What kind of future are we creating for ourselves today? I'm sure at one point or another we've all wished we had a magic crystal ball that could foretell our future. We've all wondered when that big job promotion is coming our way, or whether we'll ever win the lottery and be able to take that world round trip, or if we'll be financially secure in our older years.
Looking at the figures and projections based upon our current level of debt doesn't paint a heartwarming picture for the future.
Like the very real threat of today's global warming and our impact on climate change as a result of our appetite for natural resources, we humans have transferred an equally insatiable appetite toward debt and consumerism.
To get perspective on just how dire our situation really is you need to know the facts.
Fact Number One:
The ten percent of American's who owe ,000 or more on their credit cards have incomes of under ,000, that means they owe over a third of their income to someone else before even sparing a thought toward their living expenses.
One third of American's below the ,000 income threshold also have credit card debt in excess of ,000, that's still a 20% chunk of your income that you give to someone else, money that will never be put to work for you, money you will never see again.
Your best defense to alleviate debt now is to consolidate. Condense the debt in to one manageable loan and get rid of all credit cards except one. Get a budget sorted, put it into action and resist the urge to apply for any more cards as this will only impede your future financial goals. Remember why you're doing it, give yourself good enough reason and you'll overcome any temptation to overspend.
Fact Number Two:
Why are so many companies offering you endless credit card solicitations each month when they know you can't afford them?
They know that if you're over extended financially that you'll struggle to keep up with your payments. The late payment penalty alone has become a very lucrative income stream for the banks and credit card companies.
Did you know that in 2004 late payment fees attributed to an extra 45 billion dollars in revenue for the credit card companies alone? It's in their best interests that you incur these late fee penalties or continue paying the minimum each month, in fact if you continued to pay only the minimum, it would take you on average, 13 years to fully pay off your cards assuming an interest rate of 14%, for many companies this rate is much higher.
It's a honey trap coated in the promise of having the things you want right now at the expense of forever paying for it later.
Again, if your debts are spiraling out of control, consolidation may be for you.
Pay more than the minimum to whittle the debt down quicker, the faster you eliminate the debt, the less you pay over time.
Pay on time, you don't want to incur unnecessary late penalty fees. Remember, paying late only adds to the 45 billion revenue the companies are already making from you, don't give them another penny more.
Fact Number Three:
Bankruptcy's not the get out of jail free card it once was. In the past most people were able to file for Chapter 7, allowing them to walk away from the debts they owed without having their assets liquidated, but ever since the law changed in 2005 and saw the enforcement of Chapter 13, people could have their assets included for the disbursements of their debts, they lost their current lines of credit and had a hard slog ahead of them to repair their credit rating.
Keep up with your debts to avoid ever having to apply for bankruptcy. Seek debt management or debt counseling if you need external help. Examine all your options before considering bankruptcy, it's a major decision and not without it's downside and repercussions.
Fact Number Four:
70% of low to middle income earners refer to their credit cards as their financial back up rather than relying upon personal savings.
In our day, savings has decreased to an all time low, in fact our ancestors during the time of the 1930's depression saved comparatively more than we do, and we have more disposable income. This means that over 90% of American's will be dependent upon the government for assistance when they retire. This frightening statistic also predicts that the majority of funds of older American's will go towards covering their medical expenses and the ever ballooning cost of prescriptions.
No one is really able to rely wholeheartedly on government assistance, unless you want to drastically downscale your lifestyle, just because you think you're doing okay today doesn't mean that circumstances won't change tomorrow.
The only way to ensure you're taken care of in your golden years is to rely on yourself.
Save, save, save. Put aside 10-15% of your income, have it automatically diverted to a specially designated bank account. You won't miss the funds you never see and it'll build gradually over time. Negotiate terms with your bank to see which favorable interest rates they can offer you. Turn the interest to your advantage and use it to make more money for you.
The sun will always come up, the earth will always go round and the cost of medical expenses will always rise.
Take out health and life insurance. Always make sure you have current medical coverage so you won't be financially devastated by any unforeseen emergencies.
Fact Number Five:
In 2004, only 14% of American's used cash for their purchases compared to 25% opting to use their credit cards.
There's a higher tendency to spend more (up to 20%) on credit card purchases than if you paid with cash, you can't spend what you don't physically have.
The advantages of paying with cash means that you don't overspend, you get greater discounts on cash purchases giving you a stronger buying position, there are no interest penalties or fees associated with using cash.
It has it psychological benefits too, it's more difficult to blow 0 cash when you're forking it over note for note compared to a couple of swift swipes with the plastic.
You'll have a greater appreciation and new found respect for the money you earned and you're not spending anyone else's in the process, namely, the credit companies. More power to you.
Ensure the security of your future by taking action today.
