Credit All Around Us

 "Would you like to open a store card with us to save 15% on today's purchase?" Sound Familiar? According to the Fair Isaac Corporation the average American has nine to ten credit cards open, bet you didn't know there were that many slots in a wallet! Americans carry about $8,000 dollars in debt. Surprise i know. Most of which is accumulated through high interest cards such as the store cards opened on impulse to save that 15%. Next time you think of saying yes to this common question,think again, the 15% you save is not worth it!

*Here are some Examples of Store Card Interest Rates*
American Eagle Credit Card: 24.99%
JCPenny Store Card: 26.99%
Von-Mour: Surprisingly no interest rate!
Limited:24.99%
Express:24.99%
Victoria's Seceret:N/A
Target: 22.5%
Dillard's:22.99%
Office Depo: 27.99%

Keeping up With the...Wait Who?

Class Matters

Keeping up with the Jones has turned into Keeping up with the Kardahsians. This is what society has come to.  According to Professor Schor, in the last 30 years, people have become increasingly isolated from their neighbors, a barrage of magazines and television shows celebrating the toys and totems of the rich has fostered a whole new level of desire across class groups. A "horizontal desire," coveting a neighbor's goods, has been replaced by a "vertical desire," coveting the goods of the rich and the powerful seen on television. The old system was Keeping up with the Jones; the new is Keeping up with the Kardashsians.

Know Your Credit Score

Everyone has one, but not everyone knows it. Some are bad and some are good. Some are old and some are new. Each is based on the individuals’ financial habits and trends. Can you guess what I am describing? If you guessed a FICO or Beacon Score then you are absolutely correct. What are these scores you might ask? Well it is a mathematical way of considering all the information in your credit history and giving it a single number that represents your application for line of credit and loan risk. What are they used for? Credit scores are used in the vast majority of any major purchase or loan application and even when applying for certain businesses. You score can determine your interest rates for auto financing, credit card rates, mortgages, and car insurance. Where can you check your credit score? There are many ways to check your credit score, many people have probably heard of FreeCreditScore.com made famous for its catchy songs sung by an old boy band. There are also many other sites FreeCreditReport.com, Official FICO site, Experian Site, and the list goes on and on.  Financially it will always be with you.  Bottom line, know and understand your credit score.

Credit Card Game

Credit Card Game

While reading and writing about Oprah’s Debt Diet, I discovered one of the main reasons people are in the amount of debt that they are is due to falling into the Credit Card Trap. I refer to it as a trap, because once you are in, good luck getting out. According to David Bach, author of Automatic Millionaire states “the best way to get out of debt is to learn to play the credit card game.”  “You are how they make money; chances are they will be willing to work with you.”  To play the credit card game, you have to understand what offers (traps) to avoid and what to ask for. Simply calling the companies and talking to them about lowering your interest rates or waving late fees can work if you are persistent and always speak with a supervisor. Another hidden trick Credit card companies use to gain capital is the hidden fees. Most people know if they make a late payment to the credit card companies the interest rate on the monthly bill will go up, however what most people do NOT know is the credit card companies can and will raise your interest rate not only if your payment is late to them but also if it is late to any other company. So watch out for the hidden fees. Credit card companies want your money so they trick people into paying the minimum amount possible,to gain more money through interest rates. When you receive your bill in the mail each month and it only asks for the minimum payment: PAY MORE. What most people do not understand is if you ONLY pay the MINIMUM payment per-month; depending on the size of the bill it will be almost virtually be impossible to pay off. According to Jean Chatzky author of Pay It Down! Debt-Free on $10 a Day, the key is to pay more than your minimum payment. By applying $10 a day against your $8,000 credit card debt (at an interest rate of 16%) you'll be debt-free in 33 months. Lastly, if an offer seems to good to be true. It is. Nothing is ever going to be free, its as simple as that. When the credit card compaines say 0% interest for the first 12 months, most consumers and thinking. 'okay, this is a fantastic deal, i get to use someone else money for free.' Think Again. Its called a variable interest rate. This allows compaines to increase interest rates, at any given time, for any  given reason. Usually if it starts off incredible low, when the interest rate increases it usually sky-rockets. When it comes to credit cards, they can be very helpful, but only if you know how to play the game.

Learn More About the Credit Card Game

Meet the Widlunds

Meet the Widlunds

Marnie and Mark's combined annual income is over $75,000—but they have no retirement savings, no college savings for their two daughters, Victoria and Gracie, and no life insurance.

