Financial Freedom 1Financial Freedom 1Getting out of debt Over the next few articles we will be helping you make your financial life look fantastic as opposed to adequate. We will be looking at dealing with the money you have and your money work for you, finding more money, figuring out how to properly protect your family’s future, and growing the money you have for your retirement. There are two types of debt: 1. Unavoidable Debt Some people find that debt hit them like a ton of bricks when they lost their job, or experienced a medical issue that resulted in the inability to work or excessive medical expenses. 2. Avoidable Debt Other people find that debt has sort of "snuck up" on them, over years of casually using credit cards for little purchases that they just didn't have the cash to pay for; or from taking on large purchases like a new vehicle or a home mortgage- only to find that unexpected expenses or changes in income have made it near impossible to keep up with all of the monthly payments Did You know! Many families are drowning in debt! • Household debt is at its highest in history with 84% of Canadians reporting having some type of debt. In the U.S. it is higher. • Canadians are buried in record debt averaging $80,000 per household, with total debt now 131% of disposable income. • Bankruptcies soared to more than 100,000 last year from 43,000 in 1990. (1,2,3 – The Canadian Press, February 11, 2008) • More than one-third of non-retired Canadians plan to carry up to $100,000 of debt into retirement. (Investment Executive, Mid-January 2008) Canadians owed almost $24 billion on our credit cards in 1998, now we owe about $45 billion. (CBC Marketplace, cbc.ca, viewed January 25, 2008 71% of Canadians carry a balance on their credit cards (and do not pay the balance in full each month Last year, Canadians’ average debt-to-income ratio hit a record high of 110%, meaning consumers owed $110 of household debt for every $100 of personal disposable income. So what do you do? 1. Don’t give up. Throwing up your hands in frustration or throwing in the towel does not solve the problem. Only you can solve the problem. Winning the lottery only happens to the guy next to you. Receiving money from someone or something doesn’t change your situation it just prolongs it. Changing what you do and how you think about things is the only true answer. You or something that happened to you got you into this mess. That means only you and something you do differently will get you out of this mess. There are no easy fixes or easy answers, if there were, wouldn’t everybody be rich? It starts by how you think. If you think you can’t get out of this mess – you won’t. Henry Ford said it best, “If you think you can you can, if you think you can’t you are right!” But will things change just because you think things will change – NO. You must Think first – then you must DO. You must take the first step and then you must keep going. They may be baby steps, but even babies had to start somewhere. Ready – Shoot – Aim, is what we are going to do. We are going to get you ready to make changes in your life. In order to do this, you must first figure out that you really want to make a change. From there you need to determine what and how to change. Then we are going to get you on the road to getting out of debt and staying out of debt. Finally, we are going to take aim at securing your financial future. This future will be determined by how much money you think you will need to live the life you want to live. 2. You need to have the guts and the trust that you can do this! This is not easy stuff but it is not tough stuff either. You must believe that you CAN do this. Not only do you need to believe that you can do this, you need to believe that you WANT to do this. This is where the guts come in, anyone can do this, but you must have the guts to get over the stigma of being broke, have the guts to get over the negative self talk and the negative comments from others. Yes others! There are tons of people around you that keeping saying that you can’t change, things won’t change, look at us we are all the same, same old, same old blah, blah, blah. They only way you are going to succeed is for you to WANT to succeed. YES YOU CAN, but do you WANT to. But not only do you need to believe that you want to, you need to take the next step and believe that you DESERVE it. T. Harv Eker writes that we all have our financial thermostat. This thermostat was set when we were young. It was set by our parents, our teachers, our preachers, our neighbourhood, our friends, and our surroundings. Let’s liken it to a house that has a heater and an air conditioner. We set the thermostat in a room for a nice even 70 degrees and then we open the windows. If it is hot outside, say 100 degrees, what is going to happen? You are right the air conditioner kicks in, works like crazy, and cools the room to 70 degrees. What happens if it is 32 degrees outside? Once again you are right, the heater kicks in and works like crazy and bring the room temperature back up to 70 degrees. We do the same with our financial thermostat. Why do you think that 98% of all people who win a million dollar or more lottery are broke again in 2 years! How do we use this analogy? Simply by deciding how much money we need, want, and are determined to have. 3. Stop increasing your debt. The tried and true is, “Don’t spend more than you make!” Spending money is what got you in debt in the first place. If what you are looking at is not an absolute must – don’t buy it. Use cash as much as possible, it reduces the likelihood of increasing your credit debt. If you want something, save for it and then buy it. Also by using cash you reduce bank fees and transaction fees which can easily sneak up on you. Along with using cash and reducing your spending you must also commit to not borrowing anymore more money. It seems rather silly to do your best to get out of debt and at the same time gaining access to more money. It is like bailing out your boat with a can while being stopped under a waterfall. Regardless of how fast you can bail you will never catch up. DON’T abuse your credit. Impulse purchases can really hurt. “Credit cards are like gambling chips, in that you don’t feel the tangible loss of spending power. Studies have shown that when shoppers are handing over cash… they’re less likely to succumb to impulse purchases.” — TheChronicleHerald.ca, September 15, 2008 Debt Danger Signs • Getting a loan to repay existing debt • Charging more each month than payments • “Juggling” (rotating) payment of bills • Using credit card cash advances for bills • Chronically overdrawn bank accounts • Depending on overtime to make ends meet • Being at or near maximum credit limits • Calls and letters about overdue bills 3 Stages of Credit Difficulty • Early - begin paying late penalties – pay minimum due – a month or 2 behind • Later - bills are months overdue – difficult to pay minimum – creditors are making contact • Final - court proceedings threatened/pending – wages subject to garnishment secured items (car,etc) repossessed Your first assignment is to click on the following survey, which is not a survey, but your first steps financial freedom. *Paul Williams at http://www.providentplan.com To go back to the main page click here:
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