Posts Tagged ‘debt’
Are You Suffering from the Debt Disease
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Some of you who are over-spending have a real problem. In fact, you have a sickness, of sorts. Now before you think that I’m offering you a clinical diagnosis, let me say that I’m talking about a personal belief I have about people with massive credit card debt due to over-spending.
I feel strongly that excessive debt is the worst possible financial cancer you can have. In fact, I believe that debt for many people is a byproduct of a terrible disease – an insidious malady known as consumerism – and as a symptom of a disease, debt should be treated as such.
If you think about it, many aspects of chronic spending, and the debt that results from it, are really no different from alcoholism. Check out the following 10 similarities:
Excessive consumerism and alcoholism both:
1. Generate stress and physical illness (migraines, ulcers, etc. can result from money worries)
2. Tear families apart (70% of all couples that divorce say financial strife was a major problem in their marriage)
3. Produce short-term euphoria or escapism from daily problems
4. Can be generational (Don’t you know people whose behavior just mimics what their mom or dad did?)
5. Make individuals feel shame, guilt and embarrassment
6. Have complex underlying or root causes for the behavior
7. Cause victims to feel out of control with their actions
8. Produce hangovers (for the alcoholic, a drinking binge leads to a physical hangover; for the shopaholic, a spending binge creates a debt hangover that lasts months or years)
9. May require individuals to change their habits, their friends, the places they frequent, etc. to reduce temptations
10. Have similar and predictable phases of deterioration:
- Denial
The phase where the person refuses to admit he/she has a problem, as in: “I don’t have too much debt,” “I don’t shop too much” or perhaps: “I can handle my bills.”
- Worsening of the problem
When the debts mount, late fees occur, bill collectors call, etc.
- Hitting ‘rock bottom’
Characterized by traumatic financial events, such as foreclosure, bankruptcy, personal or business lawsuits, and so forth.
- Intervention
Sometimes the intervention is from within the family, as when a husband takes away his wife’s credit cards. Other times, the intervention/help comes from an external source, such as when a person voluntarily goes to a debt management program.
Now that you can see the common areas between excessive consumerism and alcoholism, is it any wonder that debt has such a stranglehold on you?
But don’t despair. You don’t have to remain drunk with debt. You can kick your spending addiction, if that is what has put you in this mess. Each of you can break the cycle of debt. With the right know-how and some positive action, you truly can fix your finances, once and for all.
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Your Declaration to Achieve Zero Debt
You’ve heard of “Cease Fire” agreements when nations are at war, right? Well, right now consider yourself at war with your debt. It’s a battle you’ll win if you start off with a “take no prisoners” attitude. And that means beginning with the mindset that NO MATTER WHAT you will not spend beyond your means, you will not spend for the wrong reasons, and you will no longer pile on additional credit card debt. Instead of a “Cease Fire” agreement, you’re now going to create a “Cease Spending” pact with yourself.
- Write out your very own “Declaration to Achieve Zero Debt.” Use the following model as your guide.
I , (insert your name here), realize that I am in a financial hole. Therefore, I hereby vow to stop digging myself further into debt. I acknowledge that I can never be free from money worries if I continue to spend excessively, for the wrong reasons, or on unnecessary things. From this day forward (insert month date and year) I will be more conscious of my spending habits, being careful to keep my behavior in line with my desire to reduce my debt and achieve financial freedom.
Print it and insert your name and date. Then put it in a visible place, as a reminder of your commitment to financially empower yourself. Excerpt from Zero Debt: The Ultimate Guide To Financial Freedom 2nd Edition.
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Recommended Reading – dFree: Breaking Free From Financial Slavery
Drawing on his years of experience as a pastor, public policy maker, and community leader, DeForest ‘Buster’ Soaries, Jr. shares the four vital keys to debt-free living in this groundbreaking, life-changing new approach. ‘The idea that we would be voluntary slaves is offensive to all of our sensibilities,’ says Soaries, ‘But when we continue to spend what we don’t have, charge what we don’t need, and borrow more than we can repay, then we must call the problem what it is: slavery.’
This is not another financial literacy program assuming that all people need is information. Soaries believes living in debt is an emotional, spiritual, and psychological problem as much as it is an educational and informational one.
5 Reasons to Opt-Out of Credit Card Offers
Here, Soaries shares the four vital keys to debt-free living that have helped hundreds of families in his church get out of debt. By replacing the ‘get more money’ mentality with a ‘get out of debt’ approach to financial freedom, not only were hundreds of people able to go debt free, his church’s offerings increased by $1 million dollars–during the recession.
Find out how you can leave a financial legacy of your own by saying yes to no debt. Says Soaries: ‘There may be no greater need than to understand the value and joy of debt-free living. There may be no greater legacy we can leave our children.’ Click to order or learn more.
About The Author
DeForest B. Soaries Jr. is the Senior Pastor of the First Baptist Church of Lincoln Gardens in Somerset, New Jersey. He formerly served as New Jersey’s Secretary of State and his work was featured in the acclaimed CNN documentary ‘Almighty Debt.’ Soaries earned degrees from Fordham University (BA), Princeton Theological Seminary (MDiv) and United Theological Seminary (DMin). He lives in New Jersey with his wife, Donna, and twin sons, Malcolm and Martin.
