Do you LIKE being a slave?

Piling up credit card debt makes you a slave.  You give up your freedom every time you add to the balance on your card.

When you owe debt, you are no longer working for your own financial well-being.  You are working to make someone else wealthy – the credit card company.

You are their slave.  You toil all day to make them rich.  You’ve voluntarily become one of their minions.  Does this make you mad?  It should.

The Truth About Debt and Slavery

“A person held in servitude as the chattel of another,” is how Merriam-Webster defines slave. 

What does it mean to be the “chattel of another”?  It means you are their property, their possession.  They own you.  That’s what credit card debt does.  It makes you the property of big banks.

They enjoy an amazing amount of control over your life.  More than you probably realize.  The credit score they assign you determines whether you can buy a house or rent an apartment.  It heavily influences what you pay for insurance and can often determine whether you get a job or not. 

If you fail to pay what you owe on your cards, then the banks can sue you and even send you to jail.  They can literally take away your personal freedom.  That’s what you are risking as you continue to pile on debt.  Think I’m kidding or misinformed?  Read Debtor Prison Is Real: Are You Headed There? for some recent examples of this happening to real people just like you and me.

On top of these risks, you volunteer to pay a 12 to 25 percent upcharge directly to them on the balance you carry on your card.  What if Walmart told you that in order to shop in their store you had to pay 15% to 25% more on every purchase?  Would you keep shopping there?  I don’t think you would.  Yet, you keep charging things to your credit cards and paying the interest every month. 

It is like you have a leak in your bank account that is siphoning away your financial power and it all goes directly to them.

All of this that you are voluntarily giving up, makes you a slave.  It weakens you.  It limits your options.  It makes you their property. 

Are you mad yet?  You should be.

How to Fight for Your Freedom

It is funny to me the way we carry on about freedom sometimes in this country.  We “Occupy Wall Street” to make some kind of statement against the so-called “corrosive power of major banks and multinational corporations.”  However, at the same time, we trot over to Starbucks and swipe their card through the machine to buy another latte.

We voluntarily commit ourselves to being their slaves.  They don’t coerce us into doing this.  No one is holding a gun to your head telling you to buy more stuff that you don’t need.

Demonstrations are not the way to break free from this slavery.  It is great that people are mad about what is going on, but this is the wrong way to make a difference.

The way you fight back is by taking personal responsibility for your finances.  You stop charging stuff to your credit cards, you refuse to live beyond your means and you pay off your debt.

In this way, you can reclaim your freedom.  You can liberate yourself.  You can once again be the master of your future.  By doing this, you will break the control they have over your life.

Stop giving the big banks power over you and lining their pockets with your hard-earned cash.  If you don’t owe them anything, they can’t control you anymore.  You will be free.  You can make your own decisions.  You can stop worrying about how you’re going to pay their bill.  You can use that money for things you really want.  You can be in the driver’s seat and wear the pants in your family again.

The only demonstration that is going to change what is going on in this country is the demonstration of personal financial wisdom.  By refusing to volunteer to be their slave, you will force them to change their ways.  You will turn things around.  Fiscal responsibility starts at home and it will spread from there. 

You can do this.  You can get control of your finances and you can stop volunteering to be their slave.  There is a ton of information out here on the Internet that can help you.  You don’t have to pay a dime for it either.  However, you will have to spend some time finding it and figuring out how to use it. 

If you want to expedite your progress, then check out The Super-Charged Guide to Financial Freedom.  It is a concise, step-by-step plan that I put together to give you everything you need to break free.  It is a battle plan – an underground railroad out of financial bondage.

Are you going to fight back or will you continue to volunteer yourself as their slave?  Make a decision now to take a step toward freedom.

Photo: Copyright PhotoXpress.com

Are you interested in being debt free?

There are certainly some nice advantages to living without owing anything on credit cards or car loans.

Growing up, I thought borrowing money to buy things was just what adults did.  It never even occurred to me that it was possible to pay cash for everything.

However, a few years ago, my wife decided we should become debt free.  Since then, we’ve paid off all that we owed with the exception of our mortgage.

How We Got to Where We Are in Life

As I said, technically, we aren’t completely debt free.  We still have a first mortgage, but we don’t have any credit card debt, automobile loans, department store cards, lines of credit or second mortgages.  The only regular monthly bills we pay, besides our mortgage payment, are for utilities.

Being debt free except for housing is the new norm for us.  We’ve been living this way long enough that it doesn’t even seem strange anymore, but I think it is.  Even in our neck of the woods out here in Oklahoma, which is pretty conservative, I think our financial position is very uncommon.

I want to make it clear, we didn’t win the lottery and we don’t earn a fortune.  We simply made a decision that this was right for us, got on a budget and made it happen.  If you are interested in the specifics of how we did it, then please check out The Super-Charged Guide to Financial Freedom because that’s where I detail out exactly how we pulled this off.

A Few Observations on Living a Debt Free Life

If you are curious about what it is like to live a debt free life, then let me share a few observations:

1. The Naysayers Are Wrong

I’ve come to discover that no matter what your opinion is on a topic that there are always those out there that will try to rain on your parade. They will do their best to undermine your confidence in the path you are on or want to pursue. This is just as true about living debt free as anything else. For example, you might have heard some of the things mentioned in Being Debt Free Isn’t Always All It’s Cracked Up to Be.  I suspect this piece was written by someone that is in love with their American Express Gold Card.

