Managing Debt for Dummies by John Ventura- Mary Reed

8/3/2019 Managing Debt for Dummies by John Ventura- Mary Reed

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T lh e reo,.wot,d a6vice y o u "e~dtopay down your debt without living/ike a pauper

A Referencefar theBest ot us!F r.;o .~~' " s.E:iE' t!'TipJ.J d" . ; J . . . . . . . . j'. ...""~u.....mJ"~ .~~m . ..


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Wiley Pu .bUsb 'iD :g~ Ine . .11' ] ,River S t : -Hob oken - N .J 07'03O ~ j174'" ~ ,, ,

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No part o f 'th is p u b lic atio n m ay b e rep rod uced , s tow ed in .3 , re trieva l ~y fjt e.m ,ortr a] lsm iU ,ed in an y form or by a t n i , Y me ana , e lec tro n ic , m e c ha n ic al, p ho to eo py in g ,record in g , s ean nin g , or oth erw is e, excep t a s p erm itted u nd er S ec tion s 107 or 108 ofthe 1976 Uni ted States CQPyligM t A ct, without e:ittner th e prior written perm iss ion ofth e P ub lisher, or au th eriz atio n th ro u g h paymen t o K the ' arppropri(!!t:epeT=COpy fee to th eCopyri_g;bt Clearance C enter; 222 Ro sew ocd D ri ve, Dfl lDvers, i ' M .A 0 192 3?9 7"~,-75 O-:84ijO~a'x, '9'11~-646-8,600,. Req ues ts to 'd l~ P u blis her f C H : permission should beaddressed to d]e Penn issions Departmeet, J o , h F ! L 'WHey '& Sons, Inc , 11'],RJ,VerS;b"eet;:Hobok en , N J 0 703 0~ 2 0 ~ ,.1 4 8-..6 0: l.'] " :falX 20,] , . .74,8 . .6 0 0 : 8 " or online a t :~ttp: : 1 1\VWl _ lVi] 'eYA}Om/g()/penn,]ssiofiS",Trademerks: Wile~l:!,t~~1e'W ~ J e y Pnb l i h r n ~ _ g logo , For D u nn n ies , 'd~,eDummies ~)rmllogo , A , Re fe rence for th e Rest of 'U $ ! 'j' The,Dum m ies 'W ay iI Dumm ies :DaJi [y ~The F U I ! J Jand Easy W ay ~D u mm ies com an d related tra d e d re ss a re ' tra dem a rk s o r re gis te re dtra dem a rk s o f John 'Wile,y & 8-0:18, I ] T h C " arid/olf i ts a f fi li a ie s in th e 'United. S ta tes a ndo th er c ou n tries , a nd Ina y n ot b e u sed without w ritten p erm is sio n, AU o th er tra dem a rk sare th e p ro pe rty o f ~e :i :[ 'r espe ctive owne rs , W']ley' P u blis hin g :lin c.;;s n ot a ss oc ia ted' \v]Uu,a n y p r e d u e t o r vendo r m e ] 1 J t i , Q n e d ] F ! L, tlds ~ tu)ok , "

'I f l fM ' ' l i 'T O ' D 7 L ' l i 'A B ' ] ' l i ' I T Y / ' - D ' ] 'S e L A ll - ' , 'ME'D 0 " F '1 ; 1 i . J A -n J ; N ' - l ' Y ' T i l . i k E - '~ .< i' -~l.lLitll:: ,J! i iJl '_J!.: ' , ,L",.-." .-! ,~ , : .J[\_' ':~ Y :.~ ,. -::: n e pu n isner Mu bILea uth or m a ke n o rep res en tation s or 'W ,aJrlD ties~v]tbrespect to, the accuracy orcom pleteness of th e 'OOMJt -en~5 ,of this work a nd ] s pec ific ally d :is c]w:m , all 'WaJL!l:',~n,tk~sj ]JJ~].u&i]] jgwid:lOR~~ im ita tio n w a rra nties o f fitn es s fo ["a particular pm rp ose . N o\,alfr.all'ly mJlL,aye created or extended by sales or prom otio na] , :mJJ'ltf-ritlJ~S" The advicea nd s tra teg ies con ra in ed herein m ..m y n ot b e s uita ble for e cry situat ion. This, w ork is


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Part T '" G etti ' 11 ~ a G I~I[ l 0 ' 1 ' 1 1 " y , " , O P ' F F,'I ' 1 1 2 1 . 1 1 ' ~ cesI f ' " " I'~" lL~!, ~"" ~"lJ . . , di'_1J. "'" ,JJ~,~~~',


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Chapt .e r [ (: :'U sing Credit Conns,eling to , IGe t ~1 ,Grip an 'Y,our Finances,

Chapter ' 9 : Deming wHh Deb t Co ll,ecto rs

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Par t IV: : Avoiding D'eb t Problems down , '~heRoadCha '~ t,e r ] < 6 : Gett i ,ng G ood C ~redit:B,ack

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c ~U us clairvoyant ; You 're conC IllI1 J IOOabout how much you ow e to , YOOI' creditcrs.Join the c rowdJ 'W e ' l i l 1 , r O i 1 L l:~ve n 'by to guess how nr!La:r.u,jfeople are w orried about Bleil'debts as we write these words. Suffice i.t to say the number is s ta g g erin g , twd ]t keeps.on erow In0. ',. . , ' = ' . . . . = 'A s 'w e w rite, total con sume r debt has skyrocketed to a ' l ;V]]Dppiug 52 . 2 , trillion dollars,,D~ta from th e Federal R eserve B o erd show s ihat th e Mn~,a], ra te of con su m er deb t hasrisen ntroiIJI,gho:~~his, d ec ad e, d riven prim ~dly by revolving, cred i~ - m osU y credHc ud d eb t, Statis tic s S[10\ tihalt people in the: Un ite d S t8 !te ~n ow sp en d mOle ihan theytake 1 J J O [ i le , ; they make u p ~ :1] edif fere n ce by drawing d , C H i \ f D ] ,~the]rsavings, using credit,' O F ' :1l0~pa,y]M.g~Htheir financial obligat ions, These d ismal fac ts ~ re fueled by a '~',metyof fa cto rs , in clu din g h ig her en erg y M d h ea lth eare cos ts ; s tag na nt w ag es ; eas y ac ces sto c red it; ris in g m teres t :n l f~ ies~n adeq ua te savin gs ; an d poor u nders tan din g of b as icm o n ey m a n ag em e nt.Whether you picked ' [ I "P th is h oo k b ec au s e you 'r e d row n in g in dd.lt an d looking for af i n a n c i a l] l i f e r.~ft o r because you're j u s t foeli:mLgun com fortable abou t t i T h e~_I1l0U]~tyouQ ,N"'eo you r c re dit ors , we're here to help. In this book , we show you how to asse ss thestate o : f Y~,)ll.]F f i nances; ljve 011 ' \N"btrtyou make ; get ynur debts paid off ,~Squickly asposs ib le; an d dea ], w ith high-risk deb ts [ ike your n!iL,~)r~age~ar loan , and , f ' e d . , e n d taxes.When Y o l l m r financial 'pIDblems , ~ e behind Y O ' l) . ], 6~fhich,'will happen if Y Q ' \ ] , put ouradvice into action ), w e prepare you , for yn ur :fj]]aiJ!L cia],uture . W:e 'w amcyou th ro ug hth e c re dit re bu ild in g p ro ce ss M d exp la in th e b as ics ab ou t credit an d debt and moneymanagemea t .

