1. Feeling guilty about your debt, or hoping it will go away easily. Many consumers feel guilty about the debt and feel an ethical obligation to pay it off. That’s great! But see it as a game – because that’s exactly how the creditors see it. They charge you interest, knowing some consumers will default. If it helps you feel better, you and the creditor entered into a business relationship: they charged you interest based on your then-current ability to pay. If things have changed and you now are facing a hardship, this is why they charged you interest when times were good. Mark Twain once wrote that “a banker is like a friend who lends you their umbrella, then asks for it back when it starts to rain”. Banks want to lend money to people who don’t seem to need it, and if your situation has dramatically changed, then it simply is what it is. Rather than feel guilt or dispair about a lack of control over your life, realize that you do in fact have control, and have options to get out of the trap called debt. Debts will not just go away, and it is a lot easier to get in (spend) than it is to get out – and the system was designed that way on purpose. A great first step is tallying up and writing down your total debt amount. We know this is scary for many. Stare at it, and see this as a challenge and a game of strategy. How are you going to deal with this? When you retire, will you still be paying it off, or will you stop playing by their game and create your own life? You can, but ignoring it or feeling guilty about your situation does nothing to change it.
2. Not knowing your options. Many consumers believe it’s bankruptcy or pay off the creditors, which is simply not true. Our system is one option of several, and for many, the best option. We invite you to compare your options. Some consumers must file bankruptcy, others must sell assets (i.e. a business or real estate). Contact us today for a free no-obligation, straight-talking 15 minute analysis of your financial life, and we’ll tell it to you as we see it. If you want to drive from Miami to Los Angeles, would you just “wing it and see how it goes”? Of course not – you’d have a plan. Why don’t more consumers have a financial plan then, since your life is more important than a road trip? We can create a plan if our service is a match, and help you graduate our program with zero debt. Imagine getting your paycheck, and knowing you actually get to keep most of it, and save and invest for a better tomorrow.
3. Staying on the Treadmill. Creditors really hope you never realize you have more options – because they want to keep you a cash stream forever, paying them interest. How long have you maintained a credit card balance? Based on your past history, is it likely you are going to get out of debt any time soon?
4. Confusing “Credit Score” with “Credit Ability”. If you have a perfect 850 fico score, but pay over 50% of your total income to various types of debt (mortgage, credit cards, car payments, etc.), chances are high you are carrying too much debt. Your creditors actively work to make you value your credit score. Don’t get us wrong – having a great credit score is very helpful in our modern society, however, it may or may not be as valuable as your creditors make it seem. You see, they want you to keep paying them perfectly on time forever, but to stay in debt. Someone with an 850 fico, but 65% DTI (Debt-To-Income) ratio has a perfect credit score, but zero credit ability – which is the only reason to have a perfect credit score: to use other people’s money to finance purchase of performing assets (i.e. rental real estate for example, or a business) and your lifestyle (the home and car you want, at attractive financing rates). Believe it or not, a perfect credit score may be absolutely worthless when combined with a high DTI. The creditors want you to believe that your credit score is un-repairable (not true) and the most important factor in financing (also not true). Credit scores can be repaired, and some short-term damage may be easily outweighed by the strong long-term benefit to your overall finances. All credit scores can be repaired.
5. Working by “Their Policies” instead of “Your Policies”. Creditors may seem nice on the phone, but their policies are designed to get them as much of your money as possible. It’s that simple. Their plan is to keep you in debt, paying forever… and if you’re reading this article, chances are high they have succeeded thus far. It may be time for you to create your own plan for your life, instead of being a pawn in their game.
6. Being afraid of collections. Most often, collection accounts are easier to settle than with the initial creditor. A creditors “threat to send you to collections” should be a welcome sign the collector is planning to get your debt off their books at a discount.
7. Continuing the spending pattern that got you into debt. This isn’t rocket science: you simply must make more than you spend. That said, many people don’t truly have a budget and a firm grasp of their income and expenses. It is essential you see this in writing, and then find ways to conserve and/or earn more money. This is not the fun part – but is part of the process to climbing out of the debt trap.