All I can say is that I’ve lived both ways and now that I’m debt free, I wouldn’t go back.  There might be some trade-offs somewhere along the way, but so far being debt free wins hands down.  It isn’t even close.  Before, it felt like my debt completely drained me of my financial strength.  Now, I’m beginning to grow new muscles.  For this reason and many others, I think the naysayers are flat wrong.  I hope my remaining observations help to convince you.

2.  Emergencies Are Not What They Used to Be

I just discovered that the hot water tank in my home needs to be replaced.  It is rusted and leaking.  Last summer, I had to put in a new air-conditioning unit.  These kinds of “emergencies” used to be a big deal to me because I never had any money saved to pay for them.  This stressed me out and generally forced me to borrow more money on a credit card.  However, now that I’m NOT sending all my cash to creditors every month, I’ve been able to build up an emergency fund so I’m ready when these things happen. 

This really takes the “emergency” out of these situations.  The drama is gone because I know immediately how I’m going to handle it.  There is no crisis.  I certainly enjoy this aspect of being debt free.  I count it as one of the primary benefits and I wouldn’t want to go back to the old way.

3.  Budgeting Is Easier Now

When I was using credit and regularly spending more than I earned, getting on a budget was like going on a diet.  It was pretty hard, especially at first.  At this stage, my budget was there to redirect my money to my true priorities and to keep me from overspending.  I had to manage it closely because it felt like I didn’t have any room for error (which was largely true).

Now that my debts are paid off, there is some breathing room.  Also, I’m a much better money manager.  I’ve been running my budget for several years now so I’ve learned a lot about living on a budget.  My attitudes have changes and I know better how to handle things.  My budget helped me to become debt free and now it is helping me stay that way.  I’m a big proponent.

4.  Big Purchases Are Possible

In the past, I thought it was impossible to make a big purchase without using credit.  As I said before, I was raised to think that taking out loans was just a part of being a grown-up.  If you wanted something that cost a fair amount of money, you got a loan from the bank for it or you put it on some kind of credit card.  90 days same-as-cash was one of my favorite things.

However, I’ve changed my mind about this.  I now know that it is possible to pay cash for big ticket items.  For example, about a year ago, I paid cash for a new car for the first time in my life.  It was an eye-opening experience.  Now I wonder, could we pay cash for a house should we decide to move?  I don’t know, it certainly seems like a stretch, but then again that’s what I thought about the car before.

5.  Frees Up Finances for More Important Things

When money is tight, your options are limited.  You just don’t have all of the same choices available to you.  Yes, it takes time, energy and discipline to get out of debt, but it is worth it.  Why?  Because it frees up your finances for more important things.  It allows you to pay to send your daughters to dance camp and gymnastics.  It allows you to donate to the church building fund.  It gives you the freedom to buy a new washer for your parents when they can’t afford one.

This goes back to the whole idea that being debt free gives me more financial strength.  I’ve written before saying How Much Money You Have Defines Your Life and to a large extent I believe this is so true.  When you have financial power, you can dig yourself and those you love out of a lot of holes quickly.  This might sound uppity or conceited, but it’s not.  I’m a regular guy that has made a choice.  The good news is that the choice of becoming debt free is available to everyone.

Choose How to Handle the Money in Your Life

If I can do this, so can you.  I’m so glad that my wife decided this was the right thing for us to do.  It has been a huge breakthrough for us for all the reasons that I mentioned above.  The world just looks a little different when you owe so much less.  Now, how long before that mortgage is paid off? 

Photo: Copyright PhotoXpress.com

A little over 12 months ago, my dad approached me about my credit card debt. He wanted to help me get out of it by loaning me money.

The credit card debt totaled about $16,500 and I knew I had a rough patch coming up. I just happened to be graduating in one of the toughest job markets.  Needless to say, I accepted the loan and paid off the credit card debt.

Looking back, I’m not sure if I would have made the same decision.  Family loans are a tough thing to deal with mentally. One wrong move and a lifelong relationship can be destroyed.

Luckily, my wife and I are very responsible individuals and we want to pay this back in full.  Even though the loan has no interest, we have placed it at the top of our debt snowball.  It is just eating away at our conscience. So, I thought I would share with you some thoughts on why we wouldn’t do this deal again.

If you are planning on asking someone for a family loan or wanting to loan a family member money, be sure to think extra hard about that decision for these three reasons.

1.  Things Aren’t the Same When Visiting

When we visit my dad, things feel more tense.  Knowing that we owe him money just makes us more prone to avoid him.

We don’t want to share any information with my dad because we don’t want him to think we are living lavishly (we’re not) while we still owe him money.

Christmas isn’t the same either.  My dad typically got us gifts every year.  Now, we tell him not to get us anything because we would feel wrong accepting it.

2.  Relationships Can Be Ruined

If we decided that we didn’t want to pay my dad back, the relationship we have with him would be strained if not non-existent.  Thankfully, that’s not the case with us.  However, many individuals borrow money from family and then decide not to pay them back and spend the money on other things.

One story that I read was about a mother who loaned her son $20,000 for a down payment on a house. The mother thought of it as a loan but the son thought of it as free money.  Needless to say, their relationship is now at the point where they barely speak to each other. 

If you are thinking of loaning money to a person in your family, think again.  It’s tough to say no to a family member in need, but sometimes you need to put your own financial interests first.  Are you really doing this person a favor or are you endangering the relationship?