'y011 won ' t find any n(niv~to~g,et~out-o::f.~debt-trv,emlgh,ldvice ittM,m(~gingDebt ForDummtes : 'W e know that slow and s teady wins th e race , G-el lth f~gout of d eb t takes t ime- months or 'e've;r:lJears, depending on how much you owe relative to your income,Despite '\~lha,tsom e ads cla im , there are U ;O s ho rtc uts to d eb t : r : e ; d , l J i l C t i o : n : ] "


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We en cou rag e you , to , take a . hard look at your relation sh ip w ith uloney and todetermine 'Whether l i lJat: relationship has contributed ~o your debt problems, We ~lsohelp you develop acan-do ~[titilldeabou t getting out of deb t b ecau se you r ,aU ib .lld e cainm ean the differen ce betw een saeeess and failure,

P rt ~ I G" I.. ._.. 0 " b t D ". t -, " ' I : 1 1 1 " '" '" " ' , . ' " , " . . ' . , " , ' .a "~' olng on a ueot uretb udg et-b uild in g process en d explain b O ' N to use you r 'b ud get w ma :m tag~you r money.'We s u g g es t 'li'v ay sto spend less and In .~ ,e ' m ore, aud we ,SJ lQ l iNyou how to u se a . varietyof debt m an ag em en t s trateg ies fhat mske it easier to keep up 'with your d eb t p aymen ts ,'We, also s110'wyou l~o:"v;fj c re dit c ou n se lin g agency can :h ,e]p yo,u, (and h O l , " b) find ag ood on e) , alld, \eveex pla in h ow to act 'Vbe.I~d.. bt collectors com e callin g,

Part ~II:I,ac[k,l[ing Your Hiigh-StakeDe ' - ' b ' I , t ' s ~ ~ 1 .~.'F n ' l h ~ ~ l....rt we fo .....s : " J I U speei fie k indio o f A @ I~ *(!! . ] ' i l \ P " ! II I o rtaaaes . , I " ' C i ' I " I , f ) , o t ' i1 1 ' 1 : ' , '~ l1 1 It . . . .ourt-.I~ : .J_:J! iJ i . , , ; I ' ~ _ _ _ , 11r-~ !l-r ~ I:o V ~ _ Oi ~~I:_ ~ , ~~=II:.I_~ I:=_~ ~ _ u~~ ~~~=_~_ :.I 1 L-,!j; :F~ ~~ ~ ~ ~_ _, . : .I v . ~~~, . d: ~l!j~l!r, ~ !!r.!!:J IL -ordered c~lI~dsupport, federal taxes, and fed era l s tu den t KOaM$ . , 'W e tell you what's al tstake when you faiU behind on each, wp e, o f. debt, and we o:ffer options for avoiding then eg a tiv e c on s eq u en c es

P a , r t : - : ~ V " , , : : , : ' I I I A : , ', ' , 'V : - :- O I - d , 1 _ l n ' g " - - D e : , b , j ' t -P - r : ' , o , b . - l e " ' - m - . . S - :'~ , . ~ . . ' ! ! I I ! ~ . . ' . > '.. '. '. _ .< -: . '.' '.. .'.> '! . --:: ...d o w m the R " " 0 ' - " a d - j- . . ' - - , 1 1 - . : .. . . .Ah, here's whe r e thiugs ge '~easier In this part~we as s ume '~ 11 at: ost o fy ou r de ,b~prob lem s are in the past an d, havin g follow ed t he : advice in th is book, you're wiserabou t you r m oney now. We show Y{Hl how to rebuild your credit history, build yoursavings, set financial goals, and U . 5 ! e credit a s a tool for managing your moOney andbuilding your 'wea],dt. Here's to a happier and :flnmlc1aUy nea]:mier fnmrel

Part V': The [Part of Tens'\iV h at w o uld a,F or D umm ie s ' b o - o k be w ith ou t th is , part? N ( l i t : a F at Dummie s book, weguess , Firs t, w e tu rn yow on to' an a!rra,y o . f free and, low-cost resou rces f.or fin din g ou t


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m ore ~b ou t deb t m an agem en t an d financiel m an ag em en t in g en era] . T hen 'we' h,e:]!Pyoua void s om e o : f th e m ore c~ 'mmOFIJm i stakes, consumers m ake w hen they owe too muchmoney 00 (leir creditors.

lcons Used ln the BoolkThroughoat i l i : i ; s , book, you find eye-catching, icons th~1;ow l yOQr alttel1tio:n toespeciaUiy important or helpful inform a~ion.Here 's wha t each icon indicates:

T he R em em b er icon h ig hlig hts in form a tion ~ ~a.t' cru cial, W ,e s ug gest youm ake an e : f f " b d to tu ck it in to you r m en tal fUmg cab in et for fu tu re u SiC.

T he T ip icon alerts you to advice that can , save yO lN l t ime, mOl1 ley, a nd ] eg a~hassles .

~ i J ' ~ 'rr~~""", ,. ! ,'

Whel r 'e to Go [from Here'your debt situatiou may be daU:( IJ. '~] i1L,g~u~\don !,~be daunted by this bock. "iN[Ul!t weexplain here: i sn 't tough to understand, It can be: tou gh to implement , bu t that 's 'why wehelp you g l a J r ' h e r . your ru:rul lef S t r e J m J , g ~ i l ,e~dy [ In .So plun ge in . 'W'e sugges t thaJl you get y ou r feet wet 'by s ta rtin g a t th e: V , e J 1 Y beginningof th e h oo k; in Chapter ill, we Iive you en overview of e '., e : r y ll 1 i M , g yowtU fin d inLor ., D ' it 1:" ' r"k.. . .l M i', ;I ;a n a g ln g , . . e b t !~r l..tuJrU'fues,

:B u [ ifthe re ' S a part icular '~ypeof d eb t k eep in g you awake at n ig ht, or if you 're h au n iedby never-ending phone call s from d. .eb t col lectors , j um p . rig h t to th e' c hap te rs '~alt deall j i v : u t t ' ~ 1 Jhos e' s u b j ects.'YOM cen a lw ay s back up and rea d ea rl ~eJ'chapters th a i l : p ro vid e th ehasic tools for debt m,~ntg~nu;~:nt,

fo cu s ed a n d, d is cip lin ed , y ou will overcome yQ~U'debts; ~u .d.em erge 'w ith ,~ brigheerfinancial , fu,[Ere.,


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Part [ I3,__I G i e - - - - - - - . - .ttin- g . - . - _ . - a : . .- - - I G . rl n 0-----

- _ . " . . . . 1 , . . - . , . _ " , "Your 1 'lnances


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Tbe5th Wave

I th~ t, - -.lS pa:r' ~,~~ ..o u r g oa l f u m . dills book is to help l"OI1l work yOM way ou t (If d eb t, n il we s ta r! th a tprecess by tackbng some preliminaries. firs~~you, need to getcle.' about ~J:ueacts o : fyou r fin a nc ia l s in a atio n: Exa ctly h ow much , a re you s pen din g e a c il m o nth rela tiv e 10


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YOlU ' household in eom e ? How much deb t do you . have? WI1Sl t d o you r eredi t report~lid.credi t score :(HIY a ! b c ) u . ; ~ tbe s ta te of YOll]r fin an ces ? A n d how d o y< )u rfinances s tacku p ag ain st th e s tan dard ratios th at fin en ciel profes sion als u se to evalu ate s om eon e 'sflir~Jinci~]ealth?Facing th e tru th a bo u:~y ou r fin an ces is , ~ < H l . ] , g J i l W ] J d mustering dlJeself-discipline tom ake n ec es sa ry s ac rific es , i s . ev en to ug her, But don't des pair: In ~ 1~ ]:gpar~~we ,~18i;)give 'you lots of ad v ice an d en cou rag em en t [t o help you develop a get-(r~~,afdebt mindset .


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II ain rain hig h b ~'1ances on your credit cards. A s a eouseqnence, you cenafford to p f L r _ Y - o:n~ythe min i rmrm due 'OIl, t he " cards , you p a y a 1 0 l t in interest Gin .v......'i1'ii' .......... dit ....'li'.,.;i d ,c,ijl.,j)6 a nd ....l ~,'V..,~t-debt has '~ .- . . . . .~1"'"i i"&i! ;I vou r F IC '-0 '" ' ' ' 'C , I ' ' i ; ' ' ' i 'J! ,l . .. . U .. ij:IJ. ~JPI;;~_1 l~ I~~~ y, ,'-_'wl!lJI~~ !tIll, M, l LJ l. Jl (- J : .' ~ILJl~, ~iJi lh.'" 'It!i' WeI . 'Wu. ;;; " .."'~h - ," .:.", f . : l ' , ' -OJ,~r. ;

III Have Htde (OF nothiag] ~n savings so you , have to 'u se credit to pay 0([ 'every unexpected expense,IIIM ism anage you r finances b ecau se you don't know , lh.o~vo lUal l1age' themcorrectly,

The Netion al F ou ndation ,:foW 'redit C ou nselin g su rveyed its membe r creditcounuseJi:ng s gen cies ill eB lir~ .y2006 to de tenn ~~1i.etill,e k ey rea so ns consnmers were fn iu,g,fo r ba in ikm [p l"C }!.The s"lu~leyshow ed f~ at: ,4 1 p e reenr o f COl1 s . : U U 1 J e , f S ; blamed theirbankruptey G']],poor ' m,Q,:l ley m anagem en t skills ; :34 pe r cen t ~t~]'.ibuted.t to lost ineome;and :l4 percent cited an increase ]] 1 medical costs.

W i ' com p uls ive sp en din g is 'lie C~ IJ Il]Sef you r f~ ,~~m1 'c: i,fIj ~rob lem s, g et help fr~o:m,U ' o : rg~ izar l: ]Q m i .[ike Debtors Anonymous (\:V\V''i; _df :


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P ayoff you r deb ts as qu ickly as you , can,IIIB uild up Y ( l'], ]r : savings .

