How to Get Out of Debt With the Get Out of Debt Guy » failure

Chapter 1 – I Got Hit in the Head With a Baseball and I Saw it Coming

Steve Rhode — Mon, 19 Sep 2011 13:08:57 +0000

Chapter 1 – I Got Hit in the Head With a Baseball and I Saw it Coming
Chapter 2 – What Your Money is Trying to Tell You
Chapter 3 – Take a Lap on the Gerbil Wheel of Debt
Chapter 4 – Why Money Doesn’t Make You Happy
Chapter 5 – If You Had a Million Rats, Would You be Successful?
Chapter 6 – The 10 Attributes of Internal Prosperity
Chapter 7 – The Attributes of Internal Prosperity in Action
Chapter 8 – Your Money is Your Friend
Conclusion – Listen to Your Heart

Chapter 1 – I Got Hit in the Head With a Baseball and I Saw it Coming

In 1990, my wife and I filed bankruptcy. We kept the secret for almost 10 years and never talked about it publicly. I felt like a failure. It was painful and embarrassing and, though there were many factors that lead up to that event, it still causes a deep internal ache to talk about it. But we found, as you will, that keeping the secret was worse than being honest about what happened.

The first “outsider” I ever told about my bankruptcy was Mike Kidwell. I met Mike a couple of years after filing, when we both worked at IBM. I feel truly blessed that we met and were able to share our dreams and goals with each other. Our common dream to help people overcome the pain of money troubles has developed a strong bond between us.

One day while we were at work, I felt I had to share my secret with Mike. I told him I needed to tell him something and asked him to follow me.

We went through three levels of security doors, going deeper into the heart of the building until we were finally in the mainframe room. There were a couple of glass walls through which people could see us talking, but no one could hear us because the noise in the room drowned out our conversation. I’m sure, as they saw us standing there, it seemed like something out of “2001: A Space Odyssey,” as HAL, the computer, watches the guys trying to have a private conversation in the pod. I was even worried that someone might be able to read my lips. I know it sounds ridiculous now.

I nervously told Mike my secret and it didn’t faze him a bit. What a guy. Years later, I told others. I just told you and I didn’t even need to. Since it’s no longer a matter of public record, you never would have known about my greatest financial failure. It is also the source of my inner strength. From that pain and financial devastation I was able to go on to help others. God gave me a doctorate in financial defeat. And as strange as it may sound today, I’m grateful for the blessing. God, if you are listening right now, I learned that lesson and don’t need a refresher.

Once I stopped worrying about how others might judge me, it gave me a freedom in life to stop hiding behind what might be and live in the now. It got tiring carrying around all that baggage. Once my wife and I atoned for our financial sins, it gave us even more comfort and freedom than we’d ever had. It was a huge milestone on the way to internal
prosperity.

That is how my greatest failure became my greatest gift. I found that about 1.5 million people also face bankruptcy every year. Many face uncertainty and stress over financial problems. I was able to pull myself up by my bootstraps and search for a better way to deal with financial troubles so I don’t end up making the same mistakes twice. I resolved to help others by sharing what I learned. Now you don’t have to hit a brick wall without an air bag, like I did.

Even now, after a period of prolonged economic prosperity, our country is packed with people who lack confidence, feel lonely and unhappy, and are trying to have more and more “stuff” because they think the stuff will make them confident, secure and loved.

The prevailing core belief appears to be that material wealth is the key to happiness. Ironically, people who believe that will probably never be able to achieve their dream of being wealthy because they are constantly feeding the emptiness they feel inside with money. They use money as a drug. As one client told me, “Shopping is my heroin and Discover Card my needle.” Their lives are painful and frustrating, so they pledge the money they have and the money they don’t have (credit) to the purchase of stuff they believe will dull the pain within. As they do this, the money they actually have slips through their fingers, gone forever.

So what is the secret to happiness if it isn’t money? Well, I’m not the Dalai Lama, I’m just a guy who’s been there. I’ve made mistakes and gained a lot of wisdom along the way. And, I’ve been fortunate to be able to use that wisdom to help a lot of people have more money, appreciate the money they have and lead better lives. One of the core reasons why their lives become more rewarding is because now they “get it” and a lot of the “it” is packed into this book.

I encourage you to abuse this book. Highlight passages that strike you. Underline sentences that speak directly to you and dog-ear pages you want to find again. Make it a true reference work for you as you discover your path to the rewarding life you deserve.

This book contains the skills necessary for you to begin to live a life of happiness, fulfillment, joy and wealth. It’s what you are looking for, and the basic tools are all right here.

LET’S DIG IN

When you decide to dig into your money issues, what you might find is that you’ve been stuck and confused about what to do. Of course, what makes it more painful is the perception that somehow you were a victim of circumstances beyond your control and took no action to remedy the situation.

It’s hard for people to be honest with themselves when they are struggling with money issues, or at any other time, for that matter. People often feel an almost overwhelming urge to hunt for the “perpetrator” of their difficulty. There is so much blame being spread around in bad times that people sometimes forget to point at themselves. People don’t want their inner critic to begin shouting at them about how stupid they are, and on and on.

First, let’s take a healthy approach to the situation and put duct tape over your inner critic’s mouth. Your inner critic is that voice inside your head that is quick to tell you when you’ve screwed up. There is a helpful time for your inner critic to speak, and then there is now.

I was about 10 years old and visiting relatives in Vermont when I learned an important life lesson. It was one of those perfect summer days when the wind was just gently moving, the temperature was perfect, the sky was deep blue and not a bug was in sight. My uncle Ralph asked me if I wanted togo with him to see a local baseball team and, being the baseball fan that I was, I jumped at the chance.

I think it was a high school team playing that day. We arrived late and grabbed the last two seats in the wooden bleachers. I always have fond memories of wooden bleachers; the aluminum ones of today are just not as satisfying. I mean, not only are they cold on your tush on a winter night, but they are noisy as heck as people tramp across them.

Anyway, we sat about two rows up from the bottom on the third base side. We grabbed the last couple of spots on the side of the bleachers farthest from home plate.

We had been there about 10 minutes, just long enough for me to see who was winning. This blond-headed guy got up to bat. I remember the pitch and swing in slow motion. The pitch was straight down the pipe, from my vantage point, and the swing was like you see on top of a trophy. He took a mighty pass at the ball and almost missed. His timing was just a bit off, but he got a piece of it late in the swing. I heard the “swack” and watched the ball screaming like a bullet down the third base line. Then everything went silent. At that point it was just me and the ball. Out of my peripheral vision I saw people leaning back to avoid getting hit. I watched the ball come flying right toward me like a smart bomb.

The ball slid past the crowd in the bleachers and hit me square in the side of the head. It hit me so hard that it knocked me out of the bleachers and face first onto the grass.

Thank goodness for the grass. I don’t remember whatever happened to that ball, but boy was I upset at it, though it wasn’t the ball’s fault.

The silly part is that I saw the ball coming, but I was paralyzed. Maybe I didn’t know what to do, or maybe I just didn’t have enough experience to know what was going to happen. All I do know is I watched the whole thing: I saw the ball coming and it hit me in the head and knocked me out of the stands.

The story has a happy ending. I didn’t lose consciousness, there wasn’t any blood and I think I got free popcorn out of the deal. I also got to meet the batter after he ran over to see how I was doing. I think he just wanted to see if he had killed me. More than three and a half decades later, I’m sure he’s still telling his buddies about the day he clean knocked this kid out of the stands.

I watch many people with money problems and issues behave exactly the way I did that day at the ball game. They are inexperienced, unsure of exactly what to do and rather than take some evasive action, they get hit square in the head with the problem.

“If you’re not in the game, you’re in the stands on your behind.”

Almost all people who are facing financial problems are on the creditor safari. They are on the hunt for the person or persons who got them into the situation they are in right now. The honest answer is that you are probably the most to blame for what you are going through. I don’t mean to sound harsh, but unless someone put a gun to your head and made you sign for all that credit, you don’t have a leg to stand on. OK, some people get fooled or even lied to when they sign for credit, but in my experience that very rarely occurs. For the most part, life just happens and we let it happen to us.

For many years I worked in the medical field. One day I decided to pursue my dream, which was to sell real estate, and left. I started my own company, The Great Virginia Land Company. I thought it would be really cool to work outside all day long, walking through the country, enjoying nature and making a living at the same time. I bought and sold country acreage. When I sold property I wanted to make very sure that the people clearly understood the contract they were about to sign, which included financing. At first, I would read the contract with them, explain every detail and be available to answer any questions they had. Their eyes typically glazed over by the third paragraph.

That approach wasn’t working, so I made myself available as they read the contract to answer any questions they had. Nobody asked questions. They just wanted to know where to sign. I even asked them questions to make sure they had read the contract. Most were put off by my inquisition. Finally, they trained me just to hand them the contract.

