Wednesday, July 18, 2007

Is Debt Reduction Finally Getting It's Due Recognition?

While channel surfing the other day (7/8/07) I caught this program on CNBC. Seeing that I actually was able to watch from the beginning I was able to tape (yes I still use a VCR) it in order to "study" the full contents. Following is an outline of what was presented.

[Note: there are four seperate but connected programs in this series. I happened to catch the show dealing with debt.]

The Millionaire Inside--Debt Free hosted by Erin Burnett. Mentors for this episode include:

Introduction

  • becoming a millionaire has two key components--get out of debt and use debt to build wealth
  • MI looks at the new face of debt...debt doesn't discriminate, it touches everyone...Americans are spending too much and saving to little
  • recognize your mistakes, debt can creep up when you lest expect it
  • controlling $$ means controlling destiny
Q: What does it take to motivate most people to change?
  • before things can get better they must get worse
  • it's OK to feel bad about what you've done BUT turn the negative into a positive change
Q: What are the first steps that will get people out of debt?
  • figure out exactly where your $$ is going
  • find a way to make more $$ and pay yourself first, save even while paying down debt
Q: Is bankruptcy an option for someone in debt?
  • NO--bankruptcy should not be your first choice
  • bankruptcy will destroy your credit and your future
  • BUT if you do go bankrupt, don't despair, there is hope
Q: What can people do to avoid making financial mistakes?
  • investing in financial education is very important
    • rich or poor, smart or not smart we all use $$
    • the more you know, the more money you'll make
  • take responsibility for your actions, have integrity
    • stand by agreements and honor your word
    • doing the right thing always pays off in the long term
PROFIT POINTS
  1. control your money & your life
  2. plan your future now
  3. avoid bankruptcy
  4. you can get out of debt
You keep turning to plastic and plastic keeps turning you upside down--we are a maxed out nation

Credit Card Debt

  • Sharon Epperson author of The Big Payoff: 8 Steps Couples Can Take to Make the Most of Their Money--and Live Richly Ever After
    • CC companies prey on people who make $$
    • average person carries way too much debt, most have carryover monthly balances
    • CC companies don't want you to pay, that's how they make money (ie. late fees, over limit fees)
    • CC companies profit from penalty fees, it's big business, don't get sucked in
    • how can you beat the CC companies at their own game? implement a plan to help you reduce your debt
  • Americans love to overspend--a lobster lifestyle on a tunafish budget
  • if you have to charge it, do you really need it?
  • don't stoop to competing with the neighbors
  • do what's right for you and live on a budget
  • only spend $$ on things you really use--every penny counts, think about every purchase
Tips that will get you out of debt
  • start by paying debt with highest interest first
  • ask for a lower interst rate, especially if your a long time customer
  • wipe out CC debt as fast as you can
  • use other CC offers to negotiate better rates
  • know your CC rate
  • be persistent, be firm and stand your ground
  • it's important to knock debt out fast, attack debt that you know you can eliminate
Q: Is consolidation a good way to reduce debt?
  • plastic isn't the problem, your spending is
  • consolidation is an option, but paying more than the minimum is better
  • consolidation scams are everywhere, BE CAREFUL
  • don't use a home equity loan to pay down debt--that's converting a short term debt into a long term debt
Q: Is it smart to borrow on CC to invest?
  • only borrow to invest IF your return rate is higher than your interest rate
Q: Should you use your retirement savings to pay down debt?
  • NO--under no circumstance should you cash out a 401k
  • change your habits and cut back
  • there are penalties for cashing out a 401k early
  • your 401k should grow, leave it alone
  • make contributions to your 401k so your comapny matches (if an option), it's free $$
Q: What kind of CCs are the worst to have?
  • department store cards are the worst, they are designed to rip you off; high interest rates and they will not negotiate
  • get rid of all CCs but one, use only for emergencies
PROFIT POINTS
  1. call and negotiate interest rates
  2. tackle small debts first
  3. beware of debt consolidation scams
  4. don't waste $$
  5. mistakes are OK, learn from them

Medical Debt

  • the #1 cause of bankruptcy
  • the US is in a health care crisis, people with no insurance or the under insured drowning in medical debt
  • need to make health insurance a priority
  • cut spending and get yourself health insurance
Q: Should medical and consumer debt be treated the same way?
  • debt is debt, make payments and work it off
  • try and negotiate a payment program; if you have been delinquent explain it on your credit report
  • scrutinize your medical bills for mistakes and/or over billing
  • try to communicate with your creditors, this will help you deal with your debt
  • with 44 million people without insurance check with your states high risk insurance programs
Q: How can people cope with aging parent's healthcare issues?
  • reverse mortgage
  • a VIATICAL can be used to get cash for medical bills
  • long-term insurance(s) for parents a must
Q: How does medical debt impact your credit?
  • medical debt can destroy your credit
  • medicare/medicaide don't cut it anymore, keep yourelf healthy and avoid getting sick
PROFIT POINTS
  1. negotiate with medical providers
  2. consider long-term care insurance
  3. carefully review medical bills
  4. stay healthy

Student Loans

Debt can make ou rich, the secret is knowing how to leverage to build wealth.
Q: Are student loans good debt?
Q: How should people approach paying down student loans?
  • take our time especially on low interest loans
  • prioritize--home purchase, consumer debt, etc.
  • consolidate to cut costs
Other ways to use debt to build wealth
  • eliminate bad debt and take on good debt
    • BAD DEBT--debt you have to pay for
    • GOOD DEBT--debt other people pay for
  • your home is a good investment, but a bad debt; buy an affordable home that you can pay down
  • invest in rental properties, let tenants pay the mortgage
Q: When is the right time to buy a property?
  • by a property when tenants can pay the loans
When it comes to real estate, timing is everything.
  • real estate is a finance deal
  • owning a property is a way to get tax deductions
  • know the rules of the game and play it well
Q: Is it smart to save and invest as you pay down debt?
  • get a business partner, this will allow you to invest as you get out of debt
Q: How should savings be invested?
  • place your savings in interest bearing accounts
  • gear up to find good deals on home purchases
  • always invest in yourself first, get educated and make smart decisions
  • you want high returns, so think through investments
PROFIT POINTS
  1. don't rush to pay of student loans
  2. leverage to build wealth
  3. save and invest as you pay down debt
  4. educate yourself on the rules of money

Closing

Q: What is one thing we can do tomorrow to start getting out of debt and on the road to wealth?
  • make a list of all the "people" you owe money to and hang it on your frig--decide which debt you are going to get rid of first and start making lines through each as you eliminate them one by one
  • open up your checkbook, take a look at your top five expenses and look for ways you can free up $300 and put it in a savings account until you can make your first investment purchase or start a business
  • call all your credit cards and ask what your interest rate is--then negotiate for a lower rate, be persistent and keep calling
  • figure out how much money you are making, then figure out how much you owe, cut back your lifestyle so what you owe is less than what you earn
Upcoming Programs
  • Your Guide to Wealth 8/8/07
  • Your Guide to Retiring Rich 8/13/07
  • Debt Free 7/24/07 & 8/20/07
  • Get Inspired 7/28/07

2 comments:

JW said...

AWESOME POST!!

Thanks

debtfretter said...

Thanks for highlighting this show, I rarely get to see it. I found your blog through Blogging Away Debt. I'll come back and check out your blog again!