3.  It’s Stressful

Owing family members money is stressful.  Just see the other reasons I mentioned.

It’s also stressful to our finances.  Because we feel guilty about this loan, we placed it at the top of our debt snowball.  That is hurting our finances because we are basically paying on an interest-free loan while the other debts accrue interest.  That’s just adding more to our debt. 

You may feel different about family loans than we do.  Looking back, we wouldn’t do it again.  Looking forward, we will never loan money to a family member.  We feel that if you need to help out a family member, just make it a gift and not a loan.

What are your thoughts about family member loans?  Would you do it?

Photo by Alvimann

There is a lot of talk nowadays about frugality and paying off debt, but why is living with debt so bad?  What harm is there in using a credit card to get what we want?  After all, we work hard.  Don’t we deserve some luxuries?  Why wait to get things when interest rates are so low?

Well, I lived with debt for several years and now I’ve been debt-free except for my mortgage for a little over a year.  So, I know the differences firsthand and I can say that living with debt BITES!

The top ten reasons living with debt should not be an option

Personally, I’ve ruled out using debt as an option.  I’ll pay cash or do without!  Why do I feel so strongly about this?  Well, here are my top ten reasons.

10.  You might lose everything

When you borrow money as a way of life, you run the risk of losing it all.  As we’ve recently seen, people sometimes lose their jobs unexpectedly and they don’t always find another one for months.  Falling behind on your payments often leads to foreclosures, repossessions and lawsuits.  It can even snowball into bankruptcy.  Why take the chance?  Why not just be happy with what you can afford?

9.  The worry will keep you up at night

People that are living beyond their means often suffer from sleepless nights worrying about how they are going to pay for all they’ve bought.  Is it worth it?!?  What in the world is worth dealing with insomnia, ulcers and overwhelming stress?  Getting behind will result in your debts being turned over to collectors which means things will only get worse.  People often become consumed with worry about how they’ll make ends meet.  Not me!  I sleep like a baby.  Being debt-free is a lot less worrisome.

8.  Debt leads to a lower standard of living

Being in debt robs you of your quality of life.  It is draining managing all the debt and working yourself to death trying to pay for it all.  Yes, you may appear on the outside to be living the good life, but not on the inside where it really counts.  How can you even enjoy what you have when you are juggling all those bills?  The freedom I feel from being almost completely debt-free is to me a much better way to live!

7.  It is a continual drain on your finances

Debt robs you of your financial strength.  It leaves you a monetary weakling.  Why?  For a number of reasons.  You pay way more for everything you buy because on top of the purchase price, you are also paying interest, late fees and service charges.  It is like having a leak in your checking account that you can’t get fixed.  Dribble, dribble, dribble!  That’s the sound of your money going down the drain.  I’ve fixed my leaky pipes and it is nice to have my money working for me again!

6.  Debt steals your sense of security and peace of mind

I don’t know exactly what it is about being in debt that is so unsettling, but it is.  I think this is especially true for women.  Many just don’t seem to feel as safe when debt is on the books.  Maybe it is because those living beyond their means don’t have any leverage financially.  They’re broke and broke people can’t buy their way out of a wet paper bag!  Having money in the bank makes everyone in the family feel a little more secure at night and I like that!

5.  Causes one to compromise their moral beliefs

People juggling debt often find themselves in tight places where they wind up compromising their values.  They have to lie to a lender to buy a few days.  They are tempted to do things that are unethical or just dumb to get the money they need to pay the bills.  Of course, for many, this erodes their self-confidence and makes them feel like crap.  Why put yourself in this position?

4.  Robs your children’s future

When you are living in debt, you typically aren’t saving for college or accumulating any wealth to pass on to your kids.  In addition, you are teaching them very poor money habits.  Is this what you really want?  Every time we make another purchase on a credit card, it is like stealing from your child’s future!  That is way too high of a price for me to pay.

3.  Holds you back from a life of meaning

When you are buried in debt, you can’t help others.  Most significance in life comes from being generous.  Generosity flows from abundance.  Living with debt produces a sense of scarcity.  It makes us want to hold on to everything we have with an iron fist.  Paying off debt has helped my family create margin in our finances and gives us the freedom to live a life of meaning!

2.  Prevents your money from working for you

When you borrow, your money is earning interest for others.  It is working for them.  In fact, you are no longer working for yourself at all.  You are working for those you owe because the majority of what you earn goes directly to them.  Imagine someone out there is prospering from all your hard work.  I don’t like that vision!  I want me and my family to be the ones that benefit from my earnings. 

1.  Makes you a slave

Freedom is about having options.  It is about choosing where to live and work and play.  When you have debt, your options are very limited.  You can’t change jobs because you need the pay even though the work is crappy.  You can’t buy a better house in a better area with better schools because you don’t have the money.  You can’t do the things you’d really like to do because if you did you might not be able to make ends meet.  See the rub?  This is the number one reason that I like being debt-FREE!

My top ten reasons to avoid living with debt

It truly has been a relief to pay off a bunch of our debt!  I’d choose being debt-free any day.  My wife and I have struggled with all of the above at one point or another in our lives and we’ve witnessed it in the lives of our neighbors and friends.  Living in debt is just not worth it!  If you are convinced and want to get out of debt, you will find several articles on this site that will help.

Can you relate to any of these reasons?  Leave a comment and let me know how living in debt has affected your life.

Photo by spaceodissey

Most of us have some bad money habits that continued could leave us eating ALPO for dinner!  If not literally, then certainly figuratively. 

