New credit card statistics that were just released confirm that we are going deeper and deeper in debt. Average credit card balance is now $5,729 with the delinquency rate of 1.21% which is up 11% from last quarter (FOX News March 12, 2009).

With the recent layoffs this is grim news for just about everyone. Especially Andre:

Pay bonuses to executives, but lay off Andre!

Banks are paying bonuses to the same people that got them into this mess and laying off thousands of workers. Speak up about this nonsense! If these companies are bankrupt, they should file bankruptcy under chapter 11 and get rid of the management.

If you have been affected by the latest economic events, write me and let me know what are your thoughts and how you are dealing with your situation!

You know you set the example for your kids to follow. There is no secret. They will do as you do and not as you say. It really does not matter what you say, it only matters what kind of example you set. If you are in debt, your kids are likely to follow in your footsteps. Do everyone the favor (maybe not the banks) and pay off your debt.

Changing the debt mindset is the hardest thing in the world. You can’t just reverse it on a dime. It takes time. And it’s the hardest in the beginning. But if there is one piece of advice I can give you when it comes to paying off debt is a tested and true quote from Elizabeth Smith:

Begin somewhere. You cannot build a reputation on what you intend to do.
– Elizabeth Smith

You may not think about your reputation with your family but you know it exists. Whatever you feel inside about yourself is what your family thinks about you, either secretly or openly. But there is a way out of that rat hole and it is by committing to a goal and sticking to it.

And one of the best goals to commit to is to pay off your debt. You will feel better about yourself. You will set an example for others. You will build up your reputation. It is a win-win-win, so as Elisabeth says, begin somewhere.

You can put your name and email in the box on the right to stay in touch and get the support you need to start paying off your debt.

On May 6, 1932, with stocks having plummeted 85 percent from their 1929 high, Dean G. Witter, founder of Dean Witter - a famous stock brokerage then and known today as Morgan Stanley, issued the following memo to its clients:

“There are only two premises which are tenable as to the future. Either we are going to have chaos or else recovery. The former theory is foolish. If chaos ensues nothing will maintain value; neither bonds nor stocks nor bank deposits nor gold will remain valuable. Real estate will be a worthless asset because titles will be insecure. No policy can be based upon this impossible contingency. Policy must therefore be predicated upon the theory of recovery. The present is not the first depression; it may be the worst, but just as surely as conditions have righted themselves in the past and have gradually readjusted to normal, so this will again occur. The only uncertainty is when it will occur…I wish to say emphatically that in a few years present prices will appear as ridiculously low as 1929 values appear fantastically high.

Some people say they want to wait for a clearer view of the future. But when the future is again clear, the present bargains will have vanished. In fact, does anyone think that today’s prices will prevail once full confidence has been restored?”

– Dean Witter, May 1932

Did you know that Thomas Jefferson, widely considered a genius & the smartest of all U.S. Presidents, filed bankruptcy multiple times? It’s not surprising then that people file bankruptcy as a viable vehicle to get out of bad debts.

Filing for bankruptcy means that your debts - only those you filed for - are forgiven. It does not mean you own nobody anything, it just means you would not have to pay your existing creditors any more.

The one thing you would have to pay is taxes! The IRS considers forgiven debt to be INCOME. So, if one settles $30,000 of debt for $17,000, then they’ll OWE TAXES on the $13,000 that was forgiven. It is a good idea to keep money for taxes!

Once you are in debt and start falling behind, you have three options:

• Balance your budget
• Settle your debt
• File bankruptcy

Note that the banks do not actually want you to go bankrupt but want to keep you in debt and paying interest. They loose the interest you pay them every month if you declare bankruptcy. That option is the last resort for you, and definitely the last resort for the bank as well.

We will talk more about each of the three debt relief options in the coming posts.

Got an excellent quote for you today that is so true not only when paying off credit cards but in case you need to pay off mortgage or loan. As a matter of fact, it can be applied to many other areas in life:

The two most powerful warriors are patience and time.
– Leo Tolstoy

As the old adage goes, Rome was not built in a day. And neither was your debt most likely. So don’t expect it to disappear in a day either.

Paying off credit card is simple, but not easy. Much like loosing weight. Everyone knows how to loose weight - eat well and exercise. The concept is simple, but not easy.

But most people fail to loose weight much like they fail to pay off credit card. In theory, it’s simple - spend less than you make and apply the difference to the credit card balance. But how many people actually do it?

Your business is your income. If you’re having trouble staying afloat in these troubled economic times and you are in the sales business, there is a way to help your business make it through the rough times.

The concept is called Credit Card Factoring: you take a loan to keep your business alive and in turn you agree to pay a percentage of future credit card sales back to the company that loaned you the money.

This scenario can work if you are currently in dire straights but know that you can recover if given just a little more time. The interest rates are much higher than a traditional bank loan, so it is definitely not a first choice, but is an option if you find yourself with limited choices for funding from other sources.

As with any type of loan, this one has its pros and cons and should be considered carefully before you enter into any agreement. it’s your business, whether it be web-based or a brick and mortar operation. We’re all feeling the economic crunch. Weather what you can, resort to loans as a last resort. This is simply one more tool at your disposal.

Balance transfers and introductory rates can make it very worthwhile to shop around and be choosy about the financial products you purchase. If you are carrying a balance on your credit card, you can get another card that has a low introductory interest rate and transfer the balance from your old credit card to the new credit card.

Be careful about the time line for introductory rates. The low introductory interest rate does not last forever. Most cards have a 6 month introductory rate. Some have 12 months. After this time the rates return to normal, which, in most cases is close to 20%.

Another easy slip up that will fast track you to the regular rate is a missed payment. Even one missed or late payment on your new credit card can be the basis for eliminating your introductory low period.

You should also be careful about adjustable rate programs, which can vary the interest rate significantly. In these programs, the interest rate is tied to the prime rate which is dictated by the government. If the interest rates are rising, this can be very costly and eventually put you over the top.

Most people will tell you to shop around for the best rate. Whether you are looking for a loan, a mortgage, a credit card or some other financial product, it’s wise to shop around. This is a good advice, for most part.

But how you do it matters, and it matters a lot.

If you have a good credit history you could have some negotiating power and have financial institutions clamoring for your mortgage or credit card business. If you don’t, looking around for the best rate can destroy your credit even further.

It’s a double edged sword: every credit inquiry lowers your score but in order to get the best rate you have to shop around. If your credit score can handle it, don’t hesitate to shop around. Once you are approved…

Don’t take the first offer you get!

The first offer of a loan, mortgage or credit card doesn’t have to be one you jump on. Don’t hesitate to see how competitors to your bank or financial institution fare in terms of savings. Once you have a couple of offers, take it to each lender and try and negotiate an even better rate or terms!

But always remember: never get in over your head!

It’s easy to blame the government, but in this case they are certainly not the innocent bystander. Take a look at the movie below and tell me what you think about it…

How did we get into this “mortgage” mess anyways?

The real question is how do we get out of it? How do we get rid of the monster mortgage, renegotiate with the bank and not declare the bankruptcy in the process?