Taking Out A Loan Is NOT How To Get Out Of Debt

Shovel

In my last two blogs I have talked about ads that annoyed me. Ads encouraging people to file for bankruptcy and to buy a brand new car with no down payment and an awful credit score. Now I’m going to talk about one more.

The previous two ads were on the radio and tv. This one is on the website of a major bank (that should show you how people who want you to get in and stay in debt are coming to you from every way possible). This ad literally says you can reduce your debt by taking out a loan. Huh? Reduce your debt by taking out a loan? That’s like saying, “Get out of that hole you’ve dug by buying a bigger shovel.”

Regardless of the ads you hear and what your broke friends and relatives may tell you, you can’t get out of debt by borrowing more money. Even if they make it sound easy by saying you can consolidate all of your loans into one payment, you are not saving money. Oh, sure, you may have a lower monthly payment. But you’ll pay more over the long run. A WHOLE lot more. The only people who benefit with bill consolidations are the people loaning out the money. They don’t care about you. They don’t have your best interest at heart. It’s a scam. Look at what they first three letters of the word consolidation spell – CON. Just a coincidence? Probably not.

Getting out of debt is not easy or fun, but it can be done. Millions have. But it’s not a quick, easy fix. It takes time and determination. Don’t listen to con artists. Do it the old fashioned way. Stop digging, put the shovel down and climb out of the hole you’ve dug.

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Bankruptcy Does NOT Improve Your Credit Score

Bankruptcy Picture

Last month I talked about an ad I heard on the radio for a car dealership boasting about financing a loan for a woman with a credit score of 518. As you may recall, I said it disgusted me. Well, since then I have seen an ad on TV that makes me even more disgusted.

It’s an ad for an attorney who specializes in bankruptcy. In the commercial, he is actually encouraging people to file for bankruptcy. Now maybe since that’s what he specializes in you can’t blame him for trying to get some business. But it gets worse. In the ad he actually tells people that filing for bankruptcy will improve their credit score. Seriously?

Unfortunately, it’s true. He tells them that filing for bankruptcy clears you of some payments, which means you will have extra money to pay towards other bills, and paying bills improves your credit score. Yes, he actually says that. He even goes so far as to say filing for bankruptcy is the best thing you can do for your credit. Oh, brother.

While it’s true bankruptcy can sometimes clear you of some debt you may owe, and paying your bills will help your credit score, there is still one thing wrong with his philosophy. One MAJOR thing wrong with it. Filing for bankruptcy is the worst thing you can do for your credit. In fact, it destroys your credit. While even a bad debt you never pay will not hurt you after seven years, bankruptcy stays on your credit for TEN tears. So even if you’re paying your bills easier after bankruptcy, it won’t help. Your credit is shot for a decade.

It really angers me that there are so many people in this world trying to take advantage of others who may have been bad with their money. It’s almost like digging yourself into a big hole only to look up and see dozens of people at the top of the hole trying to sell you a new shovel. You can’t dig your way out of a hole with a shovel. Instead, look for someone with a ladder.

As always I invite you to check out my website at http://www.johnfloyd.com.

No Credit Check? Did They Really Just Say That?

No Credit Check Commercial

I was in my car the other day and heard an ad that almost made me drive off the road. It was for a car dealership. The guy on the commercial was saying, no make that practically bragging, that he just sold a car to a woman with a credit score of 518. To make matters worse, he went on to brag even more that he sold her a BRAND NEW car with NO MONEY DOWN!

Are you kidding me? How is this even legal? For starters, if your credit score is that bad you shouldn’t be allowed to so much as buy a pack of gum with a credit card much less finance a brand new car. Heck, I’ve never even bought a brand new car, nor do I intend to. To me selling this woman a new car with no money down is as bad as a bartender selling a few shots to someone who is already passed out. In other words, it’s disgusting.

I can’t imagine the kind of interest rate she was charged. The lower your credit score, the higher your interest rate. Sadly because she now has new debt, her credit score probably dropped even lower. What’s worse is she probably felt like they were doing her a huge favor by letting her buy a car from them. But they weren’t. They were merely handing a really big shovel to someone who is already in a deep hole.

Sometimes I see or hear ads for car dealerships or appliance stores saying, “No Credit Check!” If you hear the words no credit check and are relieved, then the last thing you need to do is go out and get more debt. For a whole lot more information on this, check out my website at http://www.johnfloyd.com.

Don’t Let Christmas Sneak Up On You Again

Gifts

This month’s blog will be shorter than usual because, like most of you, I have a lot to do with Christmas just a week away. It comes on the same day every year yet everyone talks about how it sneaks up on them. If you’re looking forward to Christmas but not looking forward to the several months of bills that follow, you’re not alone.

But think how nice it would be if next year at this time you didn’t have to worry about the bills that come in the winter. Wouldn’t it be nice to watch all of your family and friends open their gifts and know that they are already paid for? No fat credit card bills to dread? Well, it can be done.