They would look up and before they could say anything, I’d say, “Here,” and point to the signature line. They would look up again and I’d say, “Here,” and hand them a pen.

I used to get excited when I thought someone was going to ask a question about the financing. I wanted to explain it all to them, but finally I was beaten into submission by the public’s lack of concern about the contract or financing. The prevailing question never was about the total cost, instead it was always, “What will my monthly payment be?” They didn’t want to be bothered to actually read or understand the damn thing. They just wanted what they perceived to be the benefit once they signed the contract.

One day I sold 14 pieces of property at one time. There were so many people who wanted to purchase property from me that I passed out blank contracts, stood on the trunk of my car and shouted out instructions on how to fill in the blanks. The purchasers all gathered around as if they were at a concert in the park. “In the first blank, put today’s date.” It was insane, but I could not stop the frenzied action. If I had not done it that way, it is very possible that I could have been physically injured. People would get in such a tizzy if they could not sign the contract as quickly as possible.

It was frightening at times. One day, two people wanted to buy the same piece of property. One person made the decision to buy it first, and the other said he was going to kill me with the gun in the back window of his truck. I decided it would be a good time to leave, so I calmly walked to the car, jumped in and turned the ignition. Trust me, “wrrrwrrwr” is not the kind of sound you want to hear at a moment like this. The battery was dead and I didn’t want to be.

So what did I learn from my experience? I learned people don’t like to see snakes when they are out walking in the country, and they aren’t that interested in understanding consumer credit transactions.

Inevitably, if a problem ever arose after the transaction took place, the perception was always that the purchaser was the victim, even when the terms were clearly spelled out in the contract that they refused to read.

The same is true for almost all consumer credit transactions. People don’t read the agreements they sign and if they do, they will not, or do not, ask questions. Even if they do ask a question and are a little troubled by the answer, the vast majority of people will sign the agreement anyway, as long as they get what they want when they do sign it.

To develop a foundation for internal prosperity and external wealth, you cannot sit idly by and watch your life pass before you. You have to participate; otherwise you get what’s left over. You must summon up the courage to assume responsibility for your life and while you’re at it, you’ll avoid getting hit in the head. The thought of looking inward, focusing on building internal prosperity — the inner disposition, traits and skills necessary to make you happy — is an uncomfortable thought for many people. How fortunate you are that you are willing to find a way not only to have enough money to make you wealthy, but also to pursue the admirable goal of finding your path to a rich and rewarding emotional, spiritual and financial life.

This book will help you find the answers you are looking for. Yes, it is possible to make enough money to be happy. Yes, you can be proud of yourself, your life and your accomplishments. Yes, there is a better way.

“The constant pursuit of something always leaves you pursuing, never arriving.”

The majority of people I help have spent their lives chasing a dream of wealth and ended up with the opposite of wealth, massive debt and lost opportunity. They slave at jobs they don’t like and hope for a life of luxury and happiness that will be brought about by more money. “If only I could work harder.” “If only my spouse would leave me alone so I could focus.” “Kids, shut up!” It is a shallow, sad and empty dream. It’s a dream created by the perception or belief that life would be better with more money. It is not real.

For some people, more money is definitely a blessing, but would it help bring them closer to living their dream of being “rich?” What about lottery winners who blow through their good fortune? I saw one couple as clients who won big amounts on the lottery scratch-off cards, only to blow through it and be left worse off than ever. Money alone clearly was not the secret to their happiness. Their lottery winnings became a big burden for them. They now had a string of moochers at the door, a bunch of stuff they had to take care of like homes, cars and boats. Another thing they never anticipated was that they had even fewer skills when they had to re-enter the job market later because they had essentially taken a couple of years of vacation. Money made them wealthy but not wise. Not knowing how to handle it made them ultimately less satisfied with life.

Working with people like the big lottery winners has made me think a lot about money and happiness and how they fit together.

The information in this book was gathered in part through my own experience and from working with so many people with financial problems. It’s frustrating to see people suffering and not many folks available who understand why. When I share my message with financial professionals, attorneys, social workers, therapists and others, I can see the light bulb go on and they usually say, “People need to know what you know. I haven’t met anyone else who has put the puzzle together. You’ve really got answers.”

Over the years, I’ve read so much written by financial pundits and interviewed many of them on my radio show, and now I’m convinced that while they may understand the technical side of money issues, they don’t understand the emotional side. They get it wrong because they don’t understand that money problems are not about the money and that makes it hard for them to point people back to the path to happiness. It’s kind of like sitting in the bleachers with me way back when. Think of your financial issues as that rocket ball that launched off that bat. You see the problems coming, but you don’t know what to do. “Swack” straight to the head and out of the stands you go, face first into the dirt. There is a better way.

I wrote this book to introduce you to the principles I have learned over the years to help you create a better relationship with money and make you happier and more satisfied with your life. It will keep you in the stands. You might even get box seats. Did someone say hot dogs?

WHAT CAN YOU TEACH YOURSELF?

There is no reason why you can’t use your own past experiences to help you excel in the future. Rather than run from the times you made a mistake, relive them to extract the essence of wisdom and maybe give yourself a good laugh. The ability to laugh at ourselves is important to lightening our heavy load in life. Don’t take yourself so seriously. Relax. If you are having trouble relaxing, here are a couple of quick relaxation exercises.

Steve’s Eight Cheap and Easy Steps For Stressed Out People Who Can’t Relax

Sit up straight with your hands in your lap.
Focus on relaxing your shoulders; feel them droop.
Focus on relaxing your legs and your back; feel them getting less tense.
Focus on breathing slower; feel your breathing slow down.
Close your eyes.
Count your breaths. Breathe in “10,” breathe out, “9,” breathe in “8,” you get the idea. Count your breaths this way until you get to one. Count your breathes in groups of 10. When you get to one, start over again. Just focus on counting your breaths.
As thoughts pop into your head, acknowledge you had the thought and let it go. Just focus on counting your breaths.
As you sit and relax, try not to acknowledge any stimulation, try not to move, try not to open your eyes, try not to do anything else. Just live in the moment. Stop whenever you want.

Steve’s Four Step Emergency “I Can’t Take It Anymore, I’m Going To Explode Right Now” Relaxation Exercise

Slowly count to five in your head and breathe in the entire time.
Slowly count to five in your head and hold your breath the entire time.
Slowly count to five in your head and breathe out the entire time.
Repeat as needed.

Chapter 2 – What Your Money is Trying to Tell You

Chapter 3 – Take a Lap on the Gerbil Wheel of Debt

Steve Rhode — Mon, 19 Sep 2011 13:06:46 +0000

From How to Get Out of Debt

Chapter 3 – Take a Lap on the Gerbil Wheel of Debt

Think of debt as that annoying squeak in the back seat that you hear as you drive alone in the car. The squeak distracts you from the beauty of the scenery, and before you know it, you are only worried about the squeak. I knew a guy that bought his dream car, a brand new Volvo, and was enjoying showing it off to everyone. About a week after he bought it, it was totaled. He was driving with the windows down, just enjoying the day, and a bee flew in the window. He was so focused on getting rid of the bee that he ran off the road and hit a bridge support post. He just lost focus on what was most important. The goodnews is that he survived without major injuries and the bee vanished. The bad news is that his insurance did not cover the entire new loan on his car and he was unable to buy another dream car.

“Being in debt is a state of mind, not an account balance.”

When you are in debt, you are mortgaging your future. What you are doing is promising to generate money in the future to pay off what you have in your hands today.

Too much debt means your future is locked down. It robs you of options and flexibility. It means that you become a slave to your creditors and have to work at some job, even if you hate it, to make enough money to pay off what you owe. If you wake up in the morning and you are thinking about how much you hate going to work, you’re clutched in the mouth of the monster of debt. You’ve got saliva dripping off your feet, and in a minute or two you are going down the gullet, never to be heard from again.

It doesn’t have to be that way. You can break free. It is possible for you to wake up almost every morning and look forward to the day with childish glee and anticipation. I’d say I feel that way most of the time because I love what I do and I’m thankful for any day I’m not dead. As far as I’m concerned, that’s a good day.

So what happens when you get deep in debt is you sacrifice your future. That’s all, nothing much. Now, not all debt is bad. If you love what you do and you make enough money to pay your bills and have a bunch of money leftover, it’s not such a drag on your life. However, if you are generally unhappy with yourself, your life, your reality, then debt can just be a new pair of cement slippers.

People are frequently worried about debt — whether they have too much or what is the “right” amount. They worry if they have financial problems, they hear about “good debt” and “bad debt” and don’t know the difference. I’ve developed this simple way to determine if money is a problem in your life…it’s just not that complicated. Here is a quick test to see if you are having financial problems.

