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Debt Management-The Controls 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.
See Also:
Debt Management - Correcting the Course
| Debt Management and Home Equity Loans 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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| Debt Management and Credit Scores Debt Management: Getting the Priorities Straight
Using half your paycheck to buy lottery tickets in hopes of winning millions instantly is not a satisfactory debt management plan. Successful debt management is based upon truth, reality, and keeping your priorities straight.
The necessities of life must come first when you make your debt management plan. You need food, shelter, utilities, transportation, and clothing....and pretty much in that order. After the total cost of these necessities is subtracted from your bring home pay, what's left is your disposable income.
How much you spend on each of these necessities will determine the total cost of your necessities. When you cut the cost of any of the necessities, you will have more disposable income and when you add to the cost of the necessities, you will have less disposable income.
My daddy summed it up pretty well for me. He said, “The less you spend on what you have to have, the more you will have to spend on what you want to have.”
You have to make your own choices, of course, but here are just a few ideas that might help:
1. Food: It costs less to eat at home than it does to eat out.
2. Shelter: Less space costs less money....usually.
3. Utilities: Raise the thermostat by two degrees in the summer and lower it by two degrees in the winter. Turn off lights when you leave a room. Don't leave water running.
4. Transportation: A five-year-old car will take you to the same places that a new car will take you.
5. Clothing: Clothes purchased at discount stores costs less than clothing purchased at upscale clothiers.
Debt management is all about getting your priorities straight and making choices. Priorities are nonnegotiable, but how much you spend on them is negotiable. |
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