They are $81,000 in debt!

Here is a quick summary of some of the out of control and over the top spending that goes on in the  Widlunds  house hold, to give you some insight on what the debt diet is all about.

    Marnie estimates that the family spends about $150 a week on take-out

       As well as another $200 each weekend on entertainment.

    Habit that resulted in her owning $1,000 worth of beads and $1,500 worth of scrap-booking

supplies

      Victoria, whose starting college in a year and a half, has no college savings

    Parents bought Victoria a brand new car.

*Keep in mind these are only a FEW of the expenses which have caused the Eggleston’s to go into debt

The Widlunds were assigned an expert for dealing with debt, financial expert, Glinda Bridgforth who lived with the Widlunds to insure that this plan would work and make sure the stuck to it! Here is a quick peek at the plan Glinda Bridgforth proposed to the Widlunds to kick start the Action plan to break the cycle of their Debt.
 

·          Cutting back on Marnie's arts and crafts purchases will save the Widlunds $4,000 a year.

·         By preparing more meals at home and relying less on takeout, Glinda says the Widlunds will cut their food budget in half—saving $7,000 a year.

·         Victoria has to make a decision, Glinda says—either she gives up her car or pays for it herself. By not paying half of their daughter's car payments, the Widlunds will save $1,800 a year.

This shows that the if you do not want to get out of debt; you won’t. The Widlunds did not want to work for this and in turn did no see success like the other two familys. Although the Widlunds ended up deeper in debt, they did have a few small successes. Glinda says they refinanced their home, paid off some bills and increased their income by more than $15,000.  Lear More About the Widlunds

Meet the Eggleston’s

Meet the Eggleston’s

Meet Sally and Dan Eggleston, and their three children, Emily, Danny and Sam. Dan is a fifth grade teacher; Sally is a fourth grade teacher. Together, they make $92,000 a year. When Dan quit his job and went back to school to get his teaching degree, the Eggleston’s went from being a dual income household to a single income household. During this time, they didn't alter their spending habits. Instead, the couple purchased a brand new home they knew they couldn't afford.

Now the Eggleston’s are in $115,000 dollars in debt!

Here is a quick summary of some of the out of control and over the top spending that goes on in the Eggleston’s house hold, to give you some insight on what the debt diet is all about.

          They have 12 credit cards that are all maxed out.

They cashed in Dan's 401k, quickly spending all $40,000 in savings.

      And when that was gone, they began living off their credit cards.

       Treat themselves to expensive items such as season tickets to the Chicago Bears: $1,000

The couple took a trip to Las Vegas with friends: $3,000 for a long weekend.

On top of that their biggest mistake was not adjusting the monthly budget when they went from a    two income family to a one income family

*Keep in mind these are only a FEW of the expenses which have caused the Eggleston’s to go into debt 

The Eggleston’s were assigned a expert for dealing with debt, Financial expert David Bach, who lived with the Eggleston’s to insure that this plan would work and make sure the stuck to it! Here is a quick peek at the plan David Bach proposed to the Eggleston’s to kick start the Action plan to break the cycle of their Debt.

• First, David says the Egglestons need to pinpoint their Latte Factor so they can instantly save $10 to $20 a day.
• Next, he says the Egglestons need to tackle their credit card debt by renegotiating their interest rates and working on their annual fees.
• Finally, David says the Egglestons need to reestablish their savings by paying themselves first.

By the end of the Debt Diet the Egglestons paid off $26,000 in debt. Egglestons got reduced interest rates for 11 out of 12 cards, which saved them $15,000 in interest payments. They grew their income by $19,000.
Smart financial decisions also helped them raise their credit score by 100 points. Thanks to a good score, they qualified for a standard 30-year mortgage, which will save them $400 a month.

Learn More About the Egglestons

Meet the Bradley’s

Meet the Bradley’s

Meet Lisa and Steven Bradley, and their two children, Madison and Michael. Lisa works as a case manager, while Steven is a government employee. Together, they make $102,000 a year. They live in a $300,000 house and recently purchased two new cars. Lisa admits she spends thousands of dollars every month projecting the image that "everything is perfect." "For me it's very important to look the part no matter what the cost," says Lisa.

 

The truth is that the Bradley’s are $170,000 in debt!

Here is a quick summary of some of the out of control and over the top spending that goes on in the Bradley’s house hold, to give you some insight on what the debt diet is all about.

Lisa says she doesn't cook—instead, they spend about $100 a day on takeout.

