After foreclosure

Be aware after foreclosure!

Mortgage lenders pursue homeowners even after foreclosure.

By Les Christie, CNNMoney.Com

As terrible as it is to lose your house to foreclosure, at least it's a relief to put your biggest financial headache behind you, right?

Wrong.

Former homeowners may still be on the hook if there's a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these "deficiency judgments" are ticking time bombs that can explode years after borrowers lose their homes.

It can even happen to people who got their bank to approve them selling their home for less than it is worth.

Vanessa Corey, for example, short sold her Fredericksburg, Va., home in April 2008. She and her husband built the house in 2004, but setbacks, both personal (divorce) and professional (housing bust), made it impossible for the real estate agent to keep her home. So she negotiated the short sale and thought that was the end of it.

"My understanding was that the deficiency was negotiated away," she said. "Then, last November, I got a letter from a lawyer telling me I owed my lender $65,000. I had to declare bankruptcy. There was no way I could pay it."

Many homeowners are now in the same boat. And not just those who took out bigger loans than they could afford or who did so called "liar loans" where they didn't have to verify their income.

Because of falling home prices, borrowers who always paid their mortgage but who have run into unforeseen circumstances -- like unemployment or a job transfer -- can no longer sell their homes for what they owe. As a result, they are being forced to short sell or foreclose and are getting caught up in deficiency judgments.

"After the banks foreclose, it's very common now to have large deficiencies with houses not worth the balances owed," said Don Lampe, a North Carolina real estate attorney.

Lenders mostly declined comment. Although Corey's lender, BB&T did indicate it was pursuing more deficiency judgments.

"They follow the rise and fall of foreclosures," said the spokeswoman, who would not discuss Corey's account.

Can they come after you?

Whether banks can and will pursue deficiency judgments depends on many factors, including what state the borrower lives in and whether there's a second mortgage or other liens. But if borrowers ignore the possibility of deficiencies, it could haunt them.

"Once they have a judgment, they can pursue you anywhere," said Richard Zaretsky, a board-certified real estate attorney in West Palm Beach, Fla. "They can ask for financial records, have your wages garnished and, if you fail to respond, a judge can put you in jail."

In the case of foreclosure, lenders can pursue deficiencies in more than 30 states, including Florida, New York and Texas, according to the U.S. Foreclosure Network, an organization of mortgage law firms.

Some states, such as California, are "non-recourse" and don't allow deficiency judgments. But, even there, if the if the original loan was refinanced, some or all of it may be subject to claims.

Deficiency judgments on short sales and deeds-in-lieu can happen in many more places. In these cases, extinguishing the debt is often a matter of negotiating with the bank.

But even when lenders are willing, many borrowers may not be aware that they have to ask for release. So, if you are pursuing a short sale, be sure your attorney asks the bank to release you from any further obligation.

"People shouldn't have a false sense of security that a deficiency judgment may not be later sought," Zaretsky said.

He expects many will be filed over the next few years, based on the fact that banks have sold many of these accounts to collection agencies and other third parties, at discount.

"The parties who bought those notes wouldn't have paid money for them unless they had the intention of acting," Zaretsky said.

Ticking time bomb

What can be scary is that the judgments don't have to be obtained immediately. Lenders or collection agencies may wait until debtors have recovered financially before they swoop in. In Florida, the bank can wait up to five years to file. Once the court grants a judgment, the lender has 20 years there to collect, with interest.

It doesn't have to be a large amount of debt for a lender or collection agency to come after borrowers. Richard Varno and his wife short sold their Nashville home back in 2004 after he lost his job.

It wasn't until 2008, when the second lien holder asked him for $25,000, that he realized he still was liable.

"I told them, 'Hey, you guys released the title,'" he said. "As far as I know, I'm off the hook."

He wasn't. Releasing title does not necessarily end the debt. It's complicated because of variations in state law, but, generally, a mortgage has two parts: a pledge of collateral, represented by the home, and a promise to pay off the loan.

Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale.

Zaretsky had one client who was so relieved to have arranged a short sale that he signed every paper his real estate agent shoved at him, even a confession that clearly stated he still owed the debt.

"He had no idea what he was doing," said Zaretsky. "All the lender had to do was go to court to convert the confession into a deficiency judgment."

Lenders are also very inconsistent. One of Zaretsky's short-sale clients was ready, willing and able to pay, but the bank did not even ask; another lender always reserves the right to pursue the deficiency.