Dogs might love ALPO and we might survive eating it, but it won’t be pleasant.  Shape up or you could wind up broke and desperate!

Check out this list to see if you have any bad money habits that you need to break!

1.  Struggling to keep up with the Joneses

Comparing yourself to your neighbor is a very common bad habit and trying to keep up with their lifestyle is a trap that will suck your finances dry.  Be your own person and decide for yourself what makes you happy!

2.  Shopping for groceries on an empty stomach

A big chunk of our income goes toward groceries.  When you are hungry, everything in the store looks appetizing.  Be sure to eat something just before you go grocery shopping this will help cut back on the food bill and possibly your waistline more than you can imagine.

3.  Leaving the lights on 24×7

Dads across the country ask, “Are we paying the electric company’s Christmas bonus this year?!?”  Turn off the lights when they aren’t in use.  It will reduce your power bill and it is good for the environment!

4.  Buying every book you read

I check out most of the books I read from the library.  This not only saves me money, but it also eliminates the need to store all those books.  After all, how many do you actually read more than once?

5.  Failing to consider TCO when making a purchase

TCO stands for “Total Cost of Ownership”.  Many items require us to pay upkeep, storage and usage fees.  Pools, boats, RVs, hot tubs and other luxuries often fall into this category.

6.  Saving too little

Planning for the future is important.  However, many of us catch the “I gotta have it now” attitude.  We then come up short when buying a home, paying for college or retiring.  Saving too little is a bad habit for many people!

7.  Renting or leasing everything long-term

When you rent or lease everything, you don’t build any equity.  Your money just disappears, never to be seen again.  Instead, use your money wisely to buy assets that retain value.  A home is a good example and now is a great time to buy!

8.  Following the crowd when investing in the stock market

Many people tend to get caught up in the hype about the stock market.  When market news is good, they buy.  When market news is bad, they sell.  Generally, this leads to buying high and selling low.  Not a good strategy!

9.  Buying stock in a single company on a hot tip

How many of you have lost money on this one?  I know I have.  Doing this habitually will cost you a lot of money.  A long-term, diversified portfolio is a much better strategy!

10.  Making a daily weekly visit to the mall

You may not buy something every time you visit the mall, but occasional purchases still add up.  Stay away from the places that lead you to spend more than you should.  Stop the catalogs and mall visits and you will save money!

11.  Owning more shoes than you could wear in a month

Comfortable footwear is a must, but how many pairs do you really need?  Many of us have a different pair of shoes for every possible occasion.

12.  Eating out too often

This has got to be my Achilles heel when it comes to finances.  I love eating out!  Of course, restaurants are expensive and if you go out all the time especially to fancy places, then you are throwing money down the drain.

13.  Buying a new car every couple of years

New cars depreciate 20-30% the first two years of ownership!  Why take this kind of a financial hit?  Buy a good vehicle that is two years old and keep it until it wears out.  Trading cars all the time is definitely a bad money habit.

14.  Using payday loans to make ends meet

Payday loans are notoriously bad.  The interest rate can easily be 200-400% APR!  You can quickly get yourself in a payday loan sinkhole that is practically impossible to escape.  Don’t start this habit if you haven’t already!

15.  Smoking

In 2009, the average cost of a pack of cigarettes rose to nearly $9.00!  An ex-pack-a-day-smoker could invest this money at 8% interest and have about $50,000 in 10 years or $160,000 in 20 years.

16.  Drinking a latte every morning

It is easy to get down on smokers, but what about you?  Do you stop and have a latte every morning on your way to work?  Saving just $4 per day could net you over $20,000 in 10 years!  Habits can cost you more than you think!

17.  Thinking 90 days really is the same as cash

Retailers wouldn’t offer this so often if they didn’t make money doing it.  If you are late even one day paying off this charge, then you will likely owe back interest on the full amount!  The perils of 90-days same as cash plans aren’t worth it!

18.  Charging everything to your credit card

Some find it more convenient to use a credit card for all their purchases.  Well, with interest and late fees you generally wind up paying more by using plastic over cash.  In addition, it is psychologically easier to whip out a card to buy things than it is to use hard-earned cash!

19.  Borrowing against your 401k

There are a number of reasons that borrowing from your 401k is a bad idea.  Mainly, you are robbing your future to pay for your present circumstances.  This will leave you poor!  Doing this repeatedly is a terrible habit that will come back to haunt you.

20.  Cranking the heat and air at your residence

We all like being comfortable, but it is more economical to be very conservative when setting the thermostat.  You can do all kinds of things to stay cool this summer besides just sitting in the A/C.  Be creative and save yourself some dough!

21.  Playing the lottery

In my humble opinion, the lottery is just a voluntary tax on the poor, but I won’t go there.  The odds of winning are so low that this is like throwing money in the trash.  Invest this money wisely and you might truly have a fortune some day!

22.  Paying too much

There are all kinds of ways and reasons that we pay too much for stuff.  Sometimes it’s because we want the latest and greatest or because we “need” a designer label.  Never pay retail and always look for a bargain.  This habit will save you tons over a lifetime!

23.  Being late with payments

Some of us are just never on time for anything.  However, paying your bills late is not a luxury you can afford.  Late fees add up fast!  Try online bill pay or some other technique, but be sure you pay what you owe when you owe it.