Starting right after the holidays this year, get a plain old envelope and write the word “Christmas” on it. Now figure out roughly what you spend each year on Christmas. Not just gifts, but decorations, food, travel and everything else that adds up. Then divide that number by 12 (that’s how many months there will be in 2015). Now take that amount and put it in the envelope every single month for the next year. Then when Christmas rolls around you’ll have the cash to pay for everything. The fat envelope will be the one you have full of cash instead of the one from Visa or MasterCard!

Big Amounts Of Money Are Small When Broken Down

One Dollar Bill

Every month we have big bills to pay. Some of them are planned like the mortgage. Others are unexpected like a car repair. Those amounts of money can seem big if you think of coming up with it at one time. But if you save over time, and break it down to what a small amount it is per week or even per day, it seems like pennies. In some cases it actually is.

Let’s say your car gives you problems once a year. If that repair is $500 it will seem like a lot at once. But if it’s only giving you problems once a year then that $500 is only $9.62 a week. Or broken down even more that would be $1.37 a day. You probably spend that much on coffee or soft drinks in a day (or maybe much more). Instead of letting that $500 repair sneak up on you every year, get an envelope and write the words “CAR REPAIR” on it. Then simply put about $9.62 a week in it and you’ll have the cash when that repair comes up.

Do you have a kid who is right now just a baby but someday will be a teenager who may need braces? That Orthodontist bill for $3,000 will seem steep if you’re not ready. But if when that baby is born you write the word “BRACES” on an envelope and put just $5.00 a week in it, then when they need braces at age 13 you’ll have more than that. $3,380 to be exact. It works the same for everything your kid may need from prom dresses and team uniforms to cars and college. Though you’ll want to invest your kid’s college money instead of just putting it in an envelope. Just $150 a month in a decent college fund from birth to age 18 will accumulate to over $100,000. That may seem like a lot per month but it’s only $5.00 a day. Five bucks a day to send your kid to college with no student loan seems like a good deal, huh? If you then encourage your kid to save that same $5 a day from when they graduate until age 65 and invest it in a decent mutual fund that averages 11% interest (the stock market average for over 80 years), they will be able to retire with just under 1.6 million dollars!

This method can work for everything in life. An envelope with the word “VACATION” on it can be filled with over $2,000 if you save just $40 a week for a year. Do the same with Christmas, home additions, new furniture or whatever you need that seems unaffordable when you think of the big price, but pretty darn cheap when you break it down to just a dollar or two a day.

Your Change Can Change You

Coins

Everyday we spend money and get back change. Sometimes it might be a few pennies, other times it may be almost a dollar. But where does it go? You may not really care but you should. The coins you toss around everyday may not seem like a lot. But over time they can accumulate into quite a bit. Invested well, they can literally turn into tens or even hundreds of thousands.

Many times if you buy something that cost $3.05 you may pull out a nickel to avoid getting back 95 cents in coins. Well, stop doing that. Instead pay with paper bills and get back the coins. Once or twice may not seem like much, but if you do this every single time you make a purchase it can really add up. Try it for a few days, then at the end of each day put your coins in a jar or another container. In less than a week you’ll see how they are piling up. At the end of the month you may have close to fifty bucks or even more just in change. That may not seem like much, but after a year that could be $600. If you invest that $600 a year in a decent mutual fund that averages 11% interest (the average for over 80 years) you will have a little more than $11,100. Continue to do it for another ten years and you’ll have over $42,750. Continue to do it for another twenty years after that (a total of forty years) and you’ll have over $387,000! Not bad for just some coins that you thought were worthless.

Or even if you don’t invest every penny you can still let them accumulate and buy something with cash that you might have otherwise financed. I know people who have bought new TVs and refrigerators with the change they saved over several months. It may sound crazy, but having a pocket full of change is much better than having a mailbox full of bills.

Credit Card Fees Are NOT Worth It

Piggy Bank

I get offers for credit cards in the mail all the time. We all do. Usually they go straight into the shredder but occasionally I’ll glance at them just to laugh at the misleading garbage they expect us to believe. In my mail today was an offer for a card with a $450 annual fee. Of course, they offered all kinds of “perks” I’ll never use such as VIP seats to the opera. But just out of curiosity I crunched some numbers. I love to crunch numbers, but this one even blew me away. If instead of sending them $450 a year I opted to send that money to a mutual fund for just 25 years, and it averaged 11% interest (the stock market average for over 80 years), I’d have over $57,000. That’s right. Just $11,250 out of my pocket will earn me nearly 46,000 bucks. Think that’s something? If I invested that same amount every year for 50 years I’d have over $830,000. It may be too late for me to invest for that long, but if you’re in your twenties (or know someone who is), it’s not too late at all. And while $450 may seem like a lot of money, it’s not. $450 a year is a measly $1.23 a day. Think about the next time you’re getting something from the vending machine at work. Or better yet, the next time you have VIP seats at the opera ask yourself if it’s worth over 3/4 of a million dollars.