Debt Management
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Credit Card DebtCredit Cards are necessary, but credit card debt isn’t.Debt management is key o controlling credit card debt. The interest charged by a credit card can easily double the cost of the item. Suppose you bought a big screen TV for the family for $2,500 using a credit card that charges 18% Using minimum payments of 3%, it will take you 15 years to get rid of your debt, and you will pay $2,298.88 in interest. Using fixed payments of $300.00, it will take you 9 months to get rid of your debt, and you will pay $190.68 in interest. Month: Payment: Interest Paid: Principal Paid: Balance:
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"You will not believe how great you feel when you are debt free". Debt management is worth the effort. Think about the folks who having reached the end of their rope with credit card debt. They went out a got a home equity loan to use for debt management. They used the money to pay off the credit cards. Because they and were paying less interest on the home equity loan their payment was much smaller. This freed up some monthly income. Fast forward 5 years, the credit card balances are back way up, the home equity loan is still being paid down and the value of the home has declined. "Their American Dream is gone!" People in this situation windup "in debt until the day they die" or go bankrupt. Don't beat yourself up. There are solutions debt management is available, and there is help. The Dangers of DebtDebt is a monster:
...using your credit card is seductive, it draws you in with promises of the rich life you will have by spending on this consumer product or that consumer product. "People really don’t understand how credit card debt works. They fail to calculate the true cost of debt!" When we use credit cards to make purchases we enter into a state economists call “coupling” It’s just so much easier to pass the plastic then to hand over cash. Studies show, when a purchase and payment are made together, that is when you spend cash, you are more aware of how much you are spending and tend to spend less. With a debit or credit card you tend to spend more. After you make a purchase with a credit card, you quickly do the math in your head and when you do the math--it’s wrong! Example-You buy a pair of new shoes, worth $200 on sale for $105.99 plus tax ($11.66) total’s $117.65. A friend says to you “Hey great shoes!” You proudly announce “Yeah regular $200 I got them for half price $100!”. Your mind accepts the figure of $100 as the cost of the new shoes, when it’s actually 17% more. If you do that on all your purchases to a total of $1,000 per month. That’s the amount your brain expects on your credit card bill. When the bill arrives it’s $1,150 not $1,000. You pay the $1,000 off as planned, but leave the $150 to carry over to the following month. Do this every month for 12 months on a credit card that charges 18% and by year’s end you have a credit card balance of almost $2,000! Do that for five straight years and your credit card balance is now almost $15,000! That has to be considered poor debt management! To pay off $15,000 in credit card debt. Using minimum payments of 3%, it will take you 25 years to get rid of your debt, and you will pay $14,798.90 in interest. Using fixed payments of $1,000.00, it will take you 18 months to get rid of your debt, and you will pay $2,120.73 in interest. Top of Page
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Who falls into the debt trap?Intelligent, skilled, educated, strong, healthy people with great, well paying jobs have no money, but lots of debt.Why? It’s a mind set. The new product or service is more important than the peace of mind the comes from debt management. “Hey everybody is in debt, so it must be OK? Everybody does it. Heck, the government is deficit financing all the time.” Each time you reach your credit limit with a credit card, the credit card company increases your limit. That's their idea of debt management. They love the fact you pay $1,000 each month without fail and are willing to accept the full interest penalty for not paying the balance in full. Now you owe them almost $15,000. "For what? You didn’t buy anything extra!" “Loan sharks are trying to leave the loan sharking business to become CEOs of Credit Card companies. There’s more money in it and it's LEGAL!” If your are invested time is your friend if you are in debt time is your enemy. Click here to Get out of Debt! Gratification Instant gratification takes place immediately and only lasts a very fleeting moment of time. Delayed gratification takes a lot longer, requires more effort, but the satisfaction lasts forever. What is ultimately more satisfying a series of “One Night Stands” or a long term loving relationship that carries on for years? What is ultimately more satisfying being able to scrape together the rent money to move into that awesome penthouse condo for a year before you can no longer afford it or making the last payment on your home mortgage and owning you home out right? What is ultimately more satisfying buying the big flat panel TV and making payments every month or saving money each month until you have what you need to pay for it cash. Think back to a time when there was something you really really wanted, but you had to wait before you could have it. How much more did you appreciate it when you got it? I bet you can fondly remember that bicycle, or that first car you paid cash for or the prom dress you saved all year to buy. When that memory pops into your mind don’t you smile, because you remember how good it felt? That my friend is achieving a Goal! Make it your goal to get out of debt. Use debt management techniques and regardless of how bad your situation might be right now you will succeed. If you have large amounts of debt you become a victim of the Titanic scenario. The Titanic scenario goes like this:If you are in first class (debt free) you will be helped into a limited number of lifeboats--not enough for everyone you know and although inconvenienced, you will survive.If you are in steerage (lot’s debt). Not only will you not be led to a life boat. They won’t even open the gates to let you out! You’re going down with the ship! Be proactive build your debt management plan today! Click here to Get out of Debt!
Sometimes all it takes is a fresh opportunity or just a different way looking at something. Rich successful people all have one thing in common -- "They own their own Business!"Return from Debt Management to Home Page Terry Johnston J C Mitchell Financial Services Inc. Phone: 866-721-7781 ext. 232 |