24.  Investing in things you don’t understand

Never, never, never put your money in something you don’t fully understand.  When you do, you are like a lamb being led to the slaughter.  Sorry to be so graphic, but it is time to wake up!  Get-rich-quick doesn’t work.  Don’t fall for it!  Take the safe route and you’ll be ahead.

25.  Visiting your local casino every week

Casinos are in business to make money, not give it away.  So, no matter how hard they try to convince you otherwise keep your money in your pocket.  Going to a casino regularly means that you are going to lose your money.  It is that plain and simple.

26.  Pawning or hawking items at a pawn shop

You can either sell items to pawn shops which is called hawking or you can borrow money using your item as collateral which is called pawning.  Either way, you are losing money.  Doing this regularly will cost you a bundle.  Avoid pawn shops unless you are buying!

27.  Making impulse buys

Do you go out shopping without knowing what you are going to buy before you leave the house?  If so, then you are looking for an impulse buy.  Most people live in denial about this and trick themselves into thinking  they got a “good deal”.  Buying things you don’t need is not frugal.  Staying home will truly save you money.

28.  Failing to try before you buy

I’m a big fan of trying something before you buy it.  This has helped me numerous times to avoid buyer’s remorse.  Yes, it may cost you a little to try something first, but this can save you hundreds down the road.

29.  Signing up for debt consolidation

People usually want to consolidate their debt when they have too much to afford the monthly payments.  Debt consolidation usually offers a lower monthly payment, but without a change in behavior most folks wind up deeper in debt than when they started.

30.  Relying on one income stream

What if your one source of income dries up?  What will you do then to stay afloat?  This is when many start developing some of the other bad habits on this list like using credit cards, payday loans and pawning items.  Develop multiple streams of income!

31.  Letting the government hold your money

Many of us are so afraid of owing some taxes on April 15th that we let the government take too much out of our checks.  If you get a big tax refund every year, then you need to adjust your withholdings.  You are just letting Uncle Sam use your money for free.

32.  Bouncing checks

Overdrawing your checking account will cost you big time in overdraft fees and service charges.  There is really no excuse for this with the widespread availability of online checking and budgeting systems.

33.  Buying extended warranties

You can always find someone that was glad they bought the extended warranty, but for each of these there are a thousand people that gained no benefit from the extra cost.  This is exactly what the warranty provider banks on.  Skip the extended warranty and save the difference!

34.  Overbuying gifts

I’m a generous guy.  I really am, but some people just go way overboard especially at Christmas.  Are you really doing the right thing for your family if every year you bury yourself deeper in debt?  Sensible gift-giving is the loving thing to do.

35.  Using your emergency fund unwisely

An emergency fund is for when the truly unexpected happens.  It is not for new tires, Christmas gifts or car repairs.  These are all things you should be including in your budget.  Your emergency fund is there for when you lose your job or get sick.  Using it unwisely will leave it depleted for when a true emergency pops up.

36.  Neglecting preventive maintenance tasks

Most assets need some form of preventive maintenance to keep them in top shape.  This is true of your home, car and appliances for example.  Neglecting to do this properly will cost you more in the long run.

37.  Refusing to negotiate

You can often stretch your dollars further by negotiating a better deal.  However, some people are afraid to ask.  I recently got 5% knocked off a large car repair just by asking.  It wasn’t much, but every little bit helps.

38.  Spending a dime to save a penny

Sometimes, if we aren’t careful, we can waste money trying to save money.  I’ve done this more than once with home-improvement projects.  I try to do it cheap and wind up having to redo the whole thing over the right way.  This jacks my cost up even more than expected.

39.  Buying things you don’t use

Be honest.  How many of you have a gym membership or piece of exercise equipment that you don’t use?  Why waste the money?  Stop the bleeding by refusing to continue buying things that you won’t use!

40.  Buying too soon

Technology gadgets are notoriously expensive when they are first introduced.  You can often save a bundle if you wait awhile before making such a purchase.  If you are in the habit of buying things when they are hot, then learn to chill a bit.

41.  Buying too late

Procrastination can force you into paying more for items you need.  When you notice something you’ve been saving to buy is on sale, make your move.  Waiting may lead you to miss the deal.  Be prepared and take decisive action!

42.  Acquiring too much of what depreciates

Things like cars, boats, furniture and decorations lose value fast.  These are usually things we want to impress the neighbors.  However, they have little to do with true wealth.  Buying too much of this stuff will leave you poor and disillusioned.

43.  Being too generous

Loaning or giving money to every person with a sad story will usually make you one of them.  I’m a big fan of donating to worthy causes, but be smart about how you give your money.  There is nothing wrong with checking out a story before giving to it.

44.  Being too selfish

Greedy people often find themselves in a financial ditch.  Making money the most important thing in your life is not a good strategy for living life to the fullest.  Yes, money opens many doors, but selfishness closes far more.

45.  Allowing yourself to be pressured

Don’t buy things because a salesman is pushing you to do so.  In fact, pressure should be a red flag to you that something isn’t right.  Walk out of any deal where you feel pressure to rush into something.  Legitimate deals can almost always wait overnight.

46.  Failing to ask for a raise

Ask for more money at work and they might surprise you by giving it to you.  You won’t know for sure until you ask.  Every employer wants to keep salary expense to a minimum, but they also want to keep good help.  If you haven’t had a raise in awhile, ask for one!

47.  Ignoring your credit history

In today’s world, you must monitor your credit history to avoid identity theft.  Checking your credit report a few times a year will help ensure nothing fishy is happening.  It may also help you catch and correct errors before they cause problems.

