.optoutprescreen.com .

This service is operated by the four major credit bureaus, and you will be asked to provide your birth date and Social Security number. Once you opt out, companies have 30 days to comply.

 

Did you know that you have one free credit report available to you each year?

You may have been aware of that, but did not know how easy it is to get. Well, here is the link you need to go to:  https://www.annualcreditreport.com/cra/index.jsp  and you can print it out yourself.  No waiting to receive it in the mail. It’s almost instant, like so many things are in life these days. Unfortunate, in a way, as we are becoming such an instant gratification society.

 

Hope these tips are helpful.

 

Aila Noake
Debt Relief Consultant
www.MyIntegrityDebtOptions.com

What is Debt Consolidation and does it work?

Don’t be fooled by the “non-profit” status

Most debt consolidation companies claim to be non-profit, but they make a lot of revenue at the expense of their customers.  These companies charge several different ways. Some charge a percentage of the payments made to the lenders. 

Example
Let’s look at an example of debt consolidation. Let’s say you’re facing $20,000 in credit-card debt, You turn to a debt consolidation company, attracted by its nonprofit status. You are stunned when they pocket your entire first payment as a “voluntary contribution.” You’re also surprised to learn that the company is collecting nearly 10% of your payments as “continuing contributions”. Of course this is disclosed in the “fine print” of the contract, but you figured you could trust a “non-profit” company. Besides, the representative never disclosed the fees as he applied pressure for you to sign quickly.

By now you understand the truth: They’re not doing credit counseling, they’re just passing through your money and skimming some off the top for themselves. That doesn’t sound like a non-profit company to me.

Conclusion
Debt consolidation companies, even the “non-profits”, are in the business to make money.

The Truth About Debt Consolidation

Myth: Debt consolidation saves interest, and you have one smaller payment.
Truth:  Debt consolidation is dangerous because you don’t reduce your debt, you repackage it!

Debt consolidation is nothing more than a “con” because you think you’ve done something about the debt problem. The debt is still there, – you just moved it!

Debt consolidation seems appealing because there is a lower interest rate on some of the debt and a lower payment. However, in almost every case, we find that the lower payment exists, not because the rate is actually lower but, because the term is extended. If you stay in debt longer, you get a lower payment, BUT if you stay in debt longer, you pay the lender more, which is why they are in the debt consolidation business. 

Debt Consolidation Example
Let’s say you have $30,000 in unsecured debt, including a 2-year loan for $10,000 at 12%, and a 4-year loan for $20,000 at 10%. Your monthly payment on the $10,000 loan is $517 and $583 on the $20,000 loan, for a total payment of $1,100 per month. The debt consolidation company tells you they have been able to lower your payment to $640 per month and your interest rate to 9% by negotiating with your creditors and rolling the loans together into one. Sounds great doesn’t it? Who wouldn’t want to pay $460 less per month in payments?

But they don’t tell you that it will now take you 6 years to pay off the loan.  This may not sound that bad to you at first unless you realize how much more you will actually pay in additional payments. You will now pay $46,080 to pay off the new loan vs. $40,392 for the original loans, even with the lower interest rate of 9%. This means you paid $5,688 more for the “lower payment”. Not such a good deal after all. This example shows you why they are in the business - because they make money off of you by just repackaging your debt. The Real Way to Get Out of Debt… is to get rid of the debt. Let me show you how.

Aila Noake
Debt Relief Consultant
www.MyIntegrityDebtOptions.com                                                                                                                           

Debt Free – Utopia millions are starting the New Year with

Hope it was fun while it lasted… Now that the bills are arriving reality is starting to set in as thoughts are turning towards the bitter sweet of having to pay for the fun.

Year after year Christmas has become a grander commercial feast for vendors and credit card companies. Advertising is making sure that everyone gets into the frenzy of buying, usually using plastic, with vague thoughts of what trouble may be looming ahead.

By John Hielscher of Herald Tribune in his article “Be Ready When Big Holiday Bills Roll In”:

“Most people spread out their holiday purchases over four or five credit cards,” he said. “By the time the holiday season is over, they have no idea what they spent, which is a huge problem. “Some 26 percent of Americans use credit cards most often when holiday shopping, pumping up the $63.6 billion charged on credit cards throughout the shopping season, according to a poll by Consumer Reports magazine.

Twenty-three percent of those shoppers say they won’t pay off their debt until March or later.

“Credit cards can be hazardous to your holiday season,” said Tod Marks, senior editor at Consumer Reports.

“With the average household saddled with $9,000 in credit debt already, anything that significantly adds to that impost could be potentially devastating,” he said.

Those who used credit cards said they planned to charge more than $1,000 for holiday gifts this year.

In its latest survey, Consolidated Credit found that 44 percent of shoppers are still paying off debts from last year’s holiday season.

This year, 30 percent say they plan to pay off their holiday debt within three months, and 25 percent expect to be done within 12 months.

Fifteen percent say they can pay off their debt in a lump sum, while 30 percent say they aren’t concerned about paying off that debt.

Estimates varied on how much shoppers would spend at Christmastime.
The National Retail Federation projected the average consumer spending $791.10 in the recent holiday season, up from $738.11 in 2005. Shoppers also would spend nearly $100 on themselves.

“What happens is that people tend to view credit cards not as money — ‘I can buy something and pay for it later.’ When that gets out of hand, it can really be a problem for the individual.

“The rule of thumb is if it takes you more than three equal payments to pay off a credit card, then you could have a credit card problem,” he said.

Buying a big-ticket item on credit also can become a big long-term expense. Say you bought an entertainment system for $5,000 with a credit card. At 18 percent interest, and making only the minimum payment each month, it will take 33 years to wipe out the debt, which over time will total $12,000.”

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Here are some suggestions of what you could do now.  Even more so, how you can start planning for the future so that the new year and all the years to come, as well as the next holiday seasons, will be much easier for you to handle financially.

Some recommendations

For those who overspent during the holidays, the experts have a number of recommendations to get you through.

First, sit down and figure out exactly how much you owe. Review all charge cards to come up with your total debt.

Track your other expenses. Some debt counselors suggest carrying a notebook to write down every single expense for a month, including that cup of coffee or pack of gum.

Create a budget. Balance your income with your monthly expenses, and what’s left can be used to pay credit card debt.

Pay more than the minimum balance on cards if possible. Doubling the minimum, usually 2 percent of the outstanding balance, will go a long way toward whittling down the debt.

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Financial Planning might not be such a bad idea at this time… starting the year off with a very worthwhile project… especially when you can do it yourself for free with the help of Deborah Fowles. And, if you learn to make it an ongoing project, imagine what a difference it will make in your finances and your peace of mind.

Debby Fowles, B.S., is an author, accountant, freelance writer, and small business consultant with a passion for saving, investing, making the most of her money, and helping others to do the same.

She has prepared a five part Plan titled: “Guidance for Creating Your Own Personal Financial Plan”, which will be a great source to help you come up with a solid plan of your own. You can access the Plan at http://financialplan.about.com/od/personalfinancebasics/ss/FinancialPlan.htm

Aila Noake
Debt Relief Consultant
http://www.MyIntegrityDebtOptions.com
Get rid of your debt legally and ethically
and end your payments immediately.

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