Beating Debt Excerpt

Free Yourself From Your Debts An excerpt from the Introduction to The Unofficial Guide to Beating Debt by Greg Pahl: We are the wealthiest nation on earth. Yet, millions of Americans are drowning in debt. Encouraged by the longest economic expansion in history, Americans are spending more and saving less than ever before. Much of that spending has been fueled by the easy availability of credit. Through the 1990s, U.S. households have been taking on debt at record levels. Credit card debt alone has increased from $247 billion in 1991 to a staggering $555 billion in 1999, according to a recent Federal Reserve report. And that trend has continued. The report goes on to say that the growth in the number of households that have access to a card accounts for only 17 percent of that increase, while 77 percent of the growth is due to a higher rate of utilization. It seems that Americans are charging more and more on their cards than ever before. But it's not just credit cards. Overall consumer credit is growing 13.5 percent annually according to the Federal Reserve Board. At the end of January 1999, American consumers were $1.315 trillion in debt, exclusive of home mortgages.

It gets worse. U.S. families with at least one credit card carried an average revolving debt of between $7,000 to $8,000 in late 1997, up from $6,000 to $7,000 the previous year, according to the Consumer Federation of America. That's the average. Some are struggling with a lot more. Carrying debt at even the average level costs these families about $1,000 in interest payments and fees annually. Is your family one of them? Do you owe more? Regardless of the actual amount of debt you're carrying on your credit accounts, the money you're currently spending on improving the bottom line of some bank could be earning you compound interest on a solid retirement investment. Sound interesting? Read on. The Unofficial Guide to Beating Debt can help you.

If you think that debt is a problem only for poor, unsophisticated folks, who simply don't know how to handle their money, think again. Significantly, the largest increases in debt have not been at the bottom of the economic scale among low-income families, but among those earning $50,000 to $100,000 a year, according to Juliet Schor in her excellent book, The Overspent American.

"Overall, half the population of the richest country in the world say they cannot afford everything they really need. And it's not just the poorer half," she says. Yesterday's luxuries have become today's necessities in an ever-increasing upward spiral of desire fueled by our hyper-consumptive economy, where greed has increasingly replaced actual need. We'll be looking at this phenomenon, and I'll offer practical suggestions on how you can identify the causes of bad spending habits and how to change them whether you make $20,000 or $200,000.

Okay, so why do so many Americans, regardless of their income level, have so much trouble with debt? Well, aside from compulsive overspending, we also have one of the lowest savings rates for any country on the planet. The average Japanese household saves about 13 percent of its after-tax income. The figure for American households, which has been declining for years, moved into negative territory in 1999 and was around minus 1 percent at year's end. That's just plain scary. This lack of savings leaves little room for maneuvering in the event of unexpected financial difficulty, like a serious illness or loss of employment or a major downturn in the economy.

Crisis? What crisis?

All of these depressing statistics are bad enough. We're spending too much and saving too little. Assuming that these trends continue, we're almost certainly heading for disaster. Yet, when you listen to the radio or watch television or read the morning paper, it seems as if things couldn't be better. There is a bizarre detachment from reality involved here that I find extremely disturbing. We are a nation in denial.

Sometimes I get the uneasy feeling that we are like the passengers aboard the ill-fated Titanic. It's a splendid ship and represents the height of technological sophistication. Inside, everybody feels good. Not everyone is in first class, of course; a lot of folks are down in steerage. But, overall, everyone is enjoying the ride. Outside it's dark and cold. Up on the bridge, the captain has been warned about the presence of icebergs. Yet, the ship is steaming full-speed ahead through the North Atlantic. But it's okay. The Titanic is unsinkable. And the band plays on.

Like those reports of drifting icebergs back in 1912, recent economic events around the globe should be giving us plenty of early warnings about the dangers involved with our heedless rush to spend ourselves into oblivion. Much of this spending spree is aided and abetted by various forms of easy credit--especially credit cards. Still, the message in the media remains the same: Buy! Buy! Buy! And if you've run out of options to pay for it all, why, just mortgage your house too! When was the last time you saw an ad on TV suggesting that, perhaps, you might want to consider spending a little less money on stuff that you really don't need and really can't afford and instead put that money in the bank? I haven't either.

The collapse of the former Asian Tiger economies, followed by Russia and, more recently, by Brazil, are striking--and cautionary--examples of just how fragile our increasingly interdependent global economy can be. Yet many Wall Street experts babble on about the "new economy" and "new paradigms" and keep on insisting that "the old rules no longer apply." Rubbish. One old rule hasn't changed a bit. "What goes up must come down." Eventually. Another old saying also comes to mind. "Those who do not learn from the lessons of history are doomed to repeat it."

Recent studies show that somewhere between 25 and 30 percent of U.S. households live paycheck to paycheck. With the margin of error so razor-thin, it's no wonder that personal bankruptcies are at record levels. If you are carrying a heavy debt load--especially on your credit cards--you are in even more danger because your options are very limited. When, not if, the current record economic expansion finally comes to an end, Americans who have been enjoying the Good Times Cruise on our luxury liner--particularly those who charged their trip on plastic--are all going to rush up on deck only to find that, even after all these years, there still aren't enough lifeboats for everyone.

If ever we needed some practical, down-to-earth advice about getting our collective financial house in order, now is the time. The Unofficial Guide to Beating Debt can be your ticket to one of those limited seats in the lifeboats.

Help for the credit-impaired

You don't have to wait for the economy to hit an iceberg before you decide to get your financial act together. In fact, if you're reading this right now, you've probably already been thinking that you need to do something about your debt situation. Good. Realizing you have a problem is your first step to recovery. Even if you are just slightly credit-impaired, there is no time like the present to give yourself, and your finances, a helping hand.