48.  Following the advice of broke people

Who’s financial advice are you following?  What is their net worth?  It is easy to go with the prevailing financial wind, but this often leads you to where everyone else is at — the poor house!  Make sure your advisor knows what he or she is talking about.

49.  Neglecting the march of time

Time does not stand still.  You will one day need a newer car, your kids will eventually go to college and one day, sooner than you think, it will be time for you to retire.  Are you financially prepared for these events?  Ignoring them will not make them go away!

50.  Refusing to live on a budget

Budgets get a bad rap.  Most people feel like they are too restrictive.  It doesn’t have to be that way.  Failing to plan how you want to use your money is probably the #1 bad money habit people need to overcome.  Give budgeting a try and you might be pleasantly surprised with what it can do for you!

Bad money habits don’t have to last a lifetime!

Recognize yourself in this list of bad money habits?  It is never too late to change!  I invite you to browse around my site for more tips, click one of the links in this article to visit some of my favorite sites and check out my recommended financial book reading list.

What habit strikes closest to home for you?  Leave a comment and let me know!

Photos by Leonid Mamchenkov and rafeejewell

If you have bad credit, correcting the problem may feel like an overwhelming task.  Understanding what happened, how it impacted your credit, and eventually improving your credit reputation can all be intimidating prospects, especially if you try to consider how to fix them all simultaneously.  However, by taking each step individually and working through it, moving from bad credit to good credit is not impossible.

The factors that contribute to bad credit

First, a variety of factors may contribute to accumulating bad credit.  The ways to damage your credit are numerous and include late payments on debt, non-payment of medical collections or taxes, bad cell phone and utility accounts, bankruptcies, and other issues. 

One mistake will not ruin your credit, but consistent problems or an accumulation of different red flags will put you in a significant hole.  The more times you add to your bad credit, the deeper your hole gets and the longer you have to dig.

How to check your credit score

Finding out how the issues above impacted your credit has actually become the easiest step in the corrective process.  The three credit bureaus and many other companies now offer easy access and sometimes even free credit reports and free credit scores. 

By ordering and reviewing your credit history you can see where you went wrong.  Some companies—with a one-time charge or periodic membership fee—provide detailed analysis of what went wrong and the impact on each aspect of your report. 

The credit score shows your report on a continuum that usually ranges from 300-850 and is an easy way to see how you measure against other individuals and even yourself over time. 

Starting to repair your credit history

The last and most difficult part of the process is to actually improve your credit after understanding what happened and how you were impacted. 

The best way to change your situation is a two-fold process.  On one hand, you need to clean up the existing problems by paying off bad debt, satisfying collections, and disputing any errors on your report.  At the same time, you also need to be reestablishing your positive credit history. 

Initially this may be a tough task since you may not find many creditors willing to grant you new credit.  Websites like free-credit-reports.com can help you through each step in this process and can make the task more manageable and less time consuming. 

You can overcome bad credit with a little effort!

Ultimately, the key is to commit to making a change and working towards improving your personal situation.  Having good credit is vital to giving yourself the best options in many different aspects of your life.  So make the commitment and improve your life!

Other articles you might find useful:
Is It Fair For You To Be Judged By Your FICO Score?
25 Excellent Resources To Protect Against Identity Theft
Back To Basics: Using The Debt Snowball To Pay Off Debt

Photos by cervus and Emily Abigail

Why does any of this matter?  Well, your credit score is being used for a wide variety of things besides just lending decisions.  Is this fair? 

Is your credit score holding you back from living life to the fullest?

How your FICO score is determined.

There are a number of factors used to determine your FICO score (the chart below came from CML).  The exact formula used to compute it is a closely guarded Fair Isaac Corporation secret.  However, many have said that it is roughly comprised of the factors shown in the chart below:

It is wise to understand as much as possible about your FICO score.  One of the absolute best resources I have found on this subject can be found at the Wisdom Journal.  I highly recommend reading Ron’s article The Truth About Your Credit Score (from an expert) for detailed information.

How your FICO score is used (you might be surprised).

There are a number of ways that your credit score is being used to judge you.  In fact, you might even be surprised by some of them.  If you have a low credit score, this can have a far-reaching impact on your life.  However, a low FICO score can result from simply not borrowing money.  Therefore, is it truly the best indicator of the kind of person you are?  Companies are certainly using it to determine a lot about you.

Your FICO score might be effecting your ability to get a job, a home, certain types of insurance, or even a cell phone! 

Here are just some of the ways that your FICO score is used to discriminate against you:

1.  Mortgage lending and other types of loans.

Okay, this one might seem obvious, but did you know that certain lenders make lending decisions based almost entirely on your FICO score?  It is true!  This means that in certain situations, even though you have plenty of financial means, you may not be able to borrow money to buy your dream house because your FICO score fails to measure up.  For instance, you may have trouble if one or more of the following is true for you:

• Your credit report contains inaccurate or misleading information
• You made some financial mistakes in the past, but have since cleaned up your act
• You have stopped borrowing money

All these things will make your FICO score lower.  What is also concerning is that another person may have a higher FICO score and therefore be preferred over you for the loan when they are out of a job, broke, and without any assets!  The FICO score does not include any of these factors in it’s formula!  With your lower FICO score, even if you do qualify for the mortgage, you will likely pay a higher interest rate.

Dave Ramsey recently went on a rant on his radio show about this very issue.  You should give it a listen.