“STEVEISM:” IF YOU THINK YOU HAVE A FINANCIAL PROBLEM, YOU DO

That goes for debt, too. If you think you have too much debt, well, you do.

“No man’s credit is as good as his money.” – Ed Howe

If you had to think about debt as something, would it be an anchor around your neck? The cement slippers I just mentioned? How about a gerbil? Stick with me here. Do you know what a gerbil is? It’s a small rodent about five inches long with hairless ears, large black eyes, pointed snout, short legs, clawed feet, light-colored fur and a long tail.

Sounds like a new character in the next Stephen King thriller, doesn’t it?

For some twisted reason, many kids keep gerbils as pets. They are much cuter than they sound and they kind of remind me of the Tribbles on that old Star Trek episode.

I had some gerbils as pets when I was but a young lad. They lived in an old aquarium, the one that leaked so it wasn’t any good for fish.

It was an accident that my gerbils were of opposite sex. Boy, did those things breed. I guess when you are caged up in an old 10-gallon aquarium all day long there isn’t much to do but chew everything you can and breed. They did both very well. Siskel and Ebert would have given them two thumbs up.

I got tired of them procreating all the time, so a friend suggested putting a gerbil wheel in the cage to keep them busy. It wasn’t enough of a distraction to keep them from breeding all the time but they now had something new to annoy the heck out of me.

A gerbil wheel is a cheap metal wheel that is mounted in a cheap metal frame and when they get on it and run, it just rotates around and around and around. They go nowhere fast. I’m not sure what the purpose is. Exercise? Distraction? To keep me up at night? Who knew gerbils are nocturnal? They wake up from napping all day and jump into the wheel just as you doze off to sleep. The wheel always seems to have a squeak and, of course they knock it over or it bangs against the glass all night. Squeak, bang, squeak, bang, squeak, bang.

I always wondered two things. First, would I get in trouble if I heaved the whole damn aquarium out the window, and two, don’t Fred and Ethel realize that the wheel just spins constantly but goes nowhere? I have to give them bonus points for dedication and creativity. Sometimes they would get that wheel banging and spinning so fast I thought either the side was going to bust out of the tank or they were going to make electricity.

Every once in a while they’d have a spat and both get on the wheel and try to run in opposite directions. That was interesting.

I tried to take the wheel out of the cage one night to stop the madness. I think one of them sunk their teeth deep into my flesh and took a huge chunk out of my hand as I reached for the wheel. Blood poured down my hand, ran down my arm and dripped off my elbow as I held my arm up and ran back to bed. At least that’s how I saw it as an 11-year-old. They probably just brushed against my hand. Anyway, sticking my hand in the cage in the middle of the night freaked me out, so I tried to keep late-night commando raids into the tank at a minimum.

The whole point about the gerbil wheel is that they found nothing wrong with running in place and going nowhere. They listened to the same glass banging and squeaking that I did; I know this because they have keen hearing. I’m sure they got very used to it. That was just their universe. They obviously enjoyed all of the running in place and going nowhere.

Credit and debt are a lot like a gerbil wheel for many people. No matter how much you make, you just keep making payments every month. We decide, or are trained early in life to expect that, as adults, we earn money and make payments. “What do you mean you don’t make payments each month? What the heck is wrong with you?”

A couple of times in life we wake up in a panic and realize we don’t have enough money. For most people those times are when we get married, the day before our child leaves for college and a week after we retire. But for the most part we are happy and content to keep earning and spending, earning and spending, earning and spending.

“Some people use one half of their ingenuity getting into debt, and the other half avoiding paying.” – George Prentice

Life becomes this comfortable hum of making money and never having enough. Can’t you picture a human-sized gerbil wheel with a huge sign stuck in the ground right in front of the wheel that says, “If you can touch this you will make good money.” Many people would run on that wheel all day long chasing the dream, stopping to earn a little money, spend some and then sleep. You know I’ve never quite figured out what “good money” is, but everybody seems to use the term. “I’ll be happy as soon as John lands this job.

We’ll be making good money then.” As far as I’m concerned, all the money I make is good.

STEP AWAY FROM THE WHEEL

Our consumer society is set up like a huge gerbil wheel. We are trained by our parents and environment to be good consumers when we grow up. Can we really be surprised that we do it so well or to excess? If you buy into that whole belief that you are what you own and that more is going to be enough, you will run and run and run your entire life and you will wind up in the same spot, just older, tired and still unhappy.

Here is my sage advice, “Step away from the wheel.” Can’t you picture the prosperity police pulling you over in a felony stop as you race down the road running in your gerbil wheel. “Mr. Rhode, put your hands in the air and step away from the wheel.” They’d force you to come to your senses, taking you away in handcuffs made of recycled credit cards. Platinum cuffs, please.

The perpetual cycle of debt will not make you a better person. The race for wealth will not make you happier. There are people who have 10 million dollars in the bank who don’t feel like they have enough. Enough will never be enough. Enough, already, of this enough stuff. Enough!

You are not what you make, you are not what you spend, you are not what you buy, you are not what you give, you are not your reflection and you are not the size of your pants. You are you and that can be pretty terrific if you let it.

“You hate your creditors because they make you live up to your end of the bargain.”

Your creditors are not trying to keep you enslaved on the gerbil wheel of debt. You do that all yourself. You constantly seek out more stuff. “If I only had that new outfit or golf bag, I’d be happy.” Yeh, right! Don’t you see it’s not the thing that you desire that will make you happier; purchasing the thing is just an escape from the way you feel inside.

Money isn’t your problem. You are your problem. But like most problems, if you apply a willingness to change the situation, good guidance and a plan, you can have a good chance at changing things up. You might try and fail. If you do, stop complaining and try again.

TEN THINGS YOU SHOULD DO AFTER YOU FAIL:

Take a break. Play a video game, read, listen to calming music, watch TV, go for a walk alone or do anything else you can, alone. Take a few minutes or hours to let the frustration die down a bit. You’ve probably been working hard or you’ve been distracted, and that could have contributed to your failure. The reason you need some quiet time rather than going to “twofer” night at the bar with your friends, is that you need to let all of those thoughts about the experience filter out of the crevices in your brain. You don’t need a distraction to mask what you just went through. Let it silently percolate.
Jot down or think about the factors that you think contributed to your failure.
Jot down or think about what you could have done to avoid those factors in the future.
Admit defeat. Stop pretending that you didn’t fail. You failed. Too bad, so sad. Move on. I’ve had too many clients over the years that insist on reliving their past mistakes over and over again. Let them go. The key is that they were mistakes and they were in the past.
Decide if you want to try and pursue that goal again. Was it worth it, or is the luster gone? Sometimes the moment has passed and it’s time to move on. “Next.”
Regroup. If you are going to try to achieve the same goal again, think about what additional resources or people you are going to need to help you. Identify what those resources are and gather them together. Before you move forward, consider what the new cost will be with the required time and materials. Is the goal worth the true cost of what it will take to achieve the end result?
Failure is only success masked in defeat. Some part of what you attempted was good. Figure out what that was and do that part again. No sense reinventing the wheel.
Admit that what you attempted was a failure, not you. You are not an idiot or stupid for failing. You are courageous for trying.
Remember that sometimes no matter how good the effort, the passion and desire, life just doesn’t play ball. Sometimes you win and sometimes you lose for no good reason. As the song goes, sometimes you’re the windshield; sometimes you’re the bug. Life is what it is.
Figure out what good can come from your failure. There is tremendous value in failing as long as you can analyze what went wrong. Don’t waste a perfectly good failure by trying to forget it. Learn from it. Both the recipe for Kentucky Fried Chicken and the light bulb were successes at the end of massive and repeated failures. And just think, today they actually make an oven that can cook chicken with light. If those inventors didn’t keep trying, imagine what we would be eating in the dark? Once you’ve analyzed that experience, let go of any negative baggage you are carrying from that past experience, just keep the good. Remember that the most important minute in your life is the one you are living right now. It’s the only real minute of your life. Unfortunately, we often let our past predict the future because we are stuck living in other minutes. They are no longer real. Let go. Live now.

“It doesn’t have to be perfect, just good enough.”

I’VE SEEN CREDITORS, AND THEY IS US

Creditors are, well, us. People who work for lenders as debt collectors are in the exact same boat you are in, they just have a different job. I remember one client who said she had been getting the same call from the same collector for months. The collector hadn’t been very nice in the past and when she called again, she dreaded the call. Finally, the client admitted to the collector that she was working with Myvesta and the collector stopped, paused and said, “I am too. Aren’t they great?” The whole relationship changed from that day forward.

Creditors have better memories than debtors.” –Ben Franklin

The only reason creditors keep providing us with the credit we so desperately want is that we crave it. Somehow we have to figure out a way to get off the gerbil wheel of debt. Until then, I think the person next door has a nicer wheel than yours. What are you going to do about it?