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4 Dumbest Things to Do If You’re Deep in Debt
Getting into debt is easy. It’s getting out of debt that’s the tricky part.
Unfortunately, many people who would like to eliminate their debt shoot themselves in the foot by making bone-headed mistakes that actually compound their debt problems.
Here are the four dumbest things you can do if you’re already deep in debt:
1. Keep spending recklessly.
You’d be surprised at the number of people with credit card bills up to their eyeballs who nevertheless keep on spending carelessly. Some are shopaholics who need help ending their shopping addictions. Others need to learn to budget – or haven’t even bothered trying.And a big group of consumers in debt have basically given up mentally when it comes to adjusting their spending habits. They already have $5,000, $10,000, maybe even $20,000 or more in credit card debt. So when they see something they want to buy, have or do, they think, “I’m already in debt, so what’s ‘X’ more dollars?”
But that’s the wrong mindset. If you’re in debt because of your spending ways, you’ve got to get that spending under control if you’re ever going to become debt-free. (Read my tips on creating the right mindset to become debt-free).
Also, check out the free online version of my book, Zero Debt, to learn how I paid off $100,000 in credit card debt in just three years. Needless to say, to eliminate my debt, I had to get my own reckless spending under control.
2. Use a home equity loan to “fix” a deeper debt problem.
So you’ve got a house with some equity in it and you’re thinking about using a home equity loan or home equity line of credit to pay off your mounting credit card debt, huh? Maybe you should re-think that strategy.
On the surface, it may seem like a smart move to get rid of credit card debt with a high interest rate in favor of lower-rate mortgage debt. In reality, though, this is often a terrible idea.
For starters, if your credit card bills resulted from a spending problem or from you generally mismanaging your finances, a home equity loan is a disaster waiting to happen.
When over-spenders or poor money managers take out home equity loans, it does make their credit card bills go away – but only temporarily. Then the lure of credit cards with zero balances proves to be all-too-tempting, and those chronic spenders go right back out there and charge up more credit card debt. The home equity loan hasn’t fixed the underlying issue, which is a general mishandling of one’s finances; it only served as a band-aid to cover up the deeper problem.
Even if your spending habits aren’t the problem, taking out a bigger mortgage to reduce your credit card debt could still be ill-advised if the issue that got you into debt hasn’t been resolved.
Many people get into debt because of what I call “The Dreaded Ds” – downsizing, divorce, death (i.e., a main breadwinner in the family died), disability or disease. If you were driven into debt because of one of these circumstances and the issue hasn’t yet been rectified – say, you were downsized and still don’t have a job, or you faced a disease or disability and haven’t yet bounced back from your medical problems – then tapping the equity in your home to pay off your credit card debt may wind up exacerbating your financial troubles.
Unfortunately, there are many heart-breaking stories of people who paid off their credit card debts by converting those obligations into mortgage debt – only to continue experiencing financial hardship. So they were forced to use the credit cards yet again to stay afloat and also had to pay bigger mortgages. For those who can’t keep up with all the new payments, many wind up in foreclosure.
3. Borrow money haphazardly from family members.
We’ve all heard the phrase “Desperate times call for desperate measures.” And when people are desperate for cash, they’ll do anything – even borrow money from relatives despite the huge risks involved.
Getting a loan from a family member – or even a close friend – is always a dicey proposition at best. But when you’re already in debt and are borrowing to repay another obligation, you’re just begging for trouble.
The worst times to borrow from a relative? When you have no definitive income source to repay a loan; when you have no specific date you know you can expect to get your hands on future cash; or when a family member agrees to float you some money and says, “OK, but I really need the money back soon to pay my own bills.”
Without a specific game plan on exactly how and when you’ll repay the loan, you’re setting yourself up for a major relationship rift if you don’t keep up your end of the bargain. And it’s such a shame when family squabbles erupt or relationships deteriorate over money issues. (Read these tips on how to establish proper financial boundaries with relatives and friends).
4. Ignore the warning signs of debt.
Some people in debt are living in a fantasyland when it comes to the potential dire implications of their debt or how severe their debt problems may already really be. In many cases, those who pay their bills on time or who have good credit ratings may be in denial about their debt levels – or about how that debt may impact other areas of their lives. As long as they’re making minimum payments and bill collectors aren’t calling, they think they’re doing OK.
But those with debt may ignore how that debt may be causing them to argue with their spouse about money, or how the debt gives them a gnawing feeling in their pit of their stomach when they have to open their credit card bills.
In reality, whenever you owe a creditor money of any kind – whether it’s small debts or large ones – you should be alert to the warning signs that you have too much debt. Some of those signs: You can only afford minimum payments, you constantly use credit card balance transfers to keep up with your debts, and you’re maxed out on one or more credit cards.
If you fail to heed the red flags that you might have too much debt, it’s easy for your debt to quickly spiral out of control when unexpected setbacks happen or your life circumstances change. Lynnette’s article originally appeared on WalletPop.
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