2.  Getting a job.

That’s right!  Hiring managers often look at your FICO score when considering you for a job.  You could get disqualified or at least edged out simply because your credit score was lower than someone else’s.  Your FICO score is an indicator that organizations use to assess your integrity and whether or not you live up to your obligations. 

Is a person that doesn’t pay their bills a good hire?  Probably not, but is your FICO score the best indicator of your financial success and therefore your worthiness for employment?  Should it be used to disqualify you for a job you really want simply because it is lower than a pre-determined standard?

3.  Renting a house or an apartment.

Sometimes it is advantageous to rent a place to live.  For instance, when you are new to an area and want to learn a little more before jumping into buying a home.  However, if your FICO score isn’t up to snuff, then you may find this a difficult process.

Landlords regularly pull credit scores on applicants.  They want to know if they can count on you to pay your rent.  Your credit history is certainly an apt indicator of future financial behavior, but the FICO score alone does not tell the whole story. 

4.  Purchasing various types of insurance.

Insurers want insight into your personality and behavior.  They want to know if you are the type of person that is likely to file a claim.  They know that people who are financially strapped are more likely to make a claim to try to get their insurance company to pay, even in an iffy situation.  The time it takes to evaluate and fight such claims cost the insurance company money.

Insurance companies regularly use your FICO score to help make this determination.  This means that if you have a low credit score, you may be denied coverage or at the very least, you will pay a higher premium for your coverage.

5.  Signing up for a cell phone.

Again, this is another example of how corporations are using your FICO score to size you up and determine whether or not you qualify for certain products they offer.  If you have a credit score that is lower than an arbitrary figure, the cell phone companies may decide you are too big a financial risk and therefore deny you a contract.

Again, what kicks me in the teeth about this is that the FICO score doesn’t even take into account whether or not you are currently employed!  However, many companies are misusing it by making it one of the only discriminating factors they consider when evaluating your financial history.

What can you do to protect yourself?

Obviously, your FICO score is used in a wide-range of ways.  Again, I pose the question, "Is this fair?"  Is this the right way for you and I to be evaluated?  I don’t think so, but it is going to take time for change to occur.  In the meantime, what do we do?

1.  Don’t use credit to bolster your FICO score.

First, I want to make it clear that I don’t advocate borrowing money simply to maintain a good FICO score.  That doesn’t make sense.  If you have a lower FICO score because you do not borrow money, which is different than having a low score because of bad credit, then you need to seek out companies that will take the time to investigate your situation more closely.  Do you really want to do business with a company that is judging people this way?

2.  Educate others.

I think it is our responsibility to use every opportunity we have to make as many people as possible aware of how their FICO score is being used and abused.  We need to decide as a society if this is really a fair way to judge people and their financial prowess.  Awareness is always the first step in being able to defend yourself.

3.  Monitor your credit history.

Even if you do not borrow money or use credit, you should still occasionally check your credit report to verify it is accurate.  Your credit history is the source for the information used to compute your FICO score.  You may want to check out this legitimate way to get Free FICO Scores & Credit Reports.  If you find errors, then work to get those resolved.

What do you think about the ways companies are using your FICO score?

In another story, we find that it isn’t just the average American that has a ton of consumer debt.  Apparently, members of Congress have also accumulated some impressive sums on their credit cards.  Rep. Jim Ramstad, a Republican from Minnesota recently reported that his wife owes credit card debt with American Express and Neiman Marcus totaling between $30,000 and $100,000!

The role the banks played in creating the credit crunch.

Banks aggressively market credit cards to consumers.  There is no question about it.  They send endless offers through the mail and use the media very effectively to sell the idea of credit as a tool for a better lifestyle.  Banks are also very liberal in the way they raise credit limits to encourage more debt.  Also, at the height of the housing market, banks started pushing home equity lines of credit as a way for consumers to consolidate credit card debt to get lower payments. 

Of course, once the debt is transferred off the credit cards to the home equity loans, many people simply start charging again.  This is the vicious cycle that created so much debt for many.  Banks certainly did not discourage this behavior.  In fact, I bet they delighted in it because more debt means more interest owed which means more profit.

The effects of the credit crunch on families.

According to an article in USA Today, credit card delinquencies are at a six-year high and the amount America owes on revolving credit is soaring.  The total revolving household debt topped $969 billion in 2007.  Once families get behind on their credit card payments, then banks increase their interest rates and start charging late fees.  Of course, for those in a financial crunch this just accelerates their demise. 

In addition to the credit card woes that many face, foreclosures are also at record levels.  People that borrowed money via home equity loans at the height of the market are now finding that they are upside down in their homes.  In one example cited by USA Today, a woman withdrew equity and now owes $105,000 on a home that is only worth $63,000.  In addition, she has charged up $30,000 on credit cards.  That is what I call a credit crunch!

Who is at fault for the credit crunch?

In my opinion, the individuals, not the banks, are at fault for creating this so-called crisis.  The banks didn’t hold a gun to anyone’s head forcing them to apply for credit cards or home equity loans.  They also didn’t force anyone to spend beyond their means like so many did.  The banks offered a product that people willingly consumed.  They legally loaned people money with an agreement to be repaid with interest.  Of course, the people that are now in a financial pickle want to be able to blame someone else instead of accepting responsibility for their actions. 