Strategic defaults

Sometimes lenders go after borrowers walking away from their homes if they have other assets, according to Florida real estate attorney Larry Tolchinsky.

"Banks are pulling credit reports to see if it's a strategic default," he said. "If you're behind on all your other payments, you're okay. But if you're not, they'll come after you."

If borrowers have any doubts about their risks, they should seek legal advice. Or, at least, call non-profit organizations such as NeighborWorks for advice. According to Doug Robinson, a NeighborWorks spokesman, its counselors always try to negotiate away deficiencies when they facilitate short sales or deeds-in-lieu.

"We don't favor any short-sale contracts that leave any deficiency that can be pursued," he said.

Robinson himself knows what can happen. He paid off a deficiency after his own New Jersey house went through foreclosure 11 years ago.

Don't pay minimum balance, pay off

In case you want know that if you pay the minimum on a $3,000 balance with a 14 percent interest rate, it could take you 10 years to pay off.

Spending Priorities

1. Food - to survive

2. Shelter - safety and comfort

3. Utilities - to bath, cook, and communicate

4. Transportation - to move around

First ATM and First Transaction at Barclays Bank

The world's first ATM cash dispenser was installed on June 27th 1967 at Barclay's Bank in Church Street, Enfield in England


After 42 years

Borrowing Money

Why are we borrowing money? Is it for materialism, for the appearance of prosperity, OR for basic needs, or for the purpose of growing wealth to enable others?

Bank Fees

Banking and fees go together. There are ways to reduce the charges you pay on a regular basis. First, make sure all of the accounts you have open are absolutely necessary. Consolidating multiple checking or savings account could add up to monthly savings of $20 or more.

Also, make sure you understand what and how you are being charged. Some accounts advertise as being free, but in order to have the monthly charges waived, you may need to fulfill some conditions including but not limited to a minimum balance, not exceeding a set number of transactions per month and/or having a set number of direct deposits or automated bills associated with that account.

Transaction fees can also add up quickly. Remember, if you withdraw money from an ATM instead of your bank, the average $3.00 fee is charged both by the cash machine AND by your bank. Likewise, most banks include a surcharge on email money transfers. Keep an eye on your account and make sure you know how much these conveniences are costing you.

$20,000 Rolex

Financial advisers call it "the problem of the $20,000 Rolex." If a 25-year-old spends $20,000 on a watch or on a big night out at a nightclub, that money is either depreciating or gone. "But if they invested in a five percent, Triple A insured, tax-free municipal bond for a period of 30 years," money manager Seymour says, "that $20,000 would be worth $86,000 at that tax-free rate of return. And needless to say, they buy more than one $20,000 Rolex."

You Have the Options even with too Much Debt

Credit cards, medical bills, personal loans and raising interest rates do not make a good financial mix. Common mistakes you may want to avoid:

1. Beware of just paying the minimum payments on your debts. This will results in your overall debt actually growing and your problems will only become worse.
2. Beware of relying on friends and family as it could damage relationships with the most important people in your life.
3. Beware of unscrupulous credit counselors that demand cash upfront or high fees for help they promise, but don't deliver.
4. Avoid taking out a new high-interest loan to pay off lower interest rate loans. It may be easier to just have one payment but it will actually increase the amount you have to pay back.
5. Declaring bankruptcy when debt settlement may work for you...

If you feel like you're in over your head with personal debt, you're not alone. The first advice of experts in the field is to be sure you don't make your situation worse by making common mistakes.

Debt Management

Paying off Debt

Step 1: Make a Pledge
To begin, you should make a pledge to yourself that over the next three days, you will:

* Plan on taking four very easy steps to increase your chances of having a secure financial future.
* Promise yourself today - right now, this minute - that you won't be surprised by financial windfalls or pitfalls in the future because you're going to plan accordingly.

Don't get too pumped up now, we're not talking about giving up your daily Starbucks here. This is going to be a lifelong process, but it's important that we get started sooner rather than later. There is no exact date for this "financial pilgrimage", so no work will be missed, no concerts will be passed up and no after-work sports leagues will be canceled. Relax. The advice below will require that you make one stop at a local store and possibly visit a couple websites.