Reducing your s :pend :~ngand m,U]:llg more money oft~,n,go hand in haad w ith creatin ga b u dg et. 'W e p ro vid e lots of practical su gg es tion s for cloiu g b oth , in . C h a p t " e - D " 5 "

,,. G ettin g ou t of debt u s u ally re qu ire s that you chan ge YOfH: spending haJbi~s ,Because t t :uQse'changes ]1ll~ arffect everyone ] : 1 1 your f~:mjly,if you havechjldren (es pecially p reteen s or t e e n s ) , you ~ndl.y o u r spouse or p a r n : t 1 i : h ~ : rhouldin vite them to' help yo u create your household budge t , They can sl!1~,e'stexpen ses to C Q t and th i ,ngs t hey can do to improve you r farm i J y ! ' 1 3 , fi,nenci a tsituation, :B y in volvin g th em , Y'Cl 't]E kids will be less ,apt t o - resent th e effects. ofb udg et cu ts on their lives , A ls o, you'll he g ivin g you r kid s the edu cation m eyn e e d . to b e e o m e responsible g{)ney IIIf l J u e u _ g e r s s a d u lt s ,

Taking the R-ght Steps When YouHave Too Much Debt1[")"0'[1, don' t O'INti ,a ta n ofmoney 00 your ' creditors , living on a bu dg et m ,ay b e ai]l t h , a : ~ :ittakes for y!l) ~to 'w :~ :itt]ed ow n yo~ r d eb ts ~ 1 1 d . hold on to you r assets , If you owe a lo t,living OIl ,~b udg et is on ly th e first step ill th e get-out-of-debt process" Y ou m,ay ,~I5Io!n eed to do som e 0[- w I ofthe following:

. , d ea~ s ~ ,< i .t hyou l i ' iCretUt,~rs.,A sk you r creditors to help you keep '~,pwith your deb ts b y 1(l\'!V'e!U1ILgyo ur m m u hly :p~ymenh:0 ]] a te rnpora ry orpermanen t basis, reducing th e in teres t ra te on 'you r deb ts , 0,[' letting ' you,mneinterest-on I y paymewtg fo r a : 1im ired period of t ime. Before : y ou a pp roa ch mliyof )"C);ln- credito:rs t you 've got homework to ' do" F0':[ ' esample , )"O'l]. need to

'I' C reate a lis t of a l l your debts . and t h e r e l e v a n t ] n fo rI T . l J , a :f c io :n: p e r [ ~ l ! i , n i ! i . 1 L g toeach debt, I n C h ep tc r 6~we expl a m , ~,e specific information to includeon , your Iist,

'I' R eview 'you r 'b ud get 0 0 : J l .l g ll lr e ; o u t how much you C - m J J afford to pay O wyour debts ~v,~lY month, sta:r.tm,g with . th e' on-e s th at arre ' t J h . ~ mostim portan r. D on 't a llow a cred itor to pressu re you. in t o , a: g re ei~ g to paym ore than you think Y DU can . ,ttffiord.,


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W.hcnev!S'F.you, talk w ith a J . creditor, c J r q ) ] a i n . why you 'rc caJning a n d exactlyw h ~l you ir e ask in g for. If the first person you speek , ; v i : t h says . n , o to ,yourreqnest, ]lQ]i.tle[y end . th e conversation ~d ask to speu w ith . .~ man~ger or9.ripe.nr~sor.~o:rrow m o.n ey t~ I J I8Y off debt" When yow get H'e\V. debt in order to pay offexisting debt, th e p roc es s is c alled c on so hd atin g d eb t. 'W ' ere a liz e t ha t g o jn gin to d eb t to get out of d eb t may no t sou nd sen sib le, b ut if]t~ done right, it canhe a Sr:l flirt d!ebt~ul~Ueligei,rneJ'lJt strategy, 'Jo de it :dght~ however , all the: f o n : I . O l V i i .1 , g ,s h o u l d n.pply l l V ' h . e 4 T 1 L Y(lU consolidate:

' . 'De m r e : r e :s . t rate on tile' n ew d eb t ~ 'sow er than th e ra tes on the deb ts you:pa off.

." Y ou . COnJIJlJL:l.t to n ot u sin g cred it ag ain u ntil you 've paid. off th e n ew debt1M .C[1.apter 1~e exp lain th e various ways to c on s olid ate debt includingtran sferrin g cred it cru d deb t to a low er rate card , a l W d , _ g , e t t m g i f ] . b an k loan . 'W 'e:a ls o d is cu ss d eb t c on solid etion offers that w i ' l l do you . m o re h arm thaa good.~~t h.ell.)' fro:M ,3 eredit eo'mlUi~1ing a g - e : u IC Y ~ The advice an d assistance of ac r e d i t counsel ing f l@ . e 'D C ) o " c a r~ ' J jb e a . ~.odse~ld.when you. h av e ~ .lo t of d eb t an d a resln].gg]iug : f lO take oo,ntro:[ of it . This kind of agency can especially help whenyou a re c en fu s ed ,aibout wha t 00 do!O F lack con fid en ce ab ou t yOU] , a J 1 h i [ ] [ ~ y 00improve ) "o u r fin anees on your O\Ol ..As YOlli :find. out in Chapte 8, : D . credircounsel ing agency can

'I' H elp you . set up a.household budget.'! I ' Evaluate a . budge t you. h av e a lre ad y c re ated to s ug g es t c han g es tha.t will

h . 6 1 1 )you get O o u t o f d e b t : : f a s t e r t a v o i d O le l o s s c r . r rassets , a n d s o o n ..~Negotiate lower p a y m e n t s with y O l l. lJ rcreditors t m r lJ put you i])b) a debtma n ag em e n t p ]a ]ii].

,~Im p ro ve Y OM rm o n ey ma1Jl:ag,eme:ntskills,N-ot.~H credit counseling a g l e : n : u c i e s are 0,[1. t he : up and u.p~so take '~]]]lleo chooseon e fb~t: ]S Fe"p.ut~b]e,. F i F S ~ M d : f a r e [ ] lD s t . H~a[;I l li iL e m i L : 5working 'with a n O : [ l p r o H t : .t a l} { = t I 5 x e 'm p t agel1cy t h a t C:hauges you. l i t t l e 0 ]" ' l l o i l i ' i l 1 J g ' f o r its s e r v i c e s , J 11Ch ap te r 8 .,.we offe'] a comp l ete !rU]1LdO\~~lof all the c ri te ria to consider whenyO' IU are ehcosin g a ered it cou ns elin g agency .A lso in C hapter 8~ .;V C warn you . a g ain s t m i sta kin g a . deb t settlement firm for acredit coun s elin g ~ ,g e ncy.I f you o r e no t c are fu l, it CfIJ!1 be an easy : rM iis ta keoma k e becau se som e de b ~ settlement f irms ' L T Y tu a iPp 'e~r as though they ,~i l:"eC11~d.[ tc ou n selin g a ,g et'lJ ,d es.H ow ever, th ere are b ig d ifferen ces b etw een th e


17/34

t1O, T he: goa! of d!c'~t settlem en t firm s is to profit off of fin an cially stressed .COI~SUm~ri8,=not help them iInprove their financea. They cha~e {Ij, lot 'for their. d f n don' d '~ " '[ . " C ' , . I I ,~1~~I"lceS3ll~"M.llan ryot them ~j)n't qeuver on t teir prom ises . '.,.onsumers ' ' ' ! , - ~ t ! L 1 I .O'work witlt debt settlement firm s eflen en d up in 'worse :fin.aJl.tc]C}]nap'e thanthev were 'b . ~~0':I!",~ll'!lr .',) _ . ~,t ~ . ~ J L l J . . _ I _ j ,w.~11,e f o r bi i' il il ,krnpte,y . .' M " n 1 L you owe tDO much relative to your income,yo;~]]"best o]ltkm sometimes is to file for bankruptcy ~especially if you'rec on cemed ,tff ila ~~ne of your c red ito rs is ~ bQ u t: to ta ke au, asset t ~ : 1 I , ~ tyou QW~, andd I' ] Y '" f i ' [ C ' "h 7['" l , ' b ' k ' ' M . " h.. I' . 1 ' . . " " , ' I " , :" ' . I I. .. " '1" I' 1-, I '. ". . " ...'..~".. '. . ..:.'.'~. ' .'.': ' . . : I '.' . ._--.. I..' . . '.. ' _ . '.' II ',: . I__'O.[IJ,t w ant ~oiose, "au C(I[IJ, .l ea .'a pte r ' ,u /~n C iIC 1 tU )n , a n .rnpf:{y; w ]0wipes out most but not ell of your debts, or a Chapter 13 r , ' e ( 'C W [ g ( {n t z a t io nbankruptcy" 'w hich g ives you three to five years to 'pa~' w hat you O~~ ~_ndIn~yj] ]SO reduce the amounts fif some of your debts, Thrnughnut ~-hj;s,book, weexplain how bankruptcy C,a i l i l L help you deal wifh varicus 'frypes of'debts,