Chapter 4 – Why Money Doesn’t Make You Happy

Is Your Old Advanced Fee Debt Settlement Company Secretly About to Fail? What to do.

Steve Rhode — Tue, 08 Mar 2011 13:51:04 +0000

From How to Get Out of Debt

photo © 2008 J.B. Hill | more info (via: Wylio)Next month will mark the six month anniversary of the passage of the FTC telemarketing sales rules which changed the landscape in debt settlement sales.

As a consumer advocate I don’t think there is any doubt they TSR has had a fundamental and positive impact on the way debt settlement services are sold. The old advanced fee model where consumers spent most of the first six months of the program paying fees to the debt settlement company rather than settling their debts, is over. Nuked by the TSR.

The only remaining bastion of the old bad ways is the continued attorney model which is now under attack by Attorneys’ General in North Carolina and Illinois.

Unless old advanced fee companies have been able to quickly implement the lessons of settling debt quickly under the new model of ‘you don’t earn your money till you deliver the service,’ they will be hurting for income.

Before the TSR went into effect on October 27, 2010 the advanced fee companies had a big push to sell as many people as possible into the old advanced fee model. They did. But by now those front loaded fees have been mostly paid and in the next four to six weeks those legacy debt settlement companies will begin to sink or swim as the bulk of those old fees stop.

My concern is that under the old advanced fee model the companies took the bulk of their revenue in fees upfront before providing the service. Those funds were not escrowed to be taken as the services were delivered. So now, in the next few years when those clients will be demanding service, those companies will be underfunded to deliver. No new “fresh meat” will be enrolled to help continue what some called a Ponzi scheme of new sales to fund old clients services.

Debt settlement companies, when asked, are going to deny they are facing shrinking reserves or facing imminent closure so the best thing you can do is to become hypervigilant. And while I certainly don’t want to be a “the sky is falling” guy, I think you need to be on the alert for some early warning signs your company might be failing.

Warning Signs of Trouble

I would suggest you keep your eyes open for the following signs that may indicate your debt settlement company is facing tough times.

Familiar staff is no longer there. Indicates a downsizing.
Takes longer to get through by phone or get emails or messages answered. This can indicate a smaller staff is getting overwhelmed.
Monitor the companies BBB page and look for an increase in the number of complaints. More complaints mean an underlying fundamental problem is brewing.
Create a Google alert for the company name and monitor what is said about them online. Get an early warning what’s being said.

What to Do Right Now

Most importantly, right now, regardless if you think your debt settlement company may be in danger, you need to to the following:

If you have settled any debt with your creditors through the company, get copies of your settlement agreements from the debt settlement company.
Keep those copies in a safe place with your other important papers.
If the company fails you will need those papers in the future when the creditor says they never agreed to a settlement. It will happen and only the written agreement will prove that.
Make sure any funds you are paying the debt settlement company are being paid to a third-party escrow company and not the debt settlement company itself.

For those that enrolled with success fee companies, there is less to worry about. If the company fails the escrow funds held with a third-party company in an FDIC account, are safe. If they have not settled your debt yet you can switch to a new company and pick right back up again without much of a loss.

What to Do If Your Debt Settlement Company Fails

If your debt settlement company fails and you did pay advanced fees it is unlikely you will get much, if anything refunded to you. People in this postion often only have one avenue to turn to in this situation, bankruptcy.

Bankruptcy is the only legal process that provides consumers with protection from creditors, blocks lawsuits and prevents wage garnishments. If you have paid advanced fees to a debt settlement company and you are not prepared to start all over again to save money to settle your debts, bankruptcy is a logical path to follow. You can click here to find a local bankruptcy attorney.

If you are prepared to begin the process again; avoid attorney model debt settlement companies. Those companies will only take your fees in advance again and you may face the exact same unwanted outcome as regulators crack down on them. Instead look for a success fee model as practiced by member companies of the AACC.

@GetOutOfDebtGuy

Failure: The Secret to Success

Steve Rhode — Mon, 15 Mar 2010 00:43:40 +0000

From How to Get Out of Debt

Here is a nice movie from Honda about about the benefits of failure. Even though this is primarily about motorsports, many of the messages are still very true when it comes to dealing with all sorts of failure in life. And the key benefit of failure is to learn from the mistake and use that to make life better moving forward.

@GetOutOfDebtGuy

Ben Wants To Know, “Will I Ever Get My Life Back After Bankruptcy?”

Steve Rhode — Tue, 19 Jan 2010 19:36:15 +0000

From How to Get Out of Debt

Ben wrote in through the GetOutofDebt.org site and asked for help and advice.

“Dear Steve,

At times I feel like my life is over. This year I did something I never thought I’d ever do, I went bankrupt. I was raised to pay my bills and I’ve always done that, but last year my overtime go cut and we were just making it by and this year my regular hours go cut and we started to fall far behind.

I contacted one of those credit counseling groups and asked for help but the monthly payment they wanted was just out of my reach. We could not afford that and the truck payment. I spoke to a bankruptcy attorney and then we gathered up the money to go bankrupt.

Now that is over and I feel terrible that I went bankrupt. Will I ever have a financial future again?“

Dear Ben,

The answer is that you will have a financial future again and you life is not over.

Bankruptcy can make you feel like a complete failure and a big loser but the reality is that what ever brought you to the point of not being able to pay your bills, happened. It’s a lot like the farmer that plants this years crop but it does not come in because of a drought. The lack of rain doesn’t make the farmer a loser, it’s just unfortunate that water did not fall from the sky in sufficient quantities to make the crop grow into cash to repay his debts.

Sure, if you want to be narrow minded and a big dick you could make a claim that you just walked away from your debts and didn’t man-up to them, but honestly, you know that’s not the truth.

I’d love to see all the people that bitch and complain about people that go bankrupt, lose all their shit and then try to put on a happy face and bound joyfully through the day.

Bankruptcy is hard and painful but believe it or not, what you have done is probably more responsible that limping along for years to come.

Bankruptcy is a legal solution that exists to help people out from situations where no reasonable hope exists to resolve the debt problems at hand.

When faced with huge debts people often live from paycheck-to-paycheck just making it by. They cut out things like needed medications, medical care, dental visits, etc. They also take away any fun times for the kids, a cheap vacation and saving for retirement.

Basically they make the future less safe to make up for past financial mistakes. Honestly, when faced with a bad debt problem you are better off facing it honestly, being real about how long it will take you to recover and determining if years of just getting by are something that you can do. You’re also better off going and talking to a bankruptcy attorney and getting the facts before emotionally deciding that bankruptcy isn’t for you.

My thought is that people at times like these have a greater responsibility to make the future better for their families than to unreasonably try to repair the past. And when I say better, I don’t mean a life of luxury, no, I mean proper health and dental care, caring for the children, not punishing them for your financial misfortune, and creating a caring, loving and safe environment for the kids to grow up in.

Ben, you’ll be surprised that now that you have gone bankrupt, creditors will be lining up again to give you unsecured credit again. In fact you’ll want to get credit again so that your credit report and credit score don’t just suddenly end with “Ben’s Bankruptcy”. If you want to get credit in the future you’ll need to start replacing your current financial problems on your credit report with good credit.

One of the ways of doing this safely is to get a secured card that will report to the credit bureaus that you are paying the card off. You can get a secured card online here.

Just remember this, Bad Debt Happens To Good People.

Big Hug!

@GetOutOfDebtGuy

I Am About to Crash and Burn Big Time. – Nicholas

Steve Rhode — Fri, 08 Jan 2010 13:54:56 +0000

From How to Get Out of Debt

Nicholas

“Dear Steve,

So far, my wife and I are current every month on all of our bills, but we’ve been living with steadily deepening debt since we got married 8 years ago. We were students then, living on student loans. We went into debt for our wedding and haven’t had a positive net worth since. I studied hard, ignoring money mostly, because I figured my time was better spent working hard to get an education than working for $8/hour while studying. But was I ever wrong! As the story continues, we had one child. I went to medical school. We continued to get student loans even while using credit cards to make up for what we couldn’t borrow from student loans. Then we had another child. Six months into medical school I realized I could either have a happy, healthy family or a career in medicine, but not both. I chose family.

Since my original plan for gaining a livelihood was suddenly a non-reality, I had to scramble to make something of myself. I got a low-paying job researching at the local university, and made plans to start a business helping people.

Well, it took many months (actually three years) of hard effort while working full time to learn heads from tails in the business world and build a business plan I am confident in and excited to implement. But now I am looking at my finances and want some guidance. I am happy with my decision to quit medical school, but obviously not happy with the resulting debt! Here’s the breakdown:

Student Loans: $69,151 (in deferment until June 2010)
Loans from family: $27,690
Credit Card debt: $30,211

I make $40,500 a year at my job, minus business expenses which have averaged about $6,000 a year.

