Sunday, August 17, 2008

The Credit & Debt Cycle is Over, Now the SAVINGS Begins!

The Credit and Debt Cycle is Over, Now the SAVINGS Begins!
by Darrel R. Walrod for Beyond 50

Ever wonder when all the negative talks about the economy will end? As a past bankrupt, I slipped easily into the attractive advertising of the bank's "Easy Credit" and "Financing Available" now options at the point of purchase. I am as guilty as all the over-indebted consumers out there today. All through the 1980's and 1990s, the temptations thrown down in front of me were too much for a nave youngster to avoid.

I know, as do many bankrupt consumers today, that the money was available NOW and I did not have to wait to figure out if I just signed on to their finance plan. I could easily afford to repay in a timely manner, they assured me. I just went for it, applying of a line of credit here, or a rewards card there!

If you are smart now though, you will realize that in this financial climate, at the end of the world's credit and debt cycle, financial survival depends on just one action: Stop spending and start saving!

Cut the Cards
As we head into a major economic downturn, your spending and financial priorities have to change if you do not want to be stuck in a debt cycle for years. That means cutting out the use of all your credit cards. From my book, "7 Little Known Secrets the Banker Won't Tell You!" we learn Banker's Secret #7: the bank set the "Golden Rule." That is, the bankers control the rules of the game, NOT YOU, and that they have the rules about credit cards down cold! Spending limits can be raised or lowered anytime. Fees, overdraft charges,a nd penalty rates can be assessed anytime. Don't miss a payment.

Look, overspending is easy, buy paying it back is hard, especially when the rules dictate that you can never easily pay down the balance leisurely, nor can you get away from "just paying the minimum." The spending party is over. Cut the cards or continue paying the consequences.

Nations and Consumers Must Restructure Their Debt
In my book, I ask you to consider secret #4, that the power of advertising will keep you looking to fulfill your desire, and that your good credit rating will allow you to keep piling on those obligations to your mountain of debt. But as you can see from all the negative market news, it is a time of chapter 11s, bankruptcies, and restructuring for companies and individuals alike.

Here are some tips to begin your quest to spend less and save more:
  • Group and consolidate all high-cost debt into smaller, more manageable chunks and look for more ways to earn more income. Part-time and seasonal jobs are OK, but there are only so many hours in the day. The most lucrative and fastest way is to create your own home-based business for a small initial investment.
  • Businesses don't earn big profits by being dumb. In most economies, running something from home is the easiest way to write off more expenses. Get an accountant or bookkeeper to help you figure something out.
  • Start a "buffer" account in one of the many online high-interest accounts available. Every payday, move a small portion of money over to that account religiously! This will be your "emergency buffer" savings in case of job loss or mandatory home repair purchase, or travel fund in family emergencies.
You Can Stop Your Wasteful Ways
You can stop your spending on wasteful or expensive things. Starting on the path to automatic savings, cash-only purchases, and getting to know the banker's tricks to get you on their "money-train" is not so hard.

Realize the "inverted" power of leverage that all financial institutions use; that those with the gold make the rules. So make yourself richer in knowledge and currency by starting your own restructuring.

Spend less, save more.

*Darrel R. Walrod is the author of "7 Little Known Secrets the Banker Won't Tell You! How to Avoid Too Much Credit, Debt, and Bankruptcy Road". He currently lives in Toronto, Canada.

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