Being contacted b y deb t collectors can 'b e' u nn ervi 11~! especially ifthey try to P]!eSSll.U(\yQ~ into paying, _ore dIUyou think. you C~, afford 'by calling you constantly,threetening you, ( ! [ I J dusing other ~ b u : s i \ l ~ tactics, Some debt collectors can be sodiffi,clNJt to deal " v i l l H i l l i a ~ you m ,aty p rom iee tb .,etmju st a b O l N J l ;m y ~ l ~ ] i 1 L _ go m a k e t h , e i 1 1 i J Jl e a v e you f ij Io n e "

Debt collectors don 't like taking no for . a m t answer, Most of them , are p l a i d according tohow much they collect, and t h , e y ' know :f(1)111 e xp erie nc e d lLa ttpushiness P~!)!\S,off. Theyalso kn ow t h U l t lDO}S, t consumers am -eU'H~~V(! ! l :e of th e fed ee al Fair Debt Collection:PI,i ic. '~~cesct (FDe]?A 1 . which g ives them righ ts ' when debt : c o u ' e c , t < H : , S , C O l r t J J t a c , 1 t ftu;~'mand re stric ts , ,vhalt debt collectors can, de to co] leer money, For example, th e FDC.P 'Asays, that yow have the' :u,i~htto

IIIA sk a,debt c ollec tor for w ritten proof t [ i 1 J llt y O ' O J owe the deb t he's h y i m i J S tocollect f rom, yO~'!LThe debt collector is obligated to comply with your request

IIDispute a d e b t if ' YDU do not H ~ ] l r t J J kh t I J l ~y o u . owe it orif you disagree w i t hthe am oun t, Y ou . : " l l 1 l u s t pu t you r dispu te in "vr~tin~,nd send it to the deb tcollector wi'~in 3~)days of beg]~,coatacted by the debt collector for the firsttime.


18/34

Write' a letter to a deb t co] Iector te l I~~~gim n ot to contact you agai 1 1 abou t( I ) , p .t]clild ~ar d eb t, A fter th e d el~ t c ollecto r reeei ves YUU,"'- ]ette:r~he cannot~ -. " , . _ ' " , - , - " ' t . , t h ' - ~f'!i)l ,-,--.- ~".,-- tn ~+,~!- k - " ' " w t h j ] . ~ 'l '~ " ,,~v i ! i ' r i ' ] .comm um ca e wlll, 0 ~ OU ag aU I l I , e x c e p t to re t ) On _n ow I l J l . l l 3 1 1 . . . I I .1 1 ,e[ compiy v_ ]lm.YO lllrreq uest or to in form you of a specific action he 's ab ou t to take in , order toc ollec t th e' m o ney yow owe .

Tt- F IO ' ' C - p A - ]. " - '- .' - that -,debt "']'~- " 1 , , " . - . ( - , - , ~ ", . !I .'il. e , . . ., .. , ;. '" "1 , ~ s o s a y s : , ! L U l L . a . ' l - I , e ; ,LI c o !L e e o r C allO nO IL ,

C an you b efore 8 a .m , O~ ,after 9 p .m , unless y01JJl j i j ,dio:ate that it's okay.IIIContact yon atwork if you. '~eiUthe collector that y O ' l ] w employer doesn'twan t von to' b e' c alled th ere.'IIICall you con stan tly d urin g a s in g le d c a , ! \ , or cell yon day afoor day , T l ' a a f sharassment lIIU s e p rofa ne 0 0 ] " insulting lan gu ag e ,~ i111e[i. a]kin ,g to ye'l]"IIh reaten you wi th , con sequ en ces that are n ot leg al or ' [ [ 'tat the deb t co lle cto rhas n o in ,ten ,Hon of ,iiCtting on .M . J'. h."" 1 l . " ' , ' ' L ' t : ' " . } d - b t eolk ,~ :'. L 'F ,e;=,,- ' t ' / (L..]-. r.,, ,any S I I A - : h J S S nave . ieir own c em co , tecu on taw s. r . > U ' m e un es rn ose aw sprovide' COllSUmC;li'S'lV~tl more p ro te ctio n s from deb t co lle ct or s than th e federall aw, Contact : YOU1 ' s t a t e attorne:y general 's office l(l ' find ou t if Y O l ) m r s'tate hassuch a law

]Ia deb t collector viola tes (he law I' g et in eon -m et with acon sum er law attorn ey righ taway, The ,a tto :rn1l. Iey: y i n , advise yeu of the actions you :Ill,ay want to t~ke"

We're no~S ' l L ] , g g } ~ , - s : t - ] ] ] g th~[~you sb ,O'u ]i1n ever dean w ith a deb t collector, I f YOl)..]agree dT ha l uyou , owe a debt, and ifyou r fin an ces allow , you m , a y w~,t to w ork....ut a I"~ i!1i \ o - \ 1 ] 1 1 " l l l the d e b t col lector f r o ] ' '1:~,'!\Vi[1Iii ,\1'0~,~ d e b t . . . .v~rr'tim e ....1 ' t h e ,d eht~I~ ~ ":I'~~~ .. ~ ! . i - ! . i - ~ ~ '-J . _ V.'~L ~~lb.-v. V. y~..,. 9~ J VI~ U~lJ. .. v.~ . '~~~v .~ ~1~~collecter :m,;ayagree 00 ] e t ~ you settle your deb t for less 'fJu i. !itth e full amountyou owe .

U1ndlers,tanldi ing why' debt collectorsbehave like they doThe adage knaw in)! eneJ.ny cert~]~dyapplies to debt collectors Unders tanding whyd e : b ' n collectors b eh ave [ ike t h e y do b e]ps '[take s ome of th eir p ow e r a w a y and~m'pr;;,"...""II"I!'J ~."""1' ~ i i t 1 i ,,.,....~"1I'IiIt"Iffl'I;,r, ',' 'U~'' I< ... . , .. .,


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'F1 the section s that follow l' lye give yOUI' finenci Sl[edu cation a q uick jump-start, ,. 0 getmore d eta ils - see CnClpters ,],6 M n _ [ _.i G : ' " , , " o d d e b t b _ _d i d ebt: " W " , . -' - ' ' I h ' " t's t h e, , ' ,100 i I e " " - , 1 a,.,; e .,.,-~,,'',,,' , a 1 - S - - ' Ied i ' f felrelnice?C on siderin g thet you have 8~110U8-p rob lem s ,viitl debt, yo'! may he s u rp ris ed to hearthis: W'e eventually \aJlt YOM to u se c red it cards an d, g et lOMS again, V V l J r y 011earth,would we steer YOl)lJ baJck into deb~when getting out of it is sue ,}] ,[~wd \QIk? Becauseowing money to creditors i s ,not necessarily a had thing.

'W~]eill.erdebt ~ s g ood , or b ad d ep en ds 'O n ' 1 ! ; ~ i h ) 1 you took on the' debt in the first placemd, how you l i l J J l L , i l ! i i t I J g , e it '= whether you m a k e your : p a : l ! Y l i l J . l L e I D r c S ,on time, f.ot example, h talso depend S O ID J how much debt you have relative to your mcom,e beeausc too muchdebt, even ifyou 'rc able to keep up w i t l h you r . p aymen ts , harms your credit history andbrings down y o u : r . - credit score {see Chapter 2J

Why debt can be a good 'thingGoing into debt can be a good , thing in many cireumstances. For example, you couldf ; I:OI"",,: ~y.,0Uil' O:1'' '! irJj) ' '- ' 1!.Pi I~'nl l I ' ~'-0,; [ I , a ~ ~ ~ - p . , '-'if'i,O~~ O 1 : k 1TfifflOil'!i"':V '~'.i), 'Ifii' ~,itVIi. ,~c;"" " 0 1 ' , h o m e . . !!';.... ~I, ' 1 i ' i T f i ortsa 0 ' . . ..:.:;' , rw., ,",,' .!I,.:; 1l


20/34

'D eb t: is a ls o a nega tive t i l i~ g w hen you , have so m uch tllat you , epte1fffordto repay it[especially when your home is tilt risk), when ~:]]eamount you owe lowers your credits co re, O rwhen you, OQ[itQW [][iO:~,U~yfrom ,shady operators (]ike finance com pan ies or: p 1 a , y d a y loan com pan ies ) w ho charge : : hig l1mteresl rates.