We got a loan for a house two years ago, mortgaged through a state program.

Our monthly living expenses have been $3,143 per month, but I am hopeful of budgeting down to $2,500 per month (this doesn’t count debt payments).

But in addition to living expenses, we have business expenses (which are variable), payments on credit cards and other debt payments (which are $1,010 per month minimum). So bottom line is I make $3,042 per month and spend $4,153. And my student loans haven’t even come into repayment yet! (they’ll be ~$400-$500 per month next June)

We’ve been charging expenses in order to have cash to pay credit card bills. All told, the result is an average of $1,111 deeper in debt every month. This is not a good situation. As I mentioned before, we haven’t missed a payment yet because we have been juggling money around.

I feel like a failure. I thought I could pull my jumbo jet out of its downward plunge but it looks like I’m about to crash and burn big time.

What plan of action would you suggest?

Should I ask for early inheritance from family? ($100,000 & no guarantee on this one!)

What can I do with student loan debt? Any way out of it?

How does bankruptcy affect my ability to start up a business?

We’d rather not lose our house. Will I necessarily lose my house if we go bankrupt?

Nicholas”

The Answer:

Dear Nicholas,

In one way you are a lucky man. It is said, and oh so true that we learn more from our failures than our successes. In your case, once you reach the other side of this financial tragedy you will be wise beyond your years. That’s what happened to me, my bankruptcy and financial failure became my greatest strength and gave me the experience and wisdom to help other people facing similar circumstances. Maybe that is what you might do as well?

I know you feel like a failure. It sucks. I felt the exact same way. But what I learned was that my feelings of failure were my feelings. Nobody else judged me as much as I judged myself. In essence, I created my own pain and that left me depressed and paralyzed.

Since you had an interest in medicine at one time, let me use a medical analogy. Let’s say you have a patient that presents with what turns out to be a terminal disease. No matter how hard you try, you are unable to save the patient and know they will die. Do you simply focus on your inability to have the tools and resources to make unreasonable miracles happen or do you continue to provide compassionate care to the end and know that you did the best you could? The right answer is that you put the needs of the patient before your own self-serving needs.

Your financial life right now has a terminal cancer. This cancer was exacerbated through a series of events that began with student loans and ended with using credit to get by. The cash advances and bill shifting are not a solution, they are a medication that masks the true underlying problem, the cancer and it’s spreading.

As a man and a father what I need for you to be most is to stand up, acknowledge the situation for what it is, be strong and take responsibility to address the issue in a way that provides the most care for your family to end this and move on.

Your family has leant you money because they care about you and want to help. But the reality is that all they did was enable your financial cancer and allow it to grow. Borrowing more from them or from an inheritance is not the solution here. The solution is bankruptcy.

At times like this you need to either increase your income, reduce your expenses, or a combination of both. From what you describe, increasing your income does not sound like a reasonable expectation. So that leaves us with legally reducing expenses, through bankruptcy.

This is going to be a two stage approach. Much like a two phase chemo to kill the cancer. The first phase is going to be addressing the debt. This is going to require bankruptcy. The second phase is going to be to address the student loans. Hopefully these are government backed loans and you might be eligible for the IBR, Income Based Repayment program to create a payment you can afford.

So here is your immediate treatment plan:

Find a local bankruptcy attorney you like. Call a bunch of offices and find one that seems communicative and nice.
Make an appointment for you are your wife to go in and meet the bankruptcy attorney. Don’t go with the intention of filing bankruptcy that day, go to ask questions and learn.
Talk to bankruptcy attorney about a game plan to address the debt.
Once you know what Chapter of bankruptcy you might file under then you can contact the student loan lender.
Go bankrupt and once it is discharged we can begin credit report therapy to make it better and get you in shape to get credit again.

Bankruptcy does not impact your ability to start a business except that if you have to personally guarantee debt for the business that might be a problem. But a successful business is not built on debt. Credit for a new business is an anchor around the neck. Build your business on a cash basis. That’s what I’ve always done. As you make money, plow it back into the business and grow it. If you do that you’ll be much more likely to be successful.

Please come back and update about your progress in the comments section to this question.

Big Hug!

@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

Fear and Loathing in Debt

Steve Rhode — Tue, 05 Jan 2010 23:00:34 +0000

From How to Get Out of Debt

Being in debt is not an emotional walk in the park and unless you know what it is like, you can’t feel the pain or suffering that goes with it.

People forget or don’t know what it is like to be in debt. No, not the kind of debt where you owe Bob a bit for spotting you for lunch. I’m talking about the type of debt when you wake up, realizing that you are in trouble and can’t afford to repay everything you owe on a monthly basis.

The fear and panic from this debt looming in front of you causes you to shutdown. It becomes hard to focus, you can’t sleep through the night, you can’t concentrate or to want to confront the situation or creditors. Dodging the collector calls is best for your fragile emotional state but that just exacerbates the underlying problem that you can’t afford to pay your bills.

Instead of addressing the situation you find yourself simply unable to cope with it. You know you should take proactive action to deal with the situation and instead you avoid it. But knowing and doing are two different things. The situation gets worse, you blame yourself, you are stupid and incompetent, you tell yourself. You begin to feel like a loser and a failure. Your self-esteem and self-worth begin to vanish and then they are gone.

Before you know it the avoidance is making the situation worse. The calls are not going away, instead they are escalating. The mailbox is filling up quicker with nasty letters and notices and since the credit cards have been maxed out, there is no more plastic available to help you go out to eat, go shopping to relax, or easily put food on the table.

You feel like you should be able to deal with the situation, but you can’t. People say it’s easy, they say it’s nothing but you know that’s not true. You know that even the slightest thing creates a bubbling stress inside of you. Your stomach churns, your neck is tense, and the headaches increase. Your stress surfaces and you are even less able to cope. You snap at others, you are either depressed or angry, you feel hopeless, alone and lost.

You know the tasks ahead to address the situation will be many but how can you face even one of them when you are just struggling to figure out what to wear today or just remember what you are supposed to do today.

Forget trying to implement some clever master plan to deal with your debt, hell, you just want to make it through enough of the day until you can slip back into bed, open the bottle, continue to contemplate killing yourself or figure out if people around you are better off if you were dead, you sit and watch television mindlessly or escape through some other means. You begin to hesitate to answer the phone when it rings, you start opening the mail less and less. Soon the phone goes unanswered completely and the mail stacks up, unopened, off to the side.

And the cycle continues in an every tightening spiral until you reach your breaking limit and you implode in tears and failure. And once you do that, and almost only then, can you move forward. It is as if you need to murder your past so you can birth a new future and a new reality. Shedding who you were and what was becomes like the process an insect goes through to shed an old skin.

The new skin looks different and you can live in it. It is colorful, the days get brighter and the future is so much better than the past. Before long you catch yourself laughing, remembering the laundry at the cleaners and making plans to do things with others.

It took too long but now you can look back on your pain, feel that pain, feel that sorrow, and be thankful for a new day. You are a new you.

There are those out here that understand your pain and the process. You are not alone. If you need help, contact me.

Steve

Mehdi is Looking For Credit Card Debt Help to Help Pay Debt

Steve Rhode — Sat, 26 Dec 2009 17:51:13 +0000

From How to Get Out of Debt

Mehdi

“Dear Steve,

I’m about $90,000 in credit card debt and can’t afford to pay them. I’m willing to pay what I can but the economy has really hurt my business.

What can I do to lower my monthly payments significantly?

Mehdi”

The Answer:

Dear Mehdi,

Sadly the reality is that you just simply might not be able to afford to continue to pay your debts or to continue your business.

I would argue that if your business has been relying upon the credit cards to help make ends meet, that it has not been profitable for a while now and that the ship is taking on more water than you are able to bail out, you are sinking.

The only two ways to deal with this situation, to stick with the nautical theme, is to plug the leak and begin to reduce the water level or abandon ship and swim for safety.

The cold truth is that your business may no longer be able to support you and bankruptcy might be in your future. While a credit counseling program might be able to allow you to go back to what your regular monthly payments were before you fell behind. It is unlikely that a debt management program will significantly reduce your monthly payments. If you want to check and see exactly what your payments would be in a credit counseling program, click here for credit counseling information.

Facing the truth of defeat is tough. It hurts. It’s hard to do. But rather than focus on the failure of things now beyond your control, it might be time to focus your energy and efforts into what you can do to make the future brighter.

While the old boat may have sunk, what can you now to do build a new and better boat?

Big Hug!

@GetOutOfDebtGuy

The Answer:

The 20 Greatest Myths About Credit and Debt

Steve Rhode — Tue, 22 Dec 2009 00:05:56 +0000

From How to Get Out of Debt

MYTH #1

My financial condition is so bad that my situation is hopeless.

