Can You Afford to Buy On Credit?

Two fish were flopping around on the ice one day trying desperately to find the little ice hole from which they found themselves being violently thrust into the light of the 'day world.' After some time one fish said to the other, "Don't worry, it'll all work out!" adding, "Even if we can't find the hole, all we need to do is wait long enough and the sun will melt the ice right out from under us." And with that sense of assurance the two fish laid back and died.

TOO many times offers to 'buy now' and 'pay later' or the so-called guaranteed no-credit check 'approvals' are finding their hooks embedded in the mouths of consumers and thrusting them into a 'debt world.' The promise of a better lifestyle with 'instant credit' is suffocating consumers on an ever-increasing iceberg of debt.

Whether due to optimism or denial, many of us have been lulled into a false sense that "Don't worry, it'll all work out," when it comes to our debt and credit card woes. But make no mistake about it; before the iceberg of debt ever melts from under, the aimless voyage many travel will end in the financial grave of bankruptcy. Still, many will find themselves resurrected from that grave only to face bankruptcy all over again. Without a grasp of reality and a plan to get, and stay debt-free, we're headed for disaster.

The Associated Press recently complied statistics gathered from recognized sources that demonstrate what this false sense of security is doing to us. Here are the facts:

What's your share of $1.58 Trillion?
Federal Reserve Board statistics state that the national balance on credit cards, auto, and other non-mortgage loans rose to a new record figure in April 2001 at $1.58 trillion. Mortgage debt figures equal an additional $5.2 trillion.

The Mortgage Bankers Association of America affirms that in the last quarter of 2000, mortgage delinquencies rose to 4.5%, which is the highest delinquency rate since late 1992. Debt payment accounts for 14.3% of take-home pay, the highest since 1986.

Delinquent credit card payments (30 days past due) has risen 0.7% in the last year to new high of 5% delinquency. Standard and Poor's reports that the credit card industry wrote off 6.7% of balances as un-collectable, which is the highest in years.

But the worst indicator of all is the 17.5% increase in bankruptcies filed in the first quarter of this year. The majority of the 367,000 filings for the quarter were consumer versus business bankruptcies. This is another record-breaker…but unlike the Olympics, whose records are held in high esteem, these records are headed for the annals of 'economic ruin.'

Record bankruptcies within a nation are the sign of an economic imbalance of tidal proportions. And make no mistake about it; there are plenty of 'money-lovers' raking in 'big bucks' for every bankruptcy recorded.

I had a credit card with a $2000 limit that I had charged to the max. My payments were a low $45 a month with most of that going toward the interest. I always paid the 'minimum' due because, with all the other credit cards I had, I always seemed to be 'over' my budget by the end of the month. One month my payment arrived late and I was charged a 'late fee,' and, since they [the bank] tacked the late fee on with my current balance (all ready at the max), I was charged an additional 'over the limit' fee. Every month I kept paying the minimum payment without ever charging again. Almost two years later my statement balance read $2150. "Look" I said to my wife, "we've paid on this card for nearly two years and the balance is higher than when we started." Something had to be done and, something was-it was called bankruptcy.      LP Groton, Vermont

The signs are clear-- the economy has changed and the "endless summer" of prosperity we knew would end one day, has given way to a different season. Sadly, for those who did not think ahead and prepare, it's going to be a very, very cold winter.

But there's good news: the good times will return. The bad news: no one can be sure just when that will happen. The only thing you can count on is that the ebb and flow of the economy is a never-ending cycle. And to make sure you stay on the crest of the wave--not engulfed by the undertow--you must simply commit to "getting back to basics."

What do we mean by basics? It's as simple as this: If you can't afford to pay cash for something…YOU CAN'T AFFORD TO BUY IT ON CREDIT!

My friend Madeline had been eyeing a $2,000 designer sofa that she just HAD to have. Maddy had just enough cash in her checking account to cover her monthly bills and a zero balance in her savings account, so, with no pun intended, there was no cushion to buy her decorating dream-sofa. After some consideration, she decided that if she bought the sofa on credit that she could easily afford the minimum monthly payments.

This is what she DIDN'T consider:

A $2000 sofa financed at 19.8% interest with minimum monthly payments will take 31 years and 2 months to pay off and you will pay a total of more than $10,000. The interest alone is $8,202! And, if you're thinking of the earnings you'll need to repay that debt, you'll need $12,000 gross to net $8202.

What sofa--what ANYTHING--could possibly be so important to you to have TODAY that it's worth paying 5 times the item's value in total cost?

Wait! There's more! It's not just the extra money you'll be paying out that will hurt your net worth. If you were to put that same $8202 of monthly payments into a mutual fund with a 10% rate of return over the same 31 years, your investment would yield you $45,540 in personal wealth!

Here's what another of my financially irresponsible friends is up to:

Vladimir (or Chief Big Wheels, as we call him) always wants what's new, especially when it comes to cars. He routinely trades up; usually selecting a payment option that he says costs him "only" $300 a month. Let's figure out the real cost:

If Chief Big Wheels would invest the money he's spending in interest, he'd build his personal wealth to over a quarter of a million dollars--$227,8l0--in just 20 years!
Put that in your pipe and smoke it, Chief!

It just doesn't make any sense except to the finance company--to them it makes terrific sense! They call it PROFIT.

Here's the rule to remember. It will see you through thick and thin, sunny skies and rainy days, days of plenty and days of want: If you can't afford to buy it with cash, don't kid yourself--YOU CAN"T AFFORD IT AT ALL!

Reduce your debt and give yourself the cash you need to make spending a pleasure.

Rapid Debt Reducer Debt Elimination Software.
Debt Elimination Software. The answer is The Rapid Debt ReducerTM, a computer program which gives you the tools you need to get completely out of debt in as little as 5 to 10 years - including paying off your mortgage! Comes with free budgeting software! As DEBT goes down NETWORTH goes up!
http://www.rapiddebtreducer.com

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Credit Cards
Credit card debt is like that proverbial snowball that keeps getting bigger and bigger and card issuers couldn’t be happier.

Credit_Counseling
Many people face difficulties when it comes to the proper handling of credit. The system of credit by ethical standards should be administered by creditors and used by consumers with caution and self control. Unfortunately, both creditor and consumer fail when it comes to handling credit and the result is waves of debt crashing on the shores of bankruptcy.

Debt Consolidation
To do or not to do?That is the question and the answer depends on the person doing the asking. Ironically, many have gone the route of debt consolidation only to find themselves in twice as much debt. How does this happen?

Debt
Debt is a lot like gravity—it’s always weighing you down. Can you imagine being free to soar in the heights of financial prosperity? It does happen and it can happen to you but there are vital steps you must take before debt can truly be eliminated.

Bad Debt
Bad debts are debt like credit cards, car loans, etc., and normally include incurred debt on anything that depreciates.

Bankruptcy
Bankruptcy law was enacted to protect American citizens who, for reasons usually beyond their control, had found themselves hopelessly in debt.

How does debt-stacking work?
Debt-Stacking is a simple method of reducing debt in the shortest time possible with the money that is already going to payments. This method has saved the average consumer over 50,000 dollars in interest and cuts the time to payback debt in half.

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