Step 2: House Keeping
a. Get a file system and get the folders to go with it. They are pretty cheap at your local office supply store. A simple file cabinet (plastic or otherwise) and some simple file folders are all that's needed here.

b. Get your most recent credit card statements, phone bills (if you pay online, print a copy), insurance information, your user names and passwords to websites, etc. Make sure to get basically everything that you could look for later but usually can't find right away when you need it - like the receipt for that wedding gift you have to return or your eBay password you can never remember. Now file all these statements, bills and receipts into the filing system you just bought. It generally helps to have the most recent document to the front of the file, but how you choose to file will depend on your personal style.

Make sure to keep adding to these folders as new bills and statements come in. Your goal here is to keep these files organized and up to date so you can always find what you're looking for when you actually need it.

Step 3: Set up an Emergency Fund
No one eagerly anticipates negative, unexpected events. But guess what? They're going to happen. It's just a fact of life. Money magazine says that 78% of us will have a major negative event happen in any given 10-year period of time. This beginning emergency fund will keep life's little Murphies from turning into new debt while you work off the old debt.

Step 4: Start Paying your Debt
The principle is to stop everything except minimum payments and focus on one thing at a time. Otherwise, nothing gets accomplished because all your effort is diluted. List your debts in order with the smallest payoff or balance first. Do not be concerned with interest rates or terms unless two debts have similar payoffs, then list the higher interest rate debt first. Paying the little debts off first gives you quick feedback, and you are more likely to stay with the plan. Continue

Step 5: Set up 6 - 9 Month Emergency Fund
Ask yourself, "Self, what would it take for you to live for 6 to 9 months if you lost your income?" Your answer to that question is how much you should save. Remember, this stash of money is not an investment; it is insurance you're paying to yourself, a buffer between you and life. Continue

Step 6: Paying off Mortgage and other long term loans

Step 7: Investment and Saving

Most importantly, remember one last thing. Your economy is up to you. If you are out of debt and have money in the bank, then the media can talk up a storm about a recession, but you won't feel it. When you have a plan, live on less than you make and save money, you are not in trouble. If you have a paid-for house, who cares if foreclosure rates are up? You are all right. If you have no credit card debt and the plastic companies decide to raise interest rates to 50%, how much will you care? NOT ONE BIT! Take care of your personal money situation, and everything else will take care of itself.

Keeping up with the Joneses

Personal spending on credit is at record levels. The average American household, has $6,000 to $15,000 in credit card debt alone (according to various statistics - who knows which to believe?) Keep in mind that this is not including mortgage debt - only consumer spending. The banks, and their investors, are getting rich by lending us money to fulfill our spending desires.

Have we been living beyond our means?

Payday Loans

This expense may be the most dangerous of the all for your pocket book. These highly unregulated lenders do provide a valuable service – if you need cash now, you can get it for a fee and a promise to repay the amount once payday comes around. However, the industry standard in annualized interest is between 200 and 500%.

These lenders are able to avoid usury laws by calling their interest charges “service fees” which are not regulated the same way in many places. In fact, payday services have been outlawed or severely restricted in 13 states according to bankrate.com. (Hold too tightly to this rescue line and you'll soon be drowning in debt.

Cash Advances

You know that getting a cash advance from your credit card is a bad idea, but we'll all been in an unforeseen situation where you need cash fast. So what does this convenience end up costing you? According to CardWeb.com, the fees ten years ago were on average 2% of the amount advanced with a $2 minimum and a $10 maximum fee. Unfortunately, today that number has gone up to 3% with a minimum ranging from $5-$15 with no maximum fees. Add these fees to the transactions fees you might be paying and you'll be shocked to see the total amount that disappears from your wallet each month on convenience fees alone.

Know your financial limits

The Financial Times recently reported that U.S. banks are set to earn $38.5 billion this year from overdraft fees alone, more than double the number from 1994. If you don't know how much is in your bank account, you could easily withdraw or spend beyond your limit or have a check clear that takes your balance below zero. When that happens, banks charge anywhere from $5-$10 in overdraft fees. And that's not all. If you fail to pay back the amount you've overdrawn, you could be hit with even more fees after a set number of days in the form of a large sum (as high as $35) or a daily tariff (often between $5-$10). According to the National Consumer Law Center, the average overdraft fee is $34.65, and considering a purchase as small as your morning latte could put your account in the red, that's a hefty price tag.

Credit cards fare no better, with late payment fees increasing as well as charges for going over your limit. According to a survey done by the Pew Safe Credit Cards Project in March 2009, 92% of credit cards had a fee for exceeding the credit limit, including 100% of student cards. The over-the-limit fee and the late payment fee were both $39 for most accounts. Also, these infringements can result in your interest rate skyrocketing up to 30% or higher. In fact, that same survey found that 93% of cards allow the issuer to raise any interest rate at any time. And once that rate goes up, it is unlikely to come down.