REALITY

Although you may not be able to find the perfect solution, you probably have some choices about how to best resolve your situation. Open your mind and be realistic about your options.

MYTH #2

If I don’t use credit, I’ll never have anything.

REALITY

If you don’t use credit, you won’t have debt. Remember when people used to pay for purchases in cash? If you want something badly enough, save for it. It is much more rewarding to purchase something and own it outright than to create another liability that you owe.

MYTH #3

I must get out of financial trouble with zero negative marks on my credit history.

REALITY

Some people would sell their souls to have a stellar credit report. Why? If they have a negative mark on their credit report, would that prevent them from getting more unsecured credit? Maybe. Would that be so bad? Isn’t that how they got themselves into trouble in the first place?

Having a negative mark on your credit report does not mean you won’t be able to get credit. It won’t stop you from buying a house or car. Often, the most important factor in buying a home or car is not how spotless your credit is, but how much of a down payment you put down. Having a negative mark also does not mean you won’t be able to get a credit card. You can get a secured credit card, where you put down a deposit. There is less risk to the lender since he has the security of the deposit and, therefore, he is more lenient in his lending guidelines.

Many people who worry about their spotless credit records make poor financial choices, such as taking out a home equity loan that they can’t afford or taking a cash advance on their credit card(s) to make their monthly payments. These actions may delay negative marks on credit reports, but they wont solve financial troubles. If you’re having a tough time, do the best you can. If you fall a little behind, it’s possible you might have some problems with lenders in the future. However, you can send a 100-word statement to the credit bureau(s) explaining your situation. The statement will appear on your credit report, enabling future creditors to understand what happened to you and why you temporarily fell behind. However, keep in mind that this can also work against you. How? Negative information stays on your credit report for only seven years. There is no time limit for when the consumer statement will be removed.

MYTH #4

Credit is bad.

REALITY

Wrong. Credit can be used for many good and worthwhile purposes, such as buying a home. Credit cards are very convenient when making purchases as long as you’ve got the money to pay off the credit card bill. Credit is like many other things in life: when used incorrectly, it can hurt you.

MYTH #5

Credit card companies wouldn’t send me applications in the mail if I couldn’t afford it.

REALITY

Wrong. The credit card companies are simply making you an offer based on mailing lists or research they have performed.

It is your responsibility to determine if you can afford to accept their credit card offers.

MYTH #6

My credit card company is taking advantage of me by charging 25 percent interest.

REALITY

Were you forced to get a credit card from that particular bank? If you were unaware of the interest rate before you completed the application, you should have inquired.

By using the card, you accepted the bank terms, no matter what they were. If you don’t want to be charged a high interest rate, either don’t get the card or, when the bill comes, pay the entire balance within the grace period. Every credit card charges 0 percent when you pay the balance in full each month.

MYTH #7

Since I have no assets, the creditors can’t do anything if I don’t pay my bills.

REALITY

If you don’t pay your bills, creditors may sue you, obtain a judgment against you, then enforce that judgment by garnishing your wages or waiting until you have assets.

Chances are that you won’t be broke forever and creditors will wait for that day (while interest is building).

Although collection activity might currently be quiet, your account will most likely be sold to another agency and the collection calls will start again.

MYTH #8

If my debts get to be too much, I’ll just file bankruptcy.

REALITY

Bankruptcy is a very serious matter and should be entered with careful thought. It is a legal case filed with the bankruptcy court that is a matter of public record. Many people who filed bankruptcy wish they had tried other alternatives before filing. Find a local bankruptcy attorney to go in and discuss your situation with before you make up your mind for or against bankruptcy.

MYTH #9

Somewhere there is a magic solution to my money problems.

REALITY

Wrong. Sometimes, you really do run out of good options.

Unlike television or the movies, there is not always a perfect ending. However, doing something about your problems, no matter how unpleasant it may be, is better than doing nothing in the long run.

MYTH #10

I can wrap up all of my credit card debt into a home equity loan and my interest will be tax deductible.

REALITY
You have just placed your home at risk and could lose it if you fail to make your payments. Nobody ever plans not to be able to make payments. The reason the lender uses your home as collateral is so he can take it from you if you default on the loan. As for the tax deduction, who knows if the interest will be deductible for the life of the loan? Credit card interest used to be deductible but no longer is. Are you confident that home equity interest will always be deductible?

MYTH #11

My lender wouldn’t have approved the loan if I couldn’t afford it.

REALITY

Wrong. Some lenders are paid bonuses for lending you money up to and beyond your ability to repay. Ultimately, you are the only one to ensure that you do not get in over your head.

MYTH #12

All I need is for someone to give me a loan and that will solve my problems.

REALITY

Wake up! If you’re having financial problems, a loan is usually a quick fix to a larger problem. By getting a loan, you are putting yourself deeper in debt just to make yourself believe that your problem is under control. Debt consolidation loans are often more costly over the long run, even though your monthly payment might be lower. You could end up consolidating no-interest debts like utilities and medical bills and, once consolidated, you’ll end up paying interest. In addition, a consolidation loan usually requires you to put up some collateral, such as your home or vehicle. If you default on the loan, you could lose your property.

MYTH #13

It’s wrong for my lender to take my collateral or sue me if I fall behind.

REALITY

When you signed the contract stating that if you failed to repay the loan, the lender could take the collateral or sue you, did you think the lender was kidding? Isn’t that your signature on the contract?

MYTH #14

It’s okay if I take a cash advance to keep me from falling behind on my payments.

REALITY

Some people take cash advances on their credit cards to pay their other creditors ‚Äúon time.‚Äù It is better to accept a late payment than to borrow your way deeper into debt just to pay for bills that you can’t afford. What often happens is you put yourself so deep in debt that it is nearly impossible to improve your situation without significant negative marks being made on your credit report.

MYTH #15

I’ll never have money to retire.

REALITY

With that attitude you probably won’t. Most people simply give up because it is more fun to spend money than it is to save it. However, you can build a fortune starting with just a few dollars. The keys to financial success are continuity and time; the earlier you begin to invest, the more you will have when you retire. Don’t be concerned about where you are going to invest your money when you begin. Just start with a simple savings account. It doesn’t pay much in interest, but you can develop the habit of regularly investing your money (at least monthly) while you look around and decide where you want to invest the funds for the long haul. You can invest in mutual funds, individual stocks, treasury bills, bond funds or a host of other investment vehicles. Go to the public library or visit a local bookstore for books on investing your money.

MYTH #16

People that look wealthy are wealthy.

REALITY

People that look wealthy often have big bills that they can’t afford. They might be living in a fancy house and driving a fancy car, but sleeping on lawn chairs and avoiding the repo man.

MYTH #17

Everything is okay because I pay the minimum payment due each month.

REALITY

By just paying the minimum payment on a debt, you extend your payments for many years. If possible, send more than the minimum payment. If this isn’t possible, you are probably living close to the financial edge. What would happen if you were injured or sick and could not work? Would you be able to pay your bills if your spouse was suddenly out of work or if your company downsized and released you?

Do you have any assets or cash reserves that you could fall back on? Simply being able to live from paycheck to paycheck is not a sign of financial well-being.

MYTH #18

If I co-sign on a loan, the lender will never come after me.

REALITY

Wrong. You co-signed for the loan, which means you promised to repay the debt if the borrower couldn’t. When the borrower is unable to pay back the loan, you are on the hook. Unless you are prepared to repay the loan when the borrower defaults, you should never cosign a loan.

MYTH #19

I can solve all of my financial problems if I sign up for this fantastic work-at-home business opportunity I heard about.

REALITY

Possibly. However, most people invest their last few dollars into such an opportunity, hoping it will save them from financial misfortune. They usually don’t have enough business experience to be immediately successful. Once they invest their available funds getting into the program, they don’t have enough money to sufficiently operate the business. Don’t believe that you will be rich just because the person that told you about the opportunity appears to be doing well. That person probably has much larger bills than you do, and is trying to recruit as many people as possible into the program to keep himself from sinking.

If you have extra money to play with, then get involved and have a good time. But be prepared to lose both the time and money you invested. Do it because it’s fun and you really enjoy the people you work with, not because you are betting that the business will solve your problems.

MYTH #20

I’m a loser and a failure because I’m in financial trouble.

REALITY

You have to accept responsibility for your actions and remember that you did accept the credit with the promise of paying it back. But most families and our schools do a poor job of teaching financial responsibility. How many classes did you take while growing up that taught you how much credit you should accept? Maybe the truth is you made a mistake and got in over your head because you didn’t know better. If you can learn from this mistake, you are neither a loser nor a failure. Accept your setback, learn from it and move on.