I guess these individuals hope that the government will come to their rescue and bail them out.  Well, I’m definitely against this.  I don’t want my tax dollars to have to pay for their stupidity.  I have been responsible with my money and now I don’t want to penalized for the mistakes of others.

What you can do if you feel the crunch.

If you are feeling the credit crunch yourself or if you know someone that is, please let me share some suggestions that will help.

1.  Accept responsibility for your actions.

Admit that you got yourself into this mess and resolve to get yourself out.  It is only hopeless if you give up.  I wrote an entire article yesterday on accepting personal responsibility as a way to a better life.  Read it!

2.  Quit digging yourself into a deeper hole.

Stop spending more than you earn!  If you don’t have the cash to pay for it, then don’t buy it.  It really is that simple.  Quit charging things to your credit cards.  Cut them up.  I know this is radical, but it is a necessary step.  You have to commit yourself to change.

3.  Create a budget.

Get serious and start living on a budget.  Trust me, I know that you don’t want to do this.  However, it is the ONLY way to turn your situation around.  Living on a budget really isn’t that bad.  In fact, it is liberating.  You’ll feel so much better about yourself when you know that you are doing the right thing with your money.  You can stop laying awake at night worrying.  Do this now!

4.  Start paying off debt.

Create a plan to start paying off your existing debt.  It can be done.  Learn how to start a debt snowball and to use the snowflaking technique to maximize your efforts.  Most people can be completely out of debt in 18 to 24 months.  I know this probably sounds impossible to you right now, but it is true.  You just have to want it bad enough.

5.  Vow to never, never, never go into debt again.

You have to promise yourself never to go into debt again.  Carve this in stone.  Write it on your forehead.  Debt is too risky.  The current credit crunch that is causing all the foreclosures and bankruptcies are proof that carries risk.  Is it worth it?  I don’t think so!

6.  Educate yourself.

Being sensible with money is not that hard once you have a plan.  There is plenty of great advice out there and most of it is free.  You can start today to learn the basics to help yourself out of the current mess.  Here are a few great places to start:

What’s Your Financial IQ- Here’s A Test @ Moolanomy
Book Review- The Total Money Makeover @ Frugal Dad
Create Your Own Dollar Plan- Step 1 @ My Dollar Plan
25 Ways I Save Money @ Cash Money Life
25 of the best books about money @ Get Rich Slowly

Wake up and beat the crunch!

While banks certainly played their role in this mess, I don’t think they did anything really illegal or unethical.  They simply sold their products to millions of willing consumers.  Could they have refused?  Sure they could have, but more importantly, we as intelligent individuals should have said no.  We control our actions and now it is time to take responsibility and fix the mess we created.  It is time to wake up and beat the crunch!

Please Stumble or Digg this article by clicking the links below!

Photos by La Luz and ShutterCat7

Minimize the risk that your personal identity will be stolen.

These articles will help you to prevent identity theft.  I strongly believe as Ben Franklin did that “An ounce of prevention is worth a pound of cure.”  So, I have included more articles in this area than the others.  If you think it will never happen to you, please read the first article listed below!

1. My Interview with United States Postal Inspector J. Krafels- All About Identity Theft
2. How to Prevent Identity Theft — Deter, Detect, Defend
3. The scams and cons that could clean you out
4. Reduce The Risk of Identity Theft
5. Email Spoofing and How to protect your online identity
6. The Ultimate Guide to Identity Theft Prevention
7. 10 ways to stop identity theft cold
8. Identity Theft, Protecting Yourself Against the #1 Crime in the World

What to do if your identity or credit card is stolen.

Okay, your identity or your credit card has been stolen, what should you do?  It is critical that you take action fast.  These articles will tell you exactly the steps that you should take.  The quicker that you recognize identity theft and act decisively, the better off you’ll be.

1. Dealing With the (Possible) Theft of Your Personal Data
2. My Identity Was Stolen!
3. How To Freeze Your Credit Report
4. 8 Things You Must Do If Your Identity Is Stolen
5. What To Do if Your Credit Card is Stolen
6. HOW TO- Get Through Having Your Identity Stolen 

How to monitor your credit report.

As I mentioned above, your credit report is used by all kinds of companies as an indicator of what kind of person that you are.  It is imperative that you regularly monitor it for accuracy.  The credit reporting companies make mistakes all the time.  Here are some great resources to help you ensure your credit report reflects the real you.

1. Getting Organized- Monitoring Your Credit Report
2. Free Credit Reports – Not From The Commercial
3. 11 myths about credit reports
4. 5 steps to do-it-yourself credit repair

Web tools to assist with identity theft.

There are some great tools on the web that can help you minimize the risk of personal identity theft.  Here are a few that you might find interesting.

1. 5 “DISPOSABLE” Web Accounts to Keep Your Identity Safe
2. GreenDimes – Stop junk mail for free.
3. ProQuo – Remove your name from marketing lists for free.
4. myFICO® – Credit score monitoring.

Non-profits with resources on identity theft.

Finally, if you still need more information or help, then you might check out these sites.  They are packed full of links and articles about identity theft.

1. Identity Theft Resource Center
2. Identity Theft Resources from Privacy Rights Clearinghouse
3. Citizens for a Secure Identity 

Identity theft doesn’t have to be a complete nightmare.

As you can see, there are a ton of great resources available to help you avoid and deal with identity theft.  If you take preventative steps, act quickly when an incident occurs, and use the resources available to you, you can minimize the impact of identity theft on your life.  Why wait until you are the victim?

Photo by CarbonNYC