Some truths about your credit...
People are told that they must protect their credit rating at all
costs and that their credit report is the most valuable document in
their world. Ring any bells? If you get some bad marks on your report,
that's it. You're in financial ruin. People do whatever it takes to
ensure that their credit report is kept up to what they believe to be
a "perfect" rating, including working 2 or even 3 jobs and
having a non-existent home life, just to keep that electronic information
— their report — looking good.
What most people don't realize is that they could have a bad credit
rating regardless of what the creditors are telling you. One of the
biggest lies put out by the creditors is that if you've been making
regular monthly payments you have perfect credit. This ensures that
you continue making those regular monthly payments, and they continue
making their money, regardless of whether you have any money left over
to eat or not. The fact is that if you have a higher than 30% debt to
income ratio your credit report probably already has some bad marks
against it. The banks know that if you have a high debt load at some
point you will run into problems. Don't believe me? Try applying for
another credit card. If you get turned down you have bad credit, even
though you're making those regular monthly payments on time.
What is that credit report used for? The only reason for your credit
report is to lend you more money. It tells the creditors how much debt,
pain and suffering they are willing to get you into. The only way to
keep a perfect report is to borrow money, make minimum payments and
make the creditors money. The more money you make them the better they
will tell you your report looks, and the more money they will lend you.
Your credit report is part of this carefully designed trap to keep you
borrowing more money.
What can you do?
Consider credit (debt) cards as one of your worst enemies.
Do not buy everyday items such as food, gas, and groceries on credit
when you can use cash. Banks are foaming at the mouth to sign as many
people up as possible, even if their credit is bad or unknown. If you
get offered credit cards by a bank, trash it after shredding it, refuse
it or send it back. The more cards you have and use, the more trouble
you can and will get into.
Work out a financial plan for you and your family. Most people have
no idea how much money they have coming in compared to what they are
spending. You can get a financial planning sheet from us, free, by just
giving us a call. Start by working out your family's total income from
all sources and include things like child support, etc. Next, list all
your fixed expenses. These are the things that remain roughly the same
every month, such as mortgage or rent payments, car payments, education
and insurance. Items like food and utility bills, etc. should under
this heading also by calculating a monthly average. List the variable
expenses, such us recreation, clothing, entertainment, car maintenance.
Include all the expenses that you can think of, even if they seem insignificant,
like your morning cup of coffee on the way to work, etc.
A good way to help figure out how much you are spending is to carry
a pen and note pad around with you and note what you are spending your
cash on throughout the week.
When this is done accurately some discover that their expenses actually
exceed their income. From here you can start working on a game plan
to cut down your expenses or increase your income and start living within
a budget. Just knowing that you are not putting yourself further into
debt every month will make you feel a lot more in control of the situation.
Prepare yourself to economize on spending and set a strict budget to
follow. Tighten your belt and treat this like you are starting a diet,
quitting smoking, or eliminating some other bad habit. Some people who
have financial problems actually get the urge to go out and indulge
themselves by spending money. Resist the impulse to go on a spending
spree to soothe your worry.
Consider looking for an additional source of income (one that does
not cost you money to start up) until you have gotten yourself out
of debt. Consider changing jobs to a higher paying position. Don't make
any big announcements at your current job. Look first. Get hired. Then
make your announcements. Make sure that any money or investments that
you have are safe and will not be devastated by a recession. If you
have low interest investments or stocks that are not increasing in value
at a higher rate of return than your cards interest rates, it might
be worth liquidating them to pay off your cards. One of the best investments
you can normally make is paying off your debts. If you're making 5%
on a CD and paying 19% on your Visa Card: what kind of financial logic
is that?
Food costs for a family of four can easily burn up 25% of your monthly
budget, costing you in excess of $550 to $650 per month. It might not
seem much but simply cutting 10% of the $550 could add up to savings
of over $700 per year.
Before you go shopping make out a list of the items you are going to
buy. Make a plan of what meals to cook for the family for the coming
week. Take advantage of special promotions or coupons you can collect.
Buy the generic brands and not the name brands. By watching food costs
and being a careful shopper, you can stretch your budget. The same thing
applies when buying other items. Buy your gas from the cheaper outlet,
use the low grade instead of the high octane gas (most cars will not
notice the difference). If you are leasing a car and can get out from
under it with little or no financial liability, do it. Buy a good used
two-year-old car for cash. Have it checked out by your mechanic first,
of course.
When paying off credit card balances, pay minimum payments on all except
one. Pick the card with the lowest balance. Concentrate on sending additional
money to that one card. When you pay that one off, take the amount you
had been paying on that card and add it to the payment you've been making
all along on the next lowest card and pay that one off. You'll have
a larger and larger amount to pay down on the remaining cards each time
you pay one off.
Get creative! You can come up with many ways to cut down on your spending.
Thousands of dollars can be saved throughout the year by simple methods
that will not adversely affect your lifestyle. These new spending habits
will help you pay off your creditors quicker. If you're in financial
trouble, now is the time to take action. Like they say at Nike: Just
Do It!
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