@GetOutOfDebtGuy

I’m in Debt Because of Too Much Fish. – Michael

Steve Rhode — Wed, 17 Jun 2009 21:06:42 +0000

From How to Get Out of Debt

Michael

“Dear Steve,

I’ve had a hellish trip through misery and desperation the past few years. In 2006, I experienced a health condition and illness from heavy metals and mercury through extreme consumption of fish and seafood since beginning to eat them more frequently in 1997. In Jan 2007, I had to leave my established sales career because of the health issues. In Sep 2007, My wife abandoned and subsequently divorced me in Dec 2007 because of the job and health issues. In Nov 2007, I had to relocate back to GA and begin staying at my Mom’s apartment for support. I went into a financial meltdown due to the disastrous downturn in the economy and lost all equity in my house and was finally only able to sell it after 18 months and only for what I owed and the realtor commissions.I have struggled with employment prospects ever since leaving my career in Jan 2007.
Currently, in 2009, I’m still at my mother’s place and struggling to pay credit card bills and an IRS tax debt from defaulting on a 401k loan to pay part of my divorce settlement.

Outside of giving up and just throwing up my hands in complete and utter failure I’m not sure what to do. Since my employment prospects are tough now and I’ve been given a small unemployment assistance check, I’m thinking of declaring bankruptcy and eliminating the $37,000 in credit card debt currently at an average 7.5% rate. There will still be money owed to a family member and the IRS debt of $5400?

Is this a reasonable option for me to consider, I have about $82k in retirement accounts total.

Michael”

The Answer:

Dear Michael,

Your story certainly does not sound like a lot of fun to have lived through. I’m worried that this has been a downhill journey to this point and without a plan to change the situation and alter your path, tomorrow will look a lot like yesterday.

Getting back on your feet will help you tremendously. While not this week or this month, once we resolve the financial situation you will move out of Mom’s apartment at some point in the near future. And once you can see a light moving forward, your old drive for sales will slowly return as well. When every day feels dark and depressing, there is nothing to get excited for.

While you see whatever is to come next for you as an utter failure, I don’t see it that way. Often the hardest thing you can do is to accept responsibility for your situation and take action to change it. That is not the picture of a failure.

You’ve got a real big priority debt in the IRS, that debt isn’t going away, so what we need to do now is address the other debts in such a way that it can remove the cloud over your head, the weight on your shoulders, and leave you room to resolve the IRS debt and pursue success again.

Based on everything you’ve told me, there is no other reasonable solution other than going to talk to a bankruptcy attorney and discussing the elimination of your debts through bankruptcy.

Then you need to start your recovery in small steps. Go beat the bushes looking for a job, any job, I honestly don’t care what it is. Maybe you can get temp work. As part of your recovery here you need to get out and be busy.

As the financial situation is resolved with the bankruptcy and you start to bring some money in you will be able to start eliminating the IRS debt and that will make you feel really good.

As your optimism for tomorrow improves and you are feeling more confident about yourself and your future, then you will be able to return to a successful sales job.

If you follow this plan, it will work out just fine for you. I believe in you. Just stay away from the fish and sushi, promise?

Big Hug!

@GetOutOfDebtGuy

Joe Started His Business Using Credit Cards And Now He is in Trouble

Steve Rhode — Thu, 04 Dec 2008 15:47:00 +0000

From How to Get Out of Debt

“Dear Steve,

I had some bad luck in small business and had to use my credit cards and now I am about $50,000. in debt. I have very little income coming in right now and have about 3 months of cash left to pay the mortgage and monthly bills. I want to pay my bills,but I am or will start to have some hard times. What is your Answer?

What is the best way to handle it. I might have some money coming in with my job, but I having been waiting a long time for the companies to start up, so I can make sales. I am in the insurance business and things are real slow. Let me know what you think I should do?

Joe”

The Answer:

Dear Joe,

I stumbled as I read your question over your statement “had to use my credit cards” to help fund the business. Actually, you didn’t have to use them, that was your choice.

It could simply be possible that what you have worked hard to create is a business that will not be able to generate sufficient income within the time available. The business might just be a failure.

This is a very difficult time to start a business for some, and a perfect time for others. What’s the difference and why do some succeed when others fail? There are lots of reason why businesses succeed or fail but a large amount of it is luck.

What you can do to give yourself the best chance of success as you start a business that has a long timeline before it will pay off is to avoid all debt so the startup does not create obligations before it generates income. And if you do decide to launch anyway, then make sure you have six to twelve months of cash to sustain it without any income at all. It is just so sad to watch people sacrifice everything, put all their money into a new business and have it fold within six months.

Luckily you’ve recognized the reality of your cash situation right now and you’ll need to prioritize the cash you’ve got left and pay your mortgage, utilities, food and transportation first. Without any money coming in, any money you send out now towards your unsecured creditors and credit card companies is just going to accelerate your speed towards foreclosure.

The logical course of action here is to secure employment or income to bring money in. If you can do that then we can start to talk about solutions like a debt management program to get you some breathing room possibly to get you back on your feet. Otherwise, without expense reduction and no income, bankruptcy is probably in your future.

Bottom line, stop funding startup business, search for income, prioritize payments to only the most important creditors and obligations. Do that first and then give me an update.

Big Hug!

@GetOutOfDebtGuy

The Answer:

Therapist: Financial Infidelity Can End Couples

Steve Rhode — Thu, 30 Oct 2008 17:26:36 +0000

From How to Get Out of Debt

This reminded me of my article on Sexually Transmitted Debt (STD). What You Need to Know. that I wrote earlier this year.

While most people know that infidelity in a relationship can cause it to end, one Valley therapist said that financial infidelity can be just as dangerous.

What is financial infidelity? According to family and marriage therapist Donna Wilburn, it is when partners lie or keep secrets from one another when it comes to money. It can be anything from keeping credit card debt a secret to hiding money from a spouse.

“I’d say finances and financial stress is one of the number one things couples argue about,” Wilburn said. “The whole idea of hiding money — of keeping a secret in a relationship — is a sign the relationship is unhealthy.”

In these tough economic times, money is on everyone’s mind and dishonesty when it comes to finances can be a catalyst for failure to any relationship, Wilburn said.

Therapist: Financial Infidelity Can End Couples Fox5 KVVU, NV - 41 minutes ago It can be anything from keeping credit card debt a secret to hiding money from a spouse. "I'd say finances and financial stress is one of the number one …

Click Here for totally free debt help, advice and answers.

Read the rest here: Therapist: Financial Infidelity Can End Couples

I’m Afraid I’m Going To Get Laid Off. How Will I Pay My Bills? What Will I Do?

Steve Rhode — Fri, 24 Oct 2008 17:16:57 +0000

From How to Get Out of Debt

“Dear Steve,

When I read the news I get so afraid that I will get laidoff. Business at work seems to be slow and I find myself surfing the internet more at work and reading more of these stories about the pink slips that are coming.

I’ve got bills and credit card debt to payoff and a wife and kids to care for and I’m afraid. What should I do, or maybe, what can I do now?

James”

The Answer:

Dear James,

I’m afraid you are right, the news is not good about jobs in the near future. As an employer even I am not immune from facing those same pressures and potentially reducing staff. Even sites like one of my favorites, The Consumerist, has just laid off some really good writers.

Rather than blow smoke up your ass and give you hollow good news I’d like to give you some honest and from the heart advice that you can use.

Losing Your Job Does Not Mean You Suck – When pink slips and job loss notices are distributed it does not mean that you are not a valuable member of the team. In my past I had to once layoff 18 members of a 70 person team. It was horrible at it and cried each time I had to do it. Maybe that shows a weakness in me, I’m not sure. Regardless, it was painful for all concerned.
As an employer it was not a decision that I took lightly. I fully realized that these were the lives of good people that were going to be hurt by the failure of my business to produce enough income to support them. I was deeply hurt that I had failed them by not finding my magic wand to save them.

Decisions to let people go were based on a number of factors that had nothing to do with who they were as individuals. Sometimes business is just business and what had to happen to save the remaining jobs.

I guess what I’m trying to say here is that if you’ve been working hard, contributing ideas and help to the company, and doing your best, you could still lose your job but that it not a negative reflection about you.

Layoff decisions in big companies come from slash and burn policies to reduce a specific head count or certain departments. Again, that is not personal it is personnel.