But why choose this book, rather than the dozens of others that line the shelves of most bookstores? There are lots of reasons. First, this is a guidebook. It's designed to help you navigate quickly through the crucial information that you need to get a handle on credit and debt. It's hard to deal with one without fully understanding the other. I'll cover both. If you're an absolute beginner who is applying for your first loan, I'll offer suggestions in Chapter 1 on how to increase your chances of getting your application approved on the first try. On the other hand, if you've been a bit too successful in obtaining credit in the past and are now facing the unhappy task of trying to crawl out from under a mountain of debt, I'll walk you through your various options in Chapter 12, and also in many other places in this book.

But that's not all. In between I'll show you how to find the cheapest credit cards with the best features. You'll learn about the differences between green cards and gold cards and the new platinum and titanium cards as well. No doubt you've heard about the wonderful features of the new debit cards promoted by most banks these days. I'm sure they've told you how fast and hassle-free these cards are and how simple they are to use. Swipe the card, and the amount of your purchase is immediately deducted from your checking account. No muss, no fuss. Why, you even get a receipt for easy record-keeping with every transaction and a detailed statement at the end of the month! I bet they didn't tell you how dangerous a debit card can be in the wrong hands, though. We'll cover this, and much, much more in Chapter 2.

A crook stealing your money isn't the only thing you need to be careful about these days. Trying to deal with problems that you have created for yourself by your own imprudent spending habits is bad enough. Trying to extricate yourself from the financial and legal morass created for you by someone else--especially someone that you don't even know--is worse. I'll tell you how to protect yourself from losses due to credit card theft and other types of credit fraud, including the bizarre and frightening world of identity theft and the havoc it can wreak on you, your family, and your credit. Chapter 3 has the eye-opening details.

While we're talking about fraud and debt, let's not forget the Internet. The Information Superhighway has certainly opened up wonderful new possibilities for tapping vast resources of information, to say nothing of the rapidly expanding world of e-commerce. Unfortunately, it's also opened up a whole new Pandora's box of criminal activity that law enforcement agencies in this country are just beginning to grapple with.

With a few quick keystrokes and the click of a mouse, you can spend--and lose-- hundreds, perhaps thousands, of dollars. Instantly. Check out Chapter 4 for more on the wild new world of cyberdebt. If just one suggestion in this book helps you avoid a peril that is lurking out there, waiting to sink your financial ship, you will easily recover the money that you spent on this guide. You'll probably save a lot more.

Taking back control

Still not convinced? Okay, have you ever looked at your credit report? You should. Did you really understand it? You can. Do you know how to fix it if it's broken? I'll tell you how. Your credit report is the key to understanding much about your financial situation. If you don't know what it means or how to use it, you are at a decided disadvantage. Unfortunately, what you don't know can hurt you. The Unofficial Guide will give you the information you need to actually use your credit report as an effective tool to get the credit you need, when you need it.

Are you already in financial trouble? The Unofficial Guide to Beating Debt is just what you need. If you have gotten yourself deeply in debt, you are probably feeling as if things are out of control. They probably are at the moment. Do angry creditors constantly besiege you on the phone? Are you being pursued by collection agencies. Have they threatened to take your car? Are they making your life completely miserable? Although things may be bad, they can get worse. You can lose your home, your self-respect, and maybe your marriage and your family.

Life doesn't have to be like this. How would you like to regain a measure of control over your life and resolve your debt problems at the same time? You can do it. I'll tell you how to stop the bill collectors in their tracks, end the harassing phone calls, and work out a negotiated settlement that can save you hundreds, maybe thousands, of dollars. While I hasten to add that money problems don't have a quick fix, there are numerous well-tested steps that you can take to eventually put your finances back in order. I'll even show you a way to improve your finances in the future.

Some people can conquer debt by themselves. However, if you are not one of those people and are feeling overwhelmed, you don't have to struggle alone. I'll tell you where to go for assistance--most help is free or almost free. A huge network of nonprofit debt counseling agencies exists out there, waiting to help you. Perhaps even more important, I'll give you the lowdown on where not to go for help. The explosion of debt in this country has encouraged the rapid growth of the for-profit debt repair industry. You have probably seen their ads on TV or the Internet, or received unsolicited junk mail promising to "fix" your credit instantly and end your financial worries forever. Far from fixing your problems, these companies may put you deeper in debt if you're not careful. At the very least, you may end up spending much more money than you need to. Of course, not everyone in the business is a crook, but these are shark-infested waters, and I'll help you navigate safely through them.

In some cases, the financial quicksand you have waded into is so deep that the only way to save yourself is to grasp at anything that is available--like bankruptcy. Although bankruptcy isn't the end of the world, it's not a strategy that you should use lightly. The implications of its use will haunt your credit history for many years (up to 10 in some cases) and may cause you a good deal of inconvenience. This is particularly annoying if you really have cleaned up your act and are ready to live a normal life again. I'll tell you what you need to know in order to decide whether you should consider this last resort. Chapter 13 describes the process, and Chapter 14 will help you decide which method to use and how to use it.

This book contains much, much more, but space does not permit my listing everything here. The main thing to remember is that The Unofficial Guide is a roadmap for individual improvement and development, not a set of strict rules to follow. And there's no hidden agenda. No expensive seminars to sign up for. No Great Secrets to instant wealth. Because there aren't any. Just down-to-earth suggestions and tips that should help you manage your debts more intelligently and effectively. And if the ideas you glean here help improve the rest of your life too, that's great. I hope they do.

As you can see, I've packed a lot of useful information into The Unofficial Guide to Beating Debt. If you like what you've read, you'll find much more in the book. Why not pick up a copy now? Once you get it, you'll be on your way to learning how to beat burdensome debt once and for all.