Y ou . m ay thin k d T h a l t , a l [ cred it is , creas ed cq u al.L ots of p eople! th in k " : H ) ~ w hich is , one ofm en y reason s th ey ru n in to d eb t prob lem s In this s ec tio n , w e brief you ab on t variou stypes o f c re dit They definite:~yaren't created eq_u~~ ,and you , should get familiar withthese term s so YOlL ] can . become fI, be-tter c:red~~;onsumer,

"e~u ~( I, :: WH l1Jth is ] l d m i J d , (If credit, ~l~ creditor guarentees t~at lin'will hepaid b ack by pl)Jl~-niu,g,a lien 0]]] an asset you , ow n" T he' Iien en titles W e creditorto tak e '~ 11e sset if you don ' t Iive up to th e 1 t e 1 ' 1 . I T S of Y'O'l~Fc red it a g reemen t , C ar] o~ n s:; m o rtg ag es , an d heme eq,uity Roans are C i O m m on . 'I.ypes of s e C U I ' O O , credit~']lse(u r-ed~\Vhen your credit i s . unsecured , you simp ly give your word tot h e . . . .e d i t o r ' j , h - . j 'U..... 'J ':~"];'I]-~r e - p .' ';"V' w h . . .1.".''i'io1l~ b . . .rr;"..,.:It' 'C ~ redit """'ifi'il] ';;n~~ . . J ~ ' ' ' ' ' ' ' ' l I ] 1 ~ n : d -llL~ '-d. ~IUt,lL ~. ~ ~ }[lIJL, ,J' U'l. ' lt1' . l L , " " , ~ ~ '11'" ~ }rJiJIj. :$ U ~ UJ,J,!U ,ty.; .:. u~ .. lL II. 'b.'~~."-]::a JL. ~1UI.lL!i.,.I(] ~!t.1 ",uti lities biUs'are: a l l, e~~1 I ,p :~es ,o f un s ecu red eredit.-R e-v olvin ,g :: If 'yo ur c red it is ,revolvjng; th e creditor b as ap P1fo,'vedyOM for aset am oun t - you r credit limit - an d Y 0 1 J ] , c ain a c ce ss ~ le c re d it v V h en ev er y ou' V i { , I D 1 L t and , ~ 5 , o ften as you, want, : ~ ~ neturn , Y:Oill must pay the creditor a t [eas t a .min imum , [ J ] 1 J J O l ) J I [ tt o n yo ur acco un t' S , o i u ' t s : [ m : n . d i u . g , b a l a n c e ea ch m o n th Cr.edliteerds fIIl]d home equi ty lin es of credit aee ,e;xflim plesof revolving credit,. 'n ,s talbl1;f[nt .~ With , in s ta llmeae c redit , you , b o rrow a ,c erta in amoun t ofmoney Ior a set period o . J f t ime an d you re-]lt:1.yhe m on ey b y making a . series o . ffix ed o r in s ta llm e n t payments, E xam p les of illst~:U:mell '~credit includemortgages, C~ loans, and student :1!o'~:5,


21/34

Seeiing yourself through a creditor'seye,sTo he 8l savvy C-O~SIlJ:mer, you . also need to 'know ' the ' c rite ria th at Ofe(UtOFS u se' toevaluate you when you app] .y for n e w u r a dd itio n al c re die , Although, eredicors m a~ 'take other factors into account; :ioU(n;,ving. are the three biggies :

~'OU.I~ ,d181'8ctLf t ::D oes your credi~ history show that you've got a,history (Ifrepaying your debts?

nur enllaterah If you . h ave a ,[ J nor credit h is to ry ~or if you are askin g toborrow j ! I J [at ofmoney, eredjtors want to know whetheryen have assets tJ]atyou can u se, to secure your debt OF guarantee payment on it,Thes e c rite ria , n ot on ly d ete rm i ne w hether a, creditor w ill approve or. denycredit; they also im pact R i , O ' V mu c h credit you 're g iven , 'Wl u a t : y c ; m - interest rateis , a nd ,~ ~1h.~~ tther term s of credit apply. See Chepter 1 . 6 , for deta ils ,

:Rignt l ' !LO'W!l when you 're :smotile:t'oo, by debt, you may not be ab le to ' think aboutimproving your c re dit n i:s'tC ~:ry yon 've got '~J()Omany other immediate concerns _Buttuck this topic into ~}ebacl 0 ' yQIlI' mind because when you've had, meney troubles,rcbr~i]d,m.g your credit h is tory sho~dd be one of you r firs t goals . Having a positivec redit h~,s ~LJ:DYu s essem isl 'to , g ' e ' t l t i n g new credit 'Ni,t~anractive term s. (A nd as weexplain in the; section "G ood debt, ' b ad ,deb t \Vb,a~:isth e di:ffe:re'llce~r,you. do 'wan t tohave access to credit again do wn 'nb,e-oad.)The c r e d i t , : 1fP~~,~ ild li~'lio ~P'I,.....f'I~ ~ ~~ ~:v!1ieh " - \ 1 \ " " \:V:o:II~.k ,\"''''''ll~t h r o u I[]ih 'i n i C _haeter '16 ] P , ,m ~'~1[~~ ~ ~ 1 ~ Ifr.i 1iJ1~. . ~, v'V'~~~~ 1 ~ ~ ~~ ." ~ . ~ er J v ~ Li VI~r~ . ~~~y~~" ~ ~. ~ ' !I].~l ~~,s im p ]e .: 'Yo u get smal l a l l i .' C ) l ] n t ; _ s ,of n e w cred it an d re pay 'm e debt an tim e, Forexam ple you get ,~MasterCard or Visa ct!!rd~use it to purchase seme goods orservices you need, and nav o.~f'vour card b alan ce accordina to 'y . -our ~;~'ree:il l iI iLent',yitifil.n" I" PJ III" C I ~th e c ard . is su er. Y ou shou ld a ls o bO r1'O ,vI ;smaU amoun t {Ifmoney from a, b m L n i l l k : and.I H l Y off the loan accordin g to the renn s of YO'[Qrgreement with the' lender,A s vou do these jh i nas vou add new oositive in form anon to von r credit h is torv!I' !f' .. . . . . . ~ .. I L~~ ~ J _.. .._., . - l['"'-. - . ~ - .. . - ,I!. -.. ., . !I '!f' .. . I! I! . . . ~.., !I'!f Meanwhile, the l u : : - g a 1 t i v e ' information in your credjt h i ; s . b : H ' Y g: r~wany begins 'todiseppear because, wid]. a . few ' exception s, M o st d.~aging credit r-ecord [ ]1fQ'g:_J; : l '~i-on,


22/34

Cml'IJe re po rte d. for onIy seven years an d ~~xm on ths . A s time passes, your credithistory wjll gradually contain more p os itiv e th an , 1 1 L e , g a r t h r e informatien, assuming tJ]ai:you manage your finences responsibly.Wbiy I S rebuilding :yO 'UI ' credit h is tory' s o crucial? First, ifyou have a r m e g a r l iv e creditreport, y o w . won't q , l N J a b f y for a credit cerd ' I t ~ i t ] r u a low' imerest rate, and . you'll havetrouble borrowing a significent amount of money from a,bank. Here: are som e otherpo1te!J:ltiaJ]onsequences ofa roeg,aluve credit history:

III Potential eLUplo ye rs who review yo ur c red it record as par~ of th e jobepplieation process m,ay not hire you. 'YO:IL] could also he denied a promction'with vour c urren t em n lov er if it checks vQu r credit reuort as part o.f'dle- t ~ ~ ~ ~

Life insurance ~QMllpanies :m~ypena]ize you , by charging you a,highepremium or [tot selling yau as much insurance as you would like.

Laedlords may not wan t to rent to youIII Y'Ol& lll:fly not be able to get a security clearance or certain types o . fp ro fes sio na l licen ses .Avoid eompanies that prom is e to re'b u]ld, your credit er promise to prestochango m ake all the aeg atives in you]" credit history diseppear, 'N 'o t on ly areyou \ va s tl1lg your m oney ~bu t (diC pe:ld,~ on , m e tactics acred it repair :firmuses) you ~'[$O :rn,m~yiolate fedeeal law ifyou do ' \Nha'~the finn te lls Y O ll] to do,See Chapter 16 Jar details.

