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

Gambler Debt Soaring to Crazy Heights and Climbing. Blamed on a Hopeless Economy.

Steve Rhode — Tue, 17 Jan 2012 03:33:49 +0000

In Wisconsin a gambling addiction hotline has seen a substantial increase in the amount of debt gamblers are carrying.

The average reported gambling debt in 2011 was more than $157,000, a huge increase over the average debt in 2010.

The Executive of the Wisconsin Council on Problem Gambling said that more people are maxing-out credit cards, getting short-term loans, or siphoning money off of family and friends to fuel this gambling habit. Anyone really surprised over that?

A down economy fuels gambling debt as more people feel frustrated, desperate, or hoping for a financial miracle. What the heck, put it all on red. We’ve got nothing to lose.

@GetOutOfDebtGuy

I Was Not a Compulsive Shopper. I Was a Day Trader. – John

Steve Rhode — Thu, 30 Sep 2010 20:24:11 +0000

From How to Get Out of Debt

“Dear Steve,

I’m currently having two debt settlements going on between two cards totalling $14,000. Actually, I had three credit cards when I started the settlement, with a total debt of $19,000. One was settled so far with a balance of $5,500 being settled for $1,700. Still waiting on the other two, but while I’m waiting my credit score is dropping, and my credit limits on my remaing cards have been dropped by as much as 90%.

Not that it matters, but I didn’t get this far in debt by compulsive shopping, about 70% of the debt came from credit I was using to meet minimum margin requirements for day trading, the minimum being $25,000.

I was in when the big crash in September hit, and it was even worse for me because the money I lost was the credit cards money. Needless to say I will never day trade again!

But now I’m worried about 1099 forms next year, where will I get the money? I go to H & R Block, do they give loans to pay off the 1099 taxes say if it was about $6,000? I read your article about govermet bail outs for indivduals being a lie, but is there any program out there like grants to help individuals pay off credit card debt? I believe debt settlements are better then going bankrupt, bought the amount I may owe on 1099s worries me.

John”

The Answer:

Dear John,

Wow, great question with a number of interesting components.

I’d like to tackle this issue about compulsive shopping and day trading. Both are more similar than you would think. In my experience, a big segment of compulsive spenders shop for the excitement and the rush or good feeling it gives them. Day trading can stimulate some of the same excitement needs in our brains and lead us to rationalize behavior that can lead us just as deep, in debt.

Your debt is not the root of your problem, it is the symptom. The root problem was that you got involved in a highly speculative endeavor. It is very similar to the gambling position that you should never gamble with borrowed money, or money that you are not prepared to lose. And yes, gambling leads to similar brain chemistry, involving dopamine, and activity outside of conscious awareness that leads us down the debt path to destructive financial actions.

I can hear you now, brain chemistry, right! Consider this, day trading, the unexpected sale, or the slot machine unexpectedly paying out, can all trigger the rush of dopamine in our brains that some find addictive and are strongly drawn to. We are subconsciously drawn towards the activity that makes us feel good, even though it is not logical.

In your case, the use of borrowed money from credit cards to pledge as collateral for a speculative stock trading endeavor was more than likely going to fail from the beginning, risky, and not a logical course of action. But I bet it was stimulating and fun when it was going well.

I’m afraid that your bargaining logic is still leading you down an illogical path. H&R Block gives refund anticipation loans based on the money you will get back from the IRS. You are expecting a bill to pay instead. They are not going to loan you money to pay a bill you already can’t afford with money you are not getting back.

Again, I think your decision to not look at bankruptcy is fueled by your emotional brain, rather than your logical brain. To discount bankruptcy as a legal tool to deal with your debt is illogical. Debt settlement can lead to big tax bills on the forgiven debt, bankruptcy does not. So, I’m at a loss, in your situation, to understand how settling your debts to face a tax bill you can’t afford is a better outcome.

I don’t think you need for me to tell you more about bankruptcy. I think you owe it to yourself to get the facts by going and meeting with a local bankruptcy attorney. Most offer a free bankruptcy consultation appointment so you can get all your questions answered. Go do that and then come back and share what you learned and let’s then take this to the next step.

