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Debt Management Correcting the Course American Version of Debt Management
The American version of debt management seems to be; buy now, pay later, or worry about it later. “Instant gratification” has replaced “save for a rainy day” as the watch-word for Americans regarding their money.
Most American households do not have savings. They simply live paycheck to paycheck. They pay what has to be paid THIS WEEK, balance the checkbook, and decide how to blow what's left....and those ARE the responsible ones.
The irresponsible ones get a paycheck, do what they want to do, buy what they want to buy, and if there's anything left, they use it to pay the bill that is most pressing at the moment. Neither method could be called responsible debt management or sound financial planning by any stretch of the imagination.
Saving money is rapidly becoming a lost art form in America. In a recent study, only 41% of all American households actually had savings accounts, but 75% of all American households are carrying substantial debt.
This is certainly not the kind of money management that our grandparents would have approved of. There was a time when being in debt was a shameful thing but that idea went the way of the Model A, apparently.
Declaring bankruptcy became so easy, and so many people were taking advantage of it, that Congress finally had to make it more difficult. Debt management businesses are thriving, and you can't turn on the TV without seeing an advertisement for debt consolidation loans.
Americans need to return to the sound financial practices of the past, like save first. American mothers and fathers need to instill the basics of debt management into their young ones. American high schools need to require that a course in financial planning and debt management be successfully completed before a diploma is awarded.
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| Surviving Debt Management Do-Overs Debt Management and Interest Rates
It is sometimes just amazing, but people have no idea what interest rate they are paying on loans -- even on their mortgages. Interest rates matter.
Interest on credit card debt is the highest. Credit card interest rates are higher than bank interest rates that you may have for your car loan or the installment loan for furniture or appliances.
Another very amazing thing is that the majority of people do not understand what simple interest is and the difference between simple interest and compound interest. Every high school in America should teach this and the course should be a graduation requirement. Not understanding interest rates costs Americans hundreds of billions of dollars every year.
I do not have the space here to teach a course about interest rates. Remember this: simple interest is less than compound interest. The compounding frequency determines how much higher. Interest that is compounded monthly will be less than interest that is compounded weekly or daily.
Your credit score determines what interest rate you will be offered, and it will also determine just how much interest rate negotiating power that you have. The people with the highest credit scores will always be able to get lower interest rates than people with lower credit scores.
No credit history is viewed in the same way by lenders as a poor credit history, in that the interest rates that are offered will be virtually the same. Build a good credit history and you will get a lower interest rate.
First-time borrowers may have to pay higher interest rates, but it is to their advantage to make their payments on time and in full. If payments can be made prior to the due date, that will raise the credit score. Paying a loan off early will also raise a credit score. |
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| Is Debt Consolidation Your Debt Management Answer Debt Management: The Controls
Managing debt is very much like driving a car. When you drive a car, you must know where you are going, keep your hands on the steering wheel, your eyes on the road ahead, look behind you, and watch your speed. That is the way that you control a car, and controlling debt is done in the very same way.
Know where you are going: You and your spouse or significant other need to sit down and define your financial goals so that everybody knows what the destination is. With specific goals in mind, the route to achieving them will be easier to define.
Keep your hands on the steering wheel: The steering wheel of debt management is the family budget. A clear allotment of funds will keep your financial life on the road and going in the right direction.
Keep your eyes on the road ahead: To avoid accidents, you need to be prepared to stop or take evasive action when driving a car. The same is true of debt management. You need to save first and spend second.
Look behind you: We always learn more from the mistakes we have made in the past, and we can learn from the things that we did right as well. Remember where you have been so that you can better see where you are going. Gauging progress inspires us all to do better.
Watch your speed: You don't want to try to go too fast when achieving your financial goals. You need to live well today, as well. But you don't want to poke along in the slow lane, either. Set a speed and stay in control of that speed. Save on a regular basis so that your goals may be achieved...but enjoy the trip, too. |
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The Traps of Debt Consolidation for Debt Management, Debt Management and Credit Scores
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