U l ill t 'h f ill I ting or ter mancra managementbaslcsA s you know ~I] too well, ~ife;is full of twists and turns. You . may in...iate sO~1I1efthese ,chm1ges~bu t others c ome at: you , , :vid] no warniug. HI~heF '1 I f .~yI harvi l : lg,a goodhandle 0:0. the basics of money management helps y o , ] , ] keep your finsnces on [tr~ckandcope 'w ith fh e inevitable bumps in , the roadHere are SO,]] ]e of the fin ancial b as ics you should have u nder you r b elt (see Chapter ],,6for deteils ) ::

-Setting: ~n~d~ lc llt i~ r ing YOI [ [ l"i:nal~c:i9]go.als~The problem: There's a gap'b etw een w hat y,ou l[ [d,ike to achieve, "flih ynu r i I il J i lO n e y and U 1.ea cb l l l . a i [ m o n e y


23/34

you live .o ~ a .a ila hle. '[ he s clu tio n: S e~ ( arn dwo rk me th od ic ally toward)'fi:~:]an Q ]a]goa ls,Go a l s ettin g i nvo lves deciding w ha t yo u. lilllJ.t to do w ith your money , :Se When ever p oss ib le, pay wiih c as h, [ lo t c re dit'. Pay 'yOUT b ills on tim e" .'.'Don't run up your credit c ard b a la n ce s,' .' D{ ) , I1 . '~ ' ~ r e ! ; ' l l t O:IL]f h o m e equity ] i k e i f s a p iggy bank .

'Cl@rni:ng' n l iI e lo I lg lfioney :~eal~,ner"he ' f in anc ial m,aru :~geu leM.~gu idancew e provide in this b ook is really on ly the' ti p of th e ic eberg" There: is it lo t moreto u ncover, an d f ort una te ly , you ' ve g ot acces s to cou ntless resou rces 'foraddition al edu c at]Q n - b ooks , m ag azin es n ew spapers , the 'W eb " clas ses atyour local colleg e, an d so 0]1], For a sam p]ing, of l:h~ pos sib ilitie s, s ee Ch a pter1 . 8 .B ein g s m art \V]t~ you r m on ey requires a li fe lo ng 00mm itm en t b ecau se t~ e lawsnu~tpertain ' l l i o c re di~ a nd debt change ever '~ im e, as do laws t [uwtapply to other


24/34

in fo rma tien , o rd erin g y O U w FI eo credi t score, an d com perin g you r : f a w r d ly ' s s pe nd in gto you r hou sehold in com e,T he m0 '1 ;e b ad u ew s you , g et as you . ccm plete these exercises , the more c ri ti ea l it is talflLtyou get serious ~holl . ] t dea].:iug" with yonr debts" The souner you do , the q u ick er a ndeasier it ,:v,HI,b e to ] ] ] 1 1prove y ou r fin an ces and the less ]ikely 1 i h a J t your creditors 1 J , ; v , i , m ntake SoCH]J ],eJ ') '" () ur' as sets or th at you'll have to file fOJ:bankruptcy. So let's g ,e l[ go]ng~

you 'I l g et a g en eral sen se of tlte s everity of YQi jX d eb t p ro b lem b y ,h on es t[ ly a nsw erin gth e fou 'O' \~r lngquestions, The m ore often yow . answer 'yes, H th e m ore you, have C~U:5ef or c on c ern "

O ver tim e, is a g row in g percen tag e of you r hou sehold in com e goin gtoward paying your debts 7

D o you ever pay you r b ills la te b ecau se yore don 't hmr~ : o . O ) i l l , _ g l t money?IIHave you , stopped ] l a " y i M . g some QfYOUT debts?

M e: you payin g on ly the m in im um dUG' on som .. of you r cred it cardsbecause you csn It ~[fo:rdto P,~ymore?

Are: you , u s i n g credit S l J i ' i t d J o rcred it card cash advan ees t o help pay debtsand/or your b as ic 'livin g exp en ses , like g roceries , ren t, u tilities , and, so on ?

Have you l f i a . ; . ' 1 , [ , e d ,.out ,any o f your c redit c ards , o r have ,any o f your camsbeen eancelled fo r I1OU]Juym eut?IID o you have H tlle or nothing in s av in g s?IIIHave you. borrowed ITIH)ney from frien ds or relatives tn :p~y you r' b ills ?

Have deb t collectors begun C : a U i l l g you, , and /o .r a re you receivingthreatenine notices fmm S ' ome ....f y",,11~r ;;:''I1'P " : ' I ' i1l',"':r""?~~~!;4J~~ b~v'.. ~~!1J3 ~v ~ ~ V V!r.4 'I;r.i~':r.i~ ~~~ ' - 1 i I- .

M e: yO IU , itavm,g fij, bard, t ime concea rr at ing at work b ecau se you are' w orriedab ou t m o ney?


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IIave you. an d you r spou se or partner begun figlltil1g, abou t rn oney?IIIAre.you drinking fil!lJoreor using illegal drugs in order to b)! to cope withY01U' : tnomey worries?

IIIAre yOll] alii,overspe:muder? ,Answering th e 1 .j questions at the D eb torsA nonym ou s 'W 'eb S]E can help you dec ide. Acco rd in g to dThe ite, m o stccm pu ls ive spen ders an sw er yes '~Q 8 ft leas t ,Sof the: 15 qu es tion s , G o to\Vw"\v';.de'btarsailoIliyitIOIllSjJIg' and chel Oil "Take a,Deb t QUlZ , ~

Some s eriou s soul-searching is i n ,o rder if 'yeu 're worried ab ou t how mu c h you ow e t o .yDW'[- c redito rs , : ]fyol) J] a re reaID],yhones t 'w]:~hyourself, you may con clu de that j !O:u aI,eth e re as on you'",: g o~ a deb t prob lem . Here are tw o good books tba:~can, help YO[U,hon es tly ev a ]~ ,a oo 'your relatioaship with money and chan ge the ' I , ~ f a . yyOf~think aboutit:

1II.Y(n(I:}~,M one y or four' Lije:' Transforming Y o u r Relationshtp 'with M o . i ! ' 1 ) e y andA,chie\ . '!in:g,Pi.nancialln'dependence (Penguin) by Joe Domieguez and VickiR G bi]]", Th is , p e rs on al fin an ce c la ss ic h e] ,p s you . e , v a ] l w a J 1 ; e the :ro]ehat l!LIQ[leyplays in ycnlr life, reorder you r p riorities , an d live on wha t you, make ,liThe Financial Ji.!J{d!.rmo.f.Ebenezer Servo ge." 5 Princip.les to :Tn.:r.ri4fbrm.fQ,Uj' Relationship l!lfitn Mone ,y ' by Ted. :KJo .: ntz> ;Rick. Kahler, an d Brad Klontz(Hci Pl1b~is]lWg)" flus b ook com bin es quotes f roM C h arle s D i ck en s's AChristmas Carol, re-al stories of people with In .o:ney problems, and, the' suthors'ow n advice 'ro, help yO'[1. fig ure ou t hOVi, fyour ,a .u ]'~udes abcr!l]~money (l)flect your]j1 fe a n d 'to h elp Y O : l l1 l , h a ng e d e s tr l l 1 l , c t i v e ,p~trerns,.

Equ8 'tin ,g stu ff with successYou ]M,ay l~ave the miscoacepticn 'm at yDU are what yOou,buy, ",vhich.m ean s the moreyou s pen d, i[ h,cm ore s uc ces sfu l an d im.por~Mtyou a rc , I f's easy to develop thatm iads et 'because' we are' b om b arded w ith m esseg es th at eq u ate money ad sruff ':vit~success . How often . d o ) , 0 - 1 ) ] , see ads prcmoting frugality ~s avin g , o r s elf-d en ia l?


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I f you're h , a _ n g i [ I J g 'w'ith ,a fast set: en d sn ug gl in g to keep up, it ]1IJ a . J y be time totOOv,~IIJ.a~eyour :fti,endJs[ljJ~S.,'frying () keep up with fhe Joneses lIllilay be dliving. yo uin to '~M .e ou r house.

M a,)!be yUlUl spen d m oney for em otion al reason s For exam ple, think abou t , ~ f f i u a tyoudo ~'jjj u..,e.1ffi, V"" '" I feel 16 o! i .. j l ""r . . ; g isappointed or when Vf ' ' i11' 'ii'ij'''lIt'fI j, , I , . . . . celesrate " ' I I 16 11' ""i"\r:!io(') e, '0 ' e,. ," 'r1i, . lL I L ' W . lJ WI)' lU i . . , l ~ Iw 'W ; , , , - ( ] U U llwo.~I, " . , : ' . , " , I~I.~"" P i' . . - . .W 1 L1 I. ~ U ~ "!I' '1. ,~:ilLll,.. Wul ", W ,;ri!JJ, I[]I~ 1[]1~ ~~""~~:)ii,. :. Vyou b ea d, ~ o th e m all or c '1 ick on your favorite retai [ Web site? Do YOM treat yourself toan expensive m ealor en joy a 'weekend. getaway even though you :re~Hycan j,~~afford : i : t . ?