Big Hug!

@GetOutOfDebtGuy

What to Do When Your In Debt Because of Gambling

Steve Rhode — Mon, 20 Sep 2010 20:15:53 +0000

From How to Get Out of Debt

If you’ve found yourself in debt because of gambling the worst thing you can possibly do is run towards a debt relief solution first. Before we begin to worry about getting out of debt the first step is to seek help and assistance for the underlying issue first, the gambling. If you don’t then you’ll wind up like most people, gambling again and racking up even more debt before long.

I know, right about now you are saying that you’ll never gamble again, but unless you seek help for the disease you are suffering from, the odds of you relapsing are very, very high.

The Hurdle

The chasm you need to cross to deal with your gambling is not to enter a debt program first but to be honest with yourself and those around you that you have a problem and require help.

Assistance for gambling problems can take many forms. You might want to find a local counselor that can provide expert assistance or you may want to visit a local and Gamblers Anonymous meeting. You can find one here. You can also visit the National Council on Problem Gambling for additional resources and a hotline you can call.

Once You Cross the Hurdle

Once you’re in treatment for your gambling behavior then we can worry about which approach to resolve your debt is most appropriate for you in your situation. Do not enroll in any debt relief program until you have sought help for the underlying gambling addiction or issue first. I want to see you succeed, not fail.

@GetOutOfDebtGuy

Steve Writes In “I Want to Cash Out My 401(k) And Pay Off Debt.”

Steve Rhode — Wed, 30 Dec 2009 20:10:07 +0000

From How to Get Out of Debt

Steve wrote me through the GetOutOfDebt.org site to ask his question below. You can too!

“Dear Steve,

I currently make $46,000.00 per year with no benefits. My wife’s income is $19,800.00 per year. Three years ago her income was $35,000.00 per year.

We have racked up about $20,000.00 in credit card debt and have a car loan of which the pay off is $15,199.00. Our 5 year old home is appraised at $158,400.00 and we owe $120,000.00 on it. No other debt. We have a small 401k of $39,550.00 and am losing between $200.00 and $500.00 a month on. We are 59 years old.

I want to cash our 401 in and pay off the credit cards and what I can of the car. We would start paying back out retirement at $600.00 per month.”

Dear Steve,

One of the key factors here is that you purchased your home and based your expenses on what your lives were like five years ago. Apparently two years latter there was a change in income for your wife and it was at that time that things probably begin to silently slip and the credit card debt started to increase to help make ends meet.

The 401(k) plan feels like your cash sitting in the bank and at a time of stock market upheaval watching the value slowly decline is painful, for sure. But the stock market will rebound over time and those funds will go back up.

If you tap those funds now you would probably have to pay a penalty of 10% of the value of the funds on top of your normal income tax rate. That means that you could cash out your retirement fund right now and walk away with around $26,000, losing around $13,500 to taxes and penalties.

With that $26,000 you should probably pay off your car loan first and then half of your credit card debt. While you say it is possible, I remain skeptical that you would be able to start saving $600 a month after that.

Depending on how much your car payment is, your credit card minimums are probably around $400 a month. That might reduce your expenses by around $850 a month. That little bit of breathing room might just be enough to help you make it from month to month but if you can’t make your monthly contribution back into the retirement account you could wind up in worse shape.

So while the plan is to put $600 a month back into the retirement plan, in six years when you reach 65 you’ll have about $43,200 in your 401(k), more or less.

Now, all of that being said, it might be beneficial for you to cash out your retirement plan as long as you retire the car debt, half of the credit card debt, faithfully add the funds back into your retirement account and don’t suffer any future reduction in income.

It’s a gamble but really only you can decide if you want to take the risk.

Big Hug!

@GetOutOfDebtGuy

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

Gambler Debt Soaring to Crazy Heights and Climbing. Blamed on a Hopeless Economy.

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I Was Not a Compulsive Shopper. I Was a Day Trader. – John

The Answer:

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What to Do When Your In Debt Because of Gambling

The Hurdle

Once You Cross the Hurdle

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Steve Writes In “I Want to Cash Out My 401(k) And Pay Off Debt.”

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