Ignorance is not a bliss

The worst culprit for keeping you in debt is not knowing where your money is going. Make it a priority to keep records of where and how you spend your hard-earned cash. Make a repayment plan and have set goal-dates for paying off debts. Without these tools, it's far too easy to stay in debt. You can purchase accounting software, make a simple (and free) spreadsheet on your computer or even work it out with a pen and paper; just make sure you make a long-term plan for regaining control of your finances.

Debt may seem like a life sentence, but it doesn't have to be. The number one tip for maintaining financial health is awareness. Be aware of your money and where it goes each month, and be aware of the options available to you. There are easy ways to help alleviate the stress on your finances and move from red to black, and the rewards are more than just monetary.

Pay Credit Card Bills Soon After They Arrive

Credit card companies will take as many as three days to log your payment, so your best bet is to pay soon after receiving your bill if you have the money in your account and can pay the balance in full. If you miss the closing date, you'll be charged the larger of a late fee (often $20) AND interest on the old and new balance.

Buying a timeshare? You got to be kidding

Few years ago, a friend went to an invitation to a timeshare demo "just to see." He and his wife were going to just say no and enjoy the free vacation the company promised. But about halfway through the presentation, he changed his mind and ended up purchasing it. He convinced himself and his wife that it was okay because it provided points that they could use anywhere. Turns out, points aren't that great; they could afford the air tickets to go to the resorts.

He paid for three years of maintenance fees before he decided he had enough. Since timeshares are so hard to get rid of, he decided signing it right back over to the resort for $0 would probably be the cheapest route. He was happy to get rid of it, but before it cost him $8,000, which could have paid for some nice vacations!

Don't Mix Siblings with Money

A friend wrote, few years ago she tried to save his brother from financial failure. He owned a car that was about to be repossessed. She decided to pay off his car with her personal loan account with the guarantee that he would make the monthly payments.

The original $18,000 loan is now up to $27,000 with cash advances and interest! Her brother made a few token payments at first, but that was not enough to even offset the cash he had advanced him. Her brother has not talked to her in two years.

The lesson learned is that repossessed is okay, and if she had allowed it, she would still have a brother and most important no personal debt. She will never again loan money to anyone again.

Bad credit can affect your job prospect

You've networked your way into a job interview. Your background is perfect and your references are impeccable. An offer may be coming. Then the hiring manager says they just need to do one more thing: run a credit check.

Depending on the kind of position you're looking for, a high credit-card balance and a few late payments -- which may have happened because you've been out of work -- now threaten your chances of receiving a job offer.

Forty-two percent of employers, including the U.S. government, run credit checks on job candidates, according to a 2006 survey by the Society for Human Resource Management. Most often credit checks are due diligence on potential employees who would have some contact with money, from CFO to clerk.

To Buy Stuff While Still In Debt

It's recommended that you wait. Sometimes things are necessities and you must buy. However, most things are not. If you want to purchase sport rims, you should wait until you pay off all your debts. Sport rims are not something you need. Being out of debt so that your family can live and save is more important than buying the sport rims. Try look at priorities. As long as you have what you need to physically survive, very few things are more important than getting out of debt as quickly as possible.

Sometimes people borrow money to pay off debt, and they just go deeper and deeper into debt. When you have more money going out than there is coming in, you are simply borrowing to pay your bills.

How to Avoid Trading Your Life with Your House

If you've ever been in the market for a home, you can relate - You walk into the "perfect" home, and you can't believe it's still on the market. The family loves it, you love it, the location is perfect, and the price tag is...well, a "little more than we wanted to spend."

By now you're drooling over the home, the family has emotionally committed, and the sudden pressure to make the numbers work begins to overtake you. The realtor mentions "alternative financing options" that are sure to get you into the home and keep the payments affordable. In a few hours on a Sunday afternoon, you've gone from financially responsible to being ready and willing to do almost anything to get this perfect house!

Never make a permanent decision based on a temporary emotion! Remember this on every outing with your realtor! When you come across a home that seemingly fits all your wants and needs but breaks the budget, the temptation to get way too creative in your financing can overtake you.