T f this describes YC)!u[' behavior, you need. to gel: ,: 1 handle O]iJJ"lil lhy y o u : I ' : r eoverspending. Meet l~rith aJ . m!el1J~~lea lth profes s iona l; 'you illa y q u .aHfy for' I' . ' ' ~ , " ,C;', '.. .. 1 ' . , , j. J ' . , j, III,. , .. , ,. , . ," ' , ., -, ' 0 " " . ' j . . ' . " , I 'I , d , "',~.II'.. D ' b ' , j , , ' . ' . ,,Jle',~ prom a "o, ' IV' ' '' ''CQ'SV!t1l.0' ''CQI5h. Cw]n,I ,'C m Y0l:U mea..! ,ge.. ~[ 'i i.HJ', ,' e a wun ue ..orsA " " " ,11 ,.', ',' t D . A ' ~ ) 1 ' O : ' : A , , . . . ' ' . ~ ' I " , ~ ; ', ', ' =, l- . .' ~. d . I ' t j : I , , . . : , . E A " j " t,]".,;"., noD '.~ ,m lOU S ' ! , . " " ' . " ' . ' " u s , e , s , 1 I. . l ~ . . n n e iLi~hi;l__rne .. lQ,c,S O,J[ . , o o ] W o lC;;S,Anonymous to hc~p people understand why fh.ey spend aad to Slam controlOVe'J : thei t~ spending, To fi I : l d a. D 'A ch ap ter in you r fI l_ rea ~o to:W'",I1J!{d o e b t - O f : 5uonym'OllSJltg ; o r C t u U 7 :8 .1,453 ~2 743,

Living for the moment:M~a.ybeyQl !J~rprob lem is that yO]!] Iive fo r to da y a nd , d on 't think abou t tOH1QUUl-V, InS i Q ' ]] 1 I J ' ea y s , Jiving in the moment i s ; great, bl!J~] J o t if y o u tu m a blind eye t(nN,~d yourfuture, How do you know ifyou lve got ~11js:~titurlle towardJ :ilti.O:fiey? Y'OlNJ :p'wbitbly

IIIDon't jry to :p ~ off your credit belances 8 ; S , quickly as possible, usin g therarion ale th at th ere w ill b e p]ooty of tim e to do dlalt later.IIa v e , ]it~l,e~i f t1ii:lythlng"IIIRarely if ever '~ake1[ [ 111e itobalance your checkbook and check Q U~ yourcred it rep orts an d credit score, much less develop ru ndu se a household budget

These money att i t 'M,dl~sare self-destru ctive, an d ,tl~ y d o catch u p w ith you c enm al~JJ.Since you're read in g th is b ook, ' t t !M . e : y probably already have


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IIE(~u ifa.x: '~Y\cv.,e g J J l !W x .C Q m , ~ 81 00 ~685~ 11 ' I l l i~D iselosure Department, P , '0 .Box . 7 4 02 4 l~ Atlanta , G ,A 30314. 'XIJC'lji ,9JIi:W\\1tv.e'xpedan,.OQln,;, R:R .8=391=3742 ;" .0 " Box 2 l l04 , ! Allen,Texas 75013~r.an.s U n:iolt,::w tyW Jran su nhm fcpm ; 800-8 8 ~ -4 1 m . . 3 ; P . O. B ox 1 O O O ~C hes ter, P A ],90.2 2

I F you order i i i d . d i tJO [ i L t I l ] , copies b y m a i i i l , p u:n y ou r re qa est i [ f t L a ]e'lt~eI'h a ! ( : i[r[Lc],ll.l]des~tefollowing ]]lJJfoFm,~'~!~iO:fi~an d b e S,UI,e'[0' sign. you r : [e tre r.

Y ou r S ocial Sec urity n umb erIIYour date cf birthIIY ou r phon e n um ber, in clu din g area code

The credit report you ~ ,e Jtcon ta in s t he ' very same infonnation that your currentc red itors a nd p oten tial fu tu re c red itors review t o . make d ec is ion s a:boild you. The :Ul01enegative : i n f Q , r : I l l , ~ t ~ Q ~ 1 L~hati s , contained ~nyQ'l!.-~r~l"ed]~histories (sl!.-~ch a s ; past-duea ce ou nts a eco um s ,j," ""'.....I~ion aceoants j.l~,~~. 'V rO " Ii I I !' . .. .r-,j'j'.,:M::i'\i:1 '~ioa'~!P :fO ]"'r!iI"Q';:!i;"':)' M f f . , r('j,fj'~'U "-' IJ~IL,o~ !l;1"""1; ,{1j ,j, u ,lbJ ' 'u, I, " '" '' '' '' . !~hu, ~ '1 . 'I""' ' iwul lOl l ,ILL,~ 'L!Jj~"'lj~ J' V ~ . ',.,... r,;?l1.Ll,'!.J.\~ ~ ,ihun ,.,. ' iw U 4 ; h. ,; :: . . .. ." , " '" iU,l;J'uncollectible, t a x ~ieus~,n d . so o n ) , the , " V O l ' S eyour f inances a r e ,You r ,ex is :lJ ng c re dito rs 1ll!L,~:y use th e in form etion to decide if d~ey ' w m ] ' [ raise the ~n 're ]" e1Strates you are iPayi~g~ lower you]' cred it lim its , or even cancel your eredi tAnd ,whenever you. ,appliy fo r new credit, the' Cred]JIDll'S review your c red it re co rdinfonnarien to decide whether to ~ppr"O've O'l).]f ,app[icatio1l;. ~Q'w' mach ( m O O i t to ,g~ve:oy o u , the r u n t : e r e s ' ~nli~evou must pay ~and s o on.'} iiA l a fll) 1 su r snc e oom pen i e s, ~ a I D ] , d ~ , i l ) \ I 1 i s ,nd employers also re vie w ' y ou r c re dit r e c o r di n format ion W ma k e decisions i l !hO:i l l tyou Iftltey find a lot. o f n eg iW tive ] n f o : t i l ! I J 1 L a H Q n . ~ ,in s ura nc e c omp a nie s :may ]l,ot agree to insure yc~t11 r , lnay charge yon higher (:h1UfiiJ


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You r S p O U S i G :or partner should g a t ft i i . ,e r u p the sam e wOll'm,a:tio.n b ecau se theg oal of th is exercise is ! to give you a s c omp le te a p ictu re as p os sib le of howyour h01:J3'~h(J ld spen din g com pares to you r hou',eholil income.

C reate a worksheet m odeled s fter the one at the end of this chapter. D oing so w illh .e 1py ou o rg a n iz e y'OUI' spen din g an d, i]]OO~1I1e i])fQl1ll;~l'~i,on.n d m ake su re tll~l~yowdon~toverlook anything . (This worksheet will also come in h~mj,t tyif you read Chapter.-4 ,) where we help you b wild],a 'budget)

, ; i: ,e d expen ses ~ T hese are expel] ses t b . l f i ~ stay th e S f I I l : l l e f i " D I I D J mon t h tomonth, Examp le s ] !ric h; ~deyou r re-n t o r ~I ilo: rf ig : tt ge:~C~T loen, home le~rl)llil~oan,and :LltS,Ul:MCe"-- -. iBi';;: 9 I b i l l , ; - ; , . e"v1 \ ' ; - ; ' 1 0 - s e "t'., T h e s e "iT'l-1l'il"'"


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'F or exam ple, lee s assume thet every w orkday you spend $ 3 0 ]1 ] a latte. ["11 a ~ ~n on dT h,yn a spend $60~and : [ 1 r t L a,yeru- tb~tt "tilly ;~:t~i]ypu rchase adds up ~D$7 . 2 0~ I f ynu also$1~e4JJr l2,_ 5: 0per d . 1 : l y for a,bage l OFpastry t o . go with th e latte, you're spending $,[ ,10each m on th and m ore tfua lfiiJ$1~ 30 0 p er yearl.,, , T0 help YOU,ge: l a band [0 on how _ ueh you fritter away, :for on e mon th wewant you to w rite down ew]ything you pu rchase w ith cash , a d e b i t caed , or a ,credit card, 'Your s , pam~eor parm er shou ld do t h e same, Carry a s ; m , ~ U .n oteb ook ,;vi(h you , whenever you leave the hou se so Y O l l . 1 l can record e, , 1 . 5 1 1 '

expenditure right WiiV~' in stead of tryin g to rem em her it Iater.AJt-elf th e mot:IJt:ns ~IP~adell.IN.:Peverything yo u spent on n on essen tial item s. W 'e b etY O t 1 i : U he su rprised to OO~ how E 1 l 1 I , c h it am ou nts to":M:ult ip]y tll]s, Il.UiI!l1Lher 'b y 11:;.:und,p u t : ' t J iJ a t numbe r ] [ 1 1 . YOUF worksheet unde r ilIO~ : he f';in ,the "Variable Spending" section.