You might find my America’s Job Bank page helpful for looking for a new position.
Let’s Assume That You Are Going To Lose Your Job And Start Implementing a Plan – It is always better to plan for the worst and enjoy the best, if that is what fate is going to give you. And so much that life has to offer is fate or divine intervention or just random luck.
Even before you get notice I think you should consider the following advice now.
1. Talk Honestly With Your Family Now – Even if you’ve always maintained a facade as a strong provider it is time to sit down with your spouse and lay out the facts. Once the two of you are on the same page then it is time to sit down with the children and be open about the facts now. Let them know what your concerns and worries are. Let them know that there might have to be cuts and ask them to help where they can to reduce expenses. Keep the entire family in the loop so there are no bombshell surprises.
2. Don’t Buy Another New Thing On Credit – If you might find yourself in a hole, you can stop digging it deeper right now. You can use your credit cards to make a purchase but make sure you are paying for what you buy in full each month. If things get really bad and bankruptcy might be in your future, which it might, then recent credit purchases can pose a problem.
3. Cut Where You Can But Don’t Eliminate – It is important to prepare for an eventually but you don’t have to run for the bunker right now. If the family is used to going out to eat twice a week, trim it back to once a week and then maybe once every other week. You don’t need to cut out things that bring happiness completely.
4. When You Face Fear, Bring Hope – You are facing uncertain times and these moments make us face our fears. Actually they just make us focus on our fears and make us feel desperate. The reality is that anyone can lose their job at anytime, and for any reason. Even in your best days there was always a possibility that you could be unemployed. You would have been hopeful then if that had happened, be hopeful now.
5. Evaluate Most Every Purchase – As you are your wife go forward from this point, spend money wisely and thoughtfully. Start asking yourself why you are buying this thing and if you really need it. Here are some helpful pre-purchase questions to ask yourself, in your head. If you ask them to yourself out loud in line, people will stare.
  Pre-Purchase Checklist
  - I feel like I really want this. Why?
  - What does this thing represent to me?
  - Once I buy this, how will it make me feel?
  - If I don’t buy this, how will it make me feel?
  (This list is from page 122 of my book The Path to Happiness and Wealth which you can download for free as my gift to you.)
  If you find that you are purchasing an item because it makes you feel better, you deserve it or it reduces your stress; put it back. Now is not the time for medicating yourself with shopping. Now is the time to be a good steward with what money you do have.
  
  That means that if you feel like you must buy a name brand of a particular item that is more expensive and you have not evaluated the less expensive alternative, do it now. Just because you have always bought the name brand of an item does not mean that the extra expense is justified, it primarily means that you have associated a benefit from purchasing that product.
  
  Not that long ago I travelled all over doing some price comparisons and found where I could buy the things we normally use for the least amount of money. You might want to do this also to find out where your money buys the most. Read the article.
6. Let’s Assume That You Will Not Be Able To Find a Replacement Job – It is better to deal with the issues of not being able to find a job that pays the same amount as you are making, now.
  There are certain realities to go along with that situation. If you do not have enough income to support your current lifestyle, you are going to have to layoff part of your current lifestyle. I guess that’s what trickle down economics is all about, at least in down times.
  
  You might have to go bankrupt, talk to your mortgage lender about a loan modification, buy generic instead of name brand, drive the family car till is falls apart, etc. All of these things are a reality.
What Happens When You Lose Your Job – If you’ve been working this plan then you will be better prepared to deal with the pain and misfortunate of losing your income. At least by thinking about these things in advance you will have better prepared yourself for the eventualities. The most likely solutions when you are not bringing in enough money are:
1. Only pay the essential bills; food, shelter, clothing, utilities, etc. You will notice that credit cards and other unsecured debts are not on that list.
2. Look at credit counseling and see if that is a payment you can afford with your new limited income.
3. Talk to a bankruptcy attorney and find out if bankruptcy is right for you. Many bankruptcy lawyers offer a free bankruptcy review.
4. Reduce your lifestyle. Move to cheaper housing, rent if you have to. Trim back on expenses that you can’t pay for in cash. Get out of your car lease or refinance your car loan to lower your transportation costs.
5. Think of your savings account money as water that can’t replaced in a drought. Consume it as carefully and wisely as you can. When it’s gone, it’s gone.

As always, I’m here for you when you need my help. I wish I was there to give you a big hug, goodness knows you sound as if you could use one. We don’t have to tell anybody.

Steve

The Answer:

Anne Writes In “I Am Going Crazy With Worry”

Steve Rhode — Fri, 05 Sep 2008 15:24:05 +0000

From How to Get Out of Debt

Anne wrote me through the GetOutofDebt.org site and asked for help. You can write me also and ask for help.

Anne says “I have a large debt load and I am unable to make the payments. I have been on short term disability for eight weeks which has made an already difficult time even worse.

Some of the creditors have already sent the debt to collection agencies. I own my own home and at this point I have only kept up the mortgage payment and utilities. I am going crazy with worry. I have not paid up my oil bill from last winter and will soon need oil. There is little equity in the house so remortgaging is not an option. I have it up for sale.

Please tell me if there is any hope of getting out of this mess without going bankrupt.”

Anne,

I wish I was there to wrap my arms around you and give you a big bear hug. These are difficult times and now with your heavy financial worries, it makes the entire situation so stressful. But don’t worry, you are a good person, just in a bad situation. You are not a failure.

Your situation sounds so common, an unexpected reduction in income leads to a snowball of growing debt that is or seems unserviceable. In your case your medical situation has thrown you under the bus but that’s not what really caused the tipping point, is it?

Your situation has been brewing for some time, especially with a not fully paid oil bill from last winter. I suspect that you’ve been just making ends meet before the recent disability. The disability just amplified the fact that you had no financial reserves to weather the debt storm. That doesn’t make you a bad person, just more typical than people believe.

Seeing how there is little equity in the house, isn’t a bad thing in this situation. If there was more equity in the home and you did borrow against it, the chances are that it would just stall dealing with the underlying issues.

My priorities for you are a roof over your head and oil in the furnace first. While bankruptcy won’t make magic money appear in your bank account now, it will when you get back to work and off disability. That money you can use to get the bill paid up and prepare to face a cold and expensive winter. Fuel bills will be much higher this year, than last.

Some might offer advice that this is a short term event and that you will emerge out of in your disability at some point in the future and that then you can regroup and deal with the past due debt. You could but my honest and from the heart opinion would be that would be a waste of time and do nothing to reduce your fear and stress levels.

Worry and stress do nothing to help you recover from your disability. The fear of debt and uncertainty of what tomorrow will bring can create an emotional situation that is almost unbearable. And for some, it is unbearable, and they kill themselves.

There is little anyone can say to snap you out of the mental anguish of debt worry. The fact that you are worrying about it just tells me that is the type of person that you are. Some internalize more than others. Some never let issues like this worry them and I wish I was one of those people at times in my life.

The only thing that will stop the collection agencies, protect your house, and eliminate the worry is going to be nothing less than bankruptcy. Based on what you have told me and what my years of experience tell me, bankruptcy is the most logical solution that will address all of your issues and allow you the best chance of recovery.

But don’t decide right now that bankruptcy is for you, go talk to a bankruptcy attorney in your area. You can find a bankruptcy lawyer here.

Bankruptcy comes with baggage as well. It is the emotional baggage that “I failed”. I lived through that. I felt like an utter failure when I went bankrupt but don’t let those emotions stand in your way of doing the responsible thing here, going bankrupt.

Feelings of failure will not keep the roof over your head nor will they fire the furnace this winter. Based on your situation, bankruptcy is the most responsible path to follow at the moment. If you feel you need to go back and repay your creditors after bankruptcy, you can.

Big Hug!

@GetOutOfDebtGuy

How to Get Out of Debt With the Get Out of Debt Guy » failure

Chapter 1 – I Got Hit in the Head With a Baseball and I Saw it Coming

TABLE OF CONTENTS

Chapter 1 – I Got Hit in the Head With a Baseball and I Saw it Coming

LET’S DIG IN

“If you’re not in the game, you’re in the stands on your behind.”

“The constant pursuit of something always leaves you pursuing, never arriving.”

WHAT CAN YOU TEACH YOURSELF?

Steve’s Eight Cheap and Easy Steps For Stressed Out People Who Can’t Relax

Steve’s Four Step Emergency “I Can’t Take It Anymore, I’m Going To Explode Right Now” Relaxation Exercise

Next

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Chapter 3 – Take a Lap on the Gerbil Wheel of Debt

TABLE OF CONTENTS

Chapter 3 – Take a Lap on the Gerbil Wheel of Debt

“Being in debt is a state of mind, not an account balance.”

“STEVEISM:” IF YOU THINK YOU HAVE A FINANCIAL PROBLEM, YOU DO

“No man’s credit is as good as his money.” – Ed Howe

“Some people use one half of their ingenuity getting into debt, and the other half avoiding paying.” – George Prentice

STEP AWAY FROM THE WHEEL

“You hate your creditors because they make you live up to your end of the bargain.”

TEN THINGS YOU SHOULD DO AFTER YOU FAIL:

“It doesn’t have to be perfect, just good enough.”

I’VE SEEN CREDITORS, AND THEY IS US

Creditors have better memories than debtors.” –Ben Franklin

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Failure: The Secret to Success

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