Attacking Your Debt From All Angles

The following is a guest post by Jasmine from Check N’ Go.

With the miserable state of the economy today, some are desperate to find ways to reduce their debt without filing bankruptcy or losing their home and savings.  The sad reality for many is that bankruptcy and foreclosure are the only events on their financial horizon.

In order to attack debt and free yourself from financial woes, it’s going to require some creative use of existing resources and changing the way you approach debt reduction.

Change Your Habits

During Market Panics Debtors And Investors Win While Savers Lose

I’m feeling a little sadistic right now.  A large part of me is hoping the equity markets take a big dump again before the end of summer.  Bring on the pain baby!  I thought I was absolutely done with refinancing my primary residential mortgage in 2010 when I got 3.625% for 5 years.  But, I just called my banker and he says I can now get 3.25% jumbo and no points or fees for the same duration!  Because I would simply refinance with the same bank, the process would be streamlined since they have all my documentation.

What is this world coming to?  Who does that, putting more money in the pockets of consumers who never asked for it?  Why save me thousands of dollars a year in interest expense when there’s a guy who’s been out of work for over two years and needs it more?  If I do the refi, living in my house will be cheaper than living in a 2 bedroom rental.  Something is wrong with how government policies are working.  The more the Fed and the Treasury meddle, the more unintended consequences result.

Those with debt are the bad guys right?  We’re living in houses we can’t afford to pay in cash, and we refuse to live in crappy rentals whose landlords never do any updating.  Debtors are living it up because they can, and know there’s only one life to live.  There’s no point making money if you aren’t spending your money.  Meanwhile, savers are getting squeezed as their rates head to 0% and their equity investments go down the tubes.  Debtors are being rewarded again for living beyond their means and that’s just fine by America and our politicians.


Understanding The Debt Relief Industry

The debt relief industry doesn’t really have the greatest reputation for some reason or another.  Perhaps the reason is because we secretly harbor resentment for people who get in way over their heads and look for solutions other than paying off their debt!  When you can solve your debt situation yourself by begging, pleading, calling your creditors to come up with a repayment program, why would you let a debt settlement company charge exorbitant fees?  If you make your case strong enough, you might even get the credit card company or the bank to forgive a portion of what you owe!

Thanks to the horrendous economy in recent years, consumer debt levels have risen to alarmingly high levels.  From buying that new car you shouldn’t have, to big screen TVs that ruin the feng shui in your bedroom, to luxury clothing with 95% margins that never get worn, to nice vacations which you think you deserve, to $100 meals per person, people’s consumer debt has blown up in a bad way.  Never fear though!  With the government ready to bail you out with incredibly long unemployment benefits, free money for your mortgage, and credits for paying on time (shouldn’t you do that anyway?), some consumers will be alright.  But for others, in come the debt relief companies to save the day!  Maybe.

The Issues With Debt Relief Companies

Will Greece Default And Blow Up The World?

16.8%.  That’s how much the current Greek 10-year bond yield is producing thanks to their debt mess.  16.8% is a juicy 13.9% higher than the current US 10-year yield to put things in perspective.  The question on everybody’s mind is will lawmakers pass a new 5-year, 28 billion Euro austerity plan in order to tap a 5th installment of the bail out money available to repay almost US$10 billion worth of maturing bonds this August? We shall see come Thursday, June 30 whether the Greek Parliament implements the package if it passes on June 29 in the first place!

More than a year has passed for the market to digest the European debt crisis, but after a year of hand wrangling, pretentious pronouncements by aggravated government officials, and raucous rioting in the streets of Athens, nothing much has changed. The economic recovery that was to produce the growth and tax revenues to bail out the sinking ship of “PIIGS” has never materialized, and patience is running thin as potential defaults creep into the not too distant horizon.

The European version of Wall Street’s “CDO” meltdown has gradually unfolded over the past two years, beginning with leaks in the press that something was askew in Greece near the end of 2009. As the truth of the financial depth of deficits finally surfaced, the crisis hit front-page news headlines in May 2010, when it became apparent that the financial malaise was not confined to Greece alone. A new anagram, namely the “PIIGS”, entered our daily lexicon. Portugal, Ireland, Spain, and possibly Italy had similar, but different, according to finance officials, debt and deficit problems.

The crisis was met with proposed bail out packages from the stronger banks in the region that claimed that capital stress tests would prove their stability to meet most any contingency. Each proposal and subsequent approval was accompanied by pompous protestations from each government that debt payment schedules and bloated deficits were no longer issues to be concerned about, at least until the next revealing story in the press negated everything that was previously said. This bumbling scenario has been repeated countless times to the point that confidence in the respective governments has all but disappeared.


How To Pay Off $35,000 In Credit Card Debt In One Month

Several years ago, I put around $35,000 on my one and only credit card thanks to a home remodeling project and a new watch purchase. My “reward” was a 1% rebate towards my home mortgage, which is not bad considering $350 paid to principal is thousands in interest savings over the life of the loan.

$35,000 is the most I’ve ever put on a credit card in one month and it felt kind of odd. But, I really wanted to create a new bathroom from a closet to add functionality and value to my house. There’s an amazing amount of stuff you need to buy when building a new bathroom: wall tiles, toilet, limestone, shower heads, copper pipes, sinks, mirrors, lights, deep soaking jacuzzi jet tub, lights, light fixtures, paint, doors, crystal knobs, skylight, ventilator and so forth. $20,000 in materials adds up quick!

The watch was a Stainless Steel Daytona that cost $9,600, which I promptly sold for a profit three weeks later because a friend begged me to sell it to him! For those who know watches, the Stainless Steel Daytona is one of the most coveted watches on the market, which can’t be bought in any store. You need a jeweler, connections, or a history of purchases to gain access to this particular watch. It’s a big waste of money, but one of my weaknesses that I so conveniently categorize as a hobby to justify.

Add on all the other normal purchases of food, insurance, membership dues and transportation costs, racking up $35,000 in credit card debt in a month is just as easy done as said!