Totallne spe -d-- a idea nlncs,-. In g ':-, o en Ing annear .Ing.Add . u p 'th e n um b ers in , each of the three s p c i o . d i r o g categ ories to get a ,8 .0 b ro tal for each.c ateg ory. '[ hero a dd , 1 J l . i P the subtotals , Tile fin al n um b er rep res en ts tIle amoun t YOIl ] , arecurrently spending e a c h , year"N ext, add up all m e ineom e you reed .cd during th e s am e :l2 -m o.n th period. T M ,e in toaccoun t n ot Ju st: y ou r n et hou sehold in com e (w hich is yo~~~ake-home PQ}!~'YCl lW grossin com e m in us , ,~U dedaction s ) .~ , ut a lso any other in c-om e you , or you r spou se orpartner :in.a~'eceive: govermuent benefits, inve stme nts ~ ta ya ],trh ;:~ $~]]i[d support nr" " p r . 1 ! : ' I ' ( i ; ] - i i . ' ! C I ~ p p"i;,.. t ;,~ ."" ' ; ( ; fl 'n~ f r om < ai Iam ;;]~ b .:;,;' l~C;Ci and s o en Record " f l . Qj, tota l .....I ' I I '0 'r:I' ' '' '- !' iI J ], a ;, n , O : : l ~,I" .: : . . . / . 1 1 " . . , 1IIl11L, ,","';'. I.:~ l V1. ,iL-i, IUiI. ,~)" tlou '~;JI;JI,;;i " O: : l ' " vu. ,;: ~I;.-'U~ ,', 11,U,UiL- ,'!j.iliL-ill. 'U'.ILl Y , , iIJ],w orksh eet too..,. ..

,

If y o u a r e eil.Hl[eO to receive c F ! L H d support a n d / c r s , IP~)u:s"d,upport bu t t F ! L epayments r,Mely come , don ' t iWc].ll lde those ,aI]]Ollli i 'iLi:S when yo u c alc ula te it totalan nu al in com e n um ber for your household , I T f if s u n relia ble in com e , y(m, can' tcou n t on it to h , L ! ' : ] i P cover you r S < 1 J ~ l l d i J ] g , .

C,alc,ullatinlg your f inan!c ia,1 bottom l i :ne. A . f i e J r you have a . tota l ann ual in com e am oun t an d. a total en nu al spend in g a t I i I 1 i l ou l i i i J ljs ub trac t you r s p'en d~ r~ g to ta l from :yOUI' in com e total.


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The Debt-Proof Living N,ewsletterFormerly called Cheapslt(~te.Mo.nthly, ~ - J h i s .publication provides lots o f information.~ld.advice 10help you m ake every donal' GOUD.n hen m on ey is tight, o r any t ime , Formore iu form ation ab ou t the n ew sletter or ' f ro s u b sc rib e, g o, to ,' ) V 1 w . c } .e : a I 1 & k . I l~ e : J m j 1 n l h ~x . ..C J lmh . .

T~l]SW eb site ('iV \Jv \.debtsmart.com } is lo ad ed with articles, advice, and o nlia e to olsto h elp you mooagc your debt 3JJd, make' w is e credit decision s. Y ou can . a]80 sig]Jljupfor a .free s u bs crip tio n to D~ b tSm .W 'fs e-ma il ] J I j e c : y v s f . s t t e r .

Thle ederal Trade ICommls"sioln(FTC)

T h e F 1C en forc es a. 'w ~ dle'ariety {If QQnSliJ~' ! i1 ie:r p rotection . law s related to d eb tco ll ec tors , c :redJ lueport ing , c redH:~repair, credit app,Hcatio 'Ds- and more , H. alsop:nJd.l!. lJoesil p ro dig io us n um b er of helpful fact sheets iJUnd.roclrures on cred it -rela tedla w s, is su es related to borrowing mOWilEf,Y an d u sin g credit card s, an d] a . va riety of oth erconsumer-oriented topics, B est of aft] ,most of the ' agency 's publicerionsare freel Clickyo~~~ou se on j :\ '\ -v"\cv .. fk j . , . g Q v t ft c /c g . n s w [ u . em ) 1 I :m 'n . t o ' t~ ke ; ad ve nta ge o f t~ e FiC 1 streasure trove of informatica ,.

Th is n etio na l n on p ro fit Owg~ IU ~Z aJ ti OW iL ~ rS ,the n ation ' s lead in g ad voea ie for low-incomec on sum ers ..It help s t hem . re so lv e p rob lem s w ith u tility term i na rion s , fo rec lo su res ,[1"'1-'11'00 C' .... ssi.....s d ebt f'I......~Ie . .; + . . . . . r s and other ,d ,(. >~~ .-rel ated 'U0011~..,.0 O . ' n T h '~1f~. W ' " " 'I I I. . . i:"~ terV'-' ~~!&'I Vi ~, ' Ir ' lJ! ~V~~\ r. I . .. .ilrU_ ~~, ! i J I ~U Vi .~~~ ~ :U~L . ~~iIrI!~ .. ~~'-' ~'! iJ.! IlI1 . ~~ ~ ~~ _ "rill ~~ILJ(W\ iV \ iV .CODlJS i lLuue:daw.o tg 1 . it offers f~e" ]n[UnlJJ.~t~onDlJsome ofd[eSle topics m l d . sellsam unber of books on c o n s u m e r i ssues , ] l1 l J O ~ u . d ] l1 l J ghe .Nere Guide toSurliJiving Debt.


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This national nonprofit owg~niza it j,ol -has c lose to 1,000 offices around tie OOU1f i iJmy,~,In ~ny of 'W]c:~ are know n as C on sum er Credit CO~'~ls ;e ru ]n gSe rvic e, Th e off oes offer a,v';ariely of services by phone or in , person, in clu din g b ud ;g ,e ,tcounseling aad education,delDt ]]i'Jj,ao,age!tle:nt plaiIS.;- , U I J d ! classes in finsneial l i t e : n l C Y " (Some o ffic es a '[ $ o p ro vid es erv ic es v ia fh e I n tern et.) A ll 'N FC C cou ns elors h ave 'b een ,highly t r ! : 1 i i n e d . an dcertified,: D e : p e n d j n ,g 0 : 0 , y o u r i [ r [ L c !O : m elevel, N F C C I 1 g s e r v ic e s may b e f r e e ; o 'U t e J " ! i i - v j s . e ,they 'win'be' low cost. for more mortlJJJ!!tio,]] abou t the NFCC ad to find an Nf'CC membernearest you, go to,'~rw,nfcc.Qil8, 0]' call : 8 0 0 - 3 : 8 , 8 , ~ 2 2 l 7 ' ,

A]Jili,o~~h" e think she I l , S . just a ta d quirky, t h i s , nafionally known f inancial p e r s - o l f i i J a r u i t yd is pen ses c on sis ten tly s ou n d, d ow n -to -ea rth a dv ic e O l ll J h er re g u la r S , lm r d . a : y n igh tCNBC television : s J ~ , O ' , , ~ { ,Sh!L;:a lso p en s amonthly column fO F ,0;" The O'pran ,Magazine;, a n d , she i s t ~ e (ljl!l'lho:r (IfDl!J!.'~]l~)f'Ql)JlSbooks, ] M . o : ~ , l !J d ] n , gThe 9 Steps to Financial FreedomfTh ree, R iver s Press), The L(Ji~f!Sof Mon~y, : 5 Ttmeless Secrets to G ( }.'iOU t and S l t ' f ( Y (yuto fF in an cia l T roub le (Free Press), al-d. The .M()tuJ.Y Book for the , Y o l 1 m g , / 1 'obulous '&Broke (R iverhead B ooks ).


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~,ei~id of credit card debt, but :flUng for bankruptcy won't erase yOUI' oh Iigation to payynar mortgage, car ]OtILil~ federal taxes, or child StitpPG1L

Making Promlaes 'That,You Can'tK-e o , e ' - ' . - p - ' - .," :~J :":"_. ,".' _. " _ .'W]],ena creditor contacts yow about ill past-due debt, cr when you c-Gnttt[lC'~he cred.itorto negotiale a '! ,N "~ y 'rI O cai~ll 'U p 0 ]] : i P t l J S l ; ~ d l . l ! . m eiayme~1Lts an d s tay c u r re n t o n , fullnre:p,a,yment.s,,!ever agree to J . 'M r y more than you tnd'y believe you can affb ;n l B ase yourd ecis ion em you r' h ou seh o ld b u dg et,

\V1U~:l1.you don't have enough money in,your checking t1JDCa'l]ir!it tID pay 'whatyou owe b) a creditor don 't give: the creditor in postdated check, g am b lin g t11a~ ~b y 'th e time the date of the check. arrives , the m on ey you 11000 to cover it willb e, ] U 1 I . y


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Managing Debt for Dummies by John Ventura- Mary Reed

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