·         She has $1,100 in car payments every month.
her cell phone bill was a whopping $398.84.

·         Lisa recently leased a piano for her daughter, which will end up costing more than buying it in the long run.$2169.65 to take home the piano

·         He says he wasn't even aware of the couple's $79,547 student loan debt
Along with $7000 dollars a year on her hair

*Keep in mind these are only a FEW of the expenses which have caused the Bradley’s to go into debt

The Bradleys were assigned a expert for dealing with debt, Financial expert Jean Chatzky, who lived with the Bradley’s to insure that this plan would work and make sure the stuck to it! Here is a quick peek at the plan Jean Chatzky proposed to the Bradley’s to kick start the Action plan to break the cycle of their Debt.

• Instead of spending $7,000 a year on her hair, Lisa will have to spend half that amount.
• The Bradleys spend $30,000 eating out, but on the Debt Diet, they'll have to cut that amount in two.
• They spend $5,000 a year on their cell phone bill—that's 1 out of every 4 waking minutes! On the Debt Diet, the Bradleys will have to limit their phone chats and cut that bill in half.
• They will also have to give up 2 of their 5 cars.
• Jean also says the Bradleys need to start using real dishes and silverware, instead of disposable dinnerware.
• And that piano Lisa leased? It's going back to the showroom! (Chatzky)

By the end of the debt diet the Bradleys Currently, they have $6,500 in savings, and they're saving another $2,500 a month for the next year. Then, Jean suggests that they scale their savings back to about $1,000 a month. When Lisa and Steven are ready to retire, Jean predicts that they'll have $1.7 million in the bank.
Lear More About the Bradleys

Oprah’s Debt Diet Action Plan

Oprah’s Debt Diet Action Plan

Over the course of a year Oprah and her team of experts push families limits to the extreme, testing their patients with each other as well as seeing how far they go with self control. The start of this plan was rough, you may think cutting out spending is as simple as - stopping spending, but for these families it showed it was much easier for some than for others, however one thing remained the same for all; the Debt Diet was a definante wakeup call. The team of experts lay out a plan for not only the families on the show but also for the rest of America to follow to help break the viscous cycle of increasing Debt.

Step 1: How much debt do you really have?
Step 2: Track you’re spending and find extra money to pay down debt
Step 3: Learn to play the credit card game
Step 4: Stop spending

The first four steps are known as phase one of the Debt Diet Action plan. During phase one it should help people come to terms with reality, the Debt you have will NOT go away on its own. Think $10 a day won't make a big difference in your debt? Think again! With this plan you can pay off $8,000 in credit card debt in just 3 years. The four steps above should take about a month. Give yourself about a week to complete each step. Once you have completed phase one, it’s time to move on to phase two, to help you break the cycle and stay out of debt.


Step 5: Create a monthly spending plan
Step 6: Take big steps to grow your income
Step 7: Prioritize your debts and raise your credit score
Step 8: Understand your spending issues...and save!


The last Four steps are designed for long term goals dealing with your debt, paying off credit cards, learning to stay organized, paying bills on time and improving your credit score. Phase two comes with  hard decisions, which did not always go over very well for the families on the Debt Diet. They were faced with selling some of their most valuable belongings along with having to increase their income, by getting a second job.

Information above collected from: Oprah.com

Short term "Solutions" Long term Catastrophes

In today’s society, the strive to do better and be better is on the minds of almost every American. To feel like they are living the “American Dream” and much, much more. With unlimited access to intangible money, and unlimited sources of credit, the strive to fit the image of success is becoming much more present in the lives of many Americans. It used to be when you walked into a shop or business most people would be able to tell if you were someone who makes a wealthy salary, someone who makes a good living, or someone who is simply just getting by. However, anymore that vivid distinction has run together, overlapping and turning into an under lying problem; Americans are living well beyond their means. Causing short term "solutions" and long term Catastrophes. Should credit be more difficult to obtain? Who’s to blame: The credit card empire OR the everyday Americans'?

Great Article: When the Jones Wear Jeans

Exploring the Cycle of Debt

This is a blog I am starting for an Economics Project in school. Our assignment was to choose a topic dealing with the current issues in today’s economy. Over the course of the semester one of our main focal points was Debt, and why so many people fall so easily into its trap. While learning about the topic we watched Oprah’s Debt Diet. Throughout this series Oprah follows three families all in an unbearable amount of debt and all spending way more than they can truly afford. This Blog is going to discuss the viscous cycle of debt and why so many Americans fall into its grasp.