Always know your boundaries before even looking at homes! Nothing is more frustrating than making a quick decision on something as large as a home, only to realize you've just traded your life for a house. It happens every day when people choose to put emotion above sound financial principles. Remember that once you take out a mortgage, the payments NEVER drop unless you pay the house off in full or refinance later. Additionally, while using financing tools such as an Adjustable Rate Mortgage (ARM) or balloon mortgage may give you lower payments, they also translate into little or no equity for 5-10 years.

The best way to combat buyer's remorse is to avoid it. Always have a financial plan in every situation. This plan should tell you how to behave with money instead of letting your emotions control your choices.

One suggestion is to take fixed-rate, conventional mortgages, specifically a 15-year fixed. It is recommended to put a minimum of 10% down, preferably 20% to avoid paying Private Mortgage Insurance (PMI). Your monthly payments should never exceed 25% of your net (take home) pay each month.

A sound plan like this:

Sets boundaries for your next home purchase before you even start looking
Builds equity
Saves for emergencies
Sets you free from being a slave to your mortgage

Nothing will ruin a new house faster than paying too much for it. Set your boundaries early, and you'll enjoy your new home for many years to come.

Power to Choose

Simple yet meaningful...hopefully you will like it too

The power of choice

Choose to pay cash, rather than credit
Choose to love, rather than hate
Choose to laugh, rather than cry
Choose to create, rather than destroy
Choose to persevere, rather than quit
Choose to praise, rather than gossip
Choose to heal, rather than wound
Choose to give, rather than steal
Choose to grow, rather than rot
Choose to pray, rather than curse
Choose to live, rather than die
Choose to say something nice, rather than hurtful words
Choose to do something nice, rather than hurtful actions
Choose to do it now, rather than later
Choose to give, rather than take
Choose to initiate, rather than follow

We have a choice, choose wisely

#adapted from the book "Say Something Nice"

Key to Zero Credit Balance

Here is a person relates his experiences on how to have no credit balance in his credit card.

He said, in the past 10 years he has zeroed his our credit card balances three different times: first was through a debt consolidation plan in 2000, second was through a homerefinancing loan in 2003, and third was through a personal loan from a bank in 2007.

Each time he paid the cards off, he ran the balances back up within a year. He finally learned that paying them off doesn't guarantee they'll stay paid off. The secret is to pay them off and stop using them!

Finally he said, at this point, he has only one card, has stopped using it, and are in the process of paying it off. Every time he make that monthly payment, he reminds himself what he could be doing instead of paying off this credit card.

Loaning Money to Friends and Relatives

So the old joke goes: if you lend your brother-in-law $100 and he never talks to you again, was it worth the investment?

The joke may be funny, but experiencing this in real life is anything but funny. Loaning money to a friend or family member is a bad decision.

Someone who lends money to a loved one has their heart—not their head—in the right place. It is okay to give money, but loaning money to someone with whom you have a relationship will lead to broken hearts and broken wallets.

Check out the statistics from a recent money-etiquette survey:

• 57% of people said they have seen a friendship or relationship ruined because one person didn't pay back the other.
• Almost 50% have loaned $100 or more to help out someone, but 55% don't get repaid.
• 71% lend money to immediate family members, 57% to relatives, and 54% to friends.
  

One fact not quoted in the survey is that dinner tastes 100% better when friends or relatives don't owe one another money! Eating with your master is different than eating with your family.

Loaning money makes relationships awkward. Parents who lend their newly married daughter and her husband a down payment for a house think they are helping out the new family. Soon, however, they are giving the young couple disapproving looks when an upcoming vacation becomes more important than repaying the loan. This leads to nothing but resentment and pain on both sides.

Don't do this to people and relationships that mean something to you. If someone is in genuine need, it's great to help. If you help with money, make it a gift instead of a loan. By not having an I.O.U. having over your head, you will keep your relationships strong.

Lessons from the Wealthy

It's a fact that people who are wealthy live in ways that make them that way. They don't believe in car loans, wasteful spending or "easy" payments. Even though most people will never have the wealth of Bill Gates or Donald Trump, that doesn't mean you can't be wealthy if you work at it.

So what are their secrets? The answers shouldn't surprise you.

1. Believe in giving. People who have money give a lot of money away. Dave stresses this! If you help people who are less fortunate, it will teach you to be satisfied with what you have. When that happens, you won't think the key to happiness is a new convertible with a $1,000 payment attached to it. Charitable giving and "paying it forward" are things that many rich people practice. Households with $100,000 or more in income give away about 5% of their earnings, which is about 3 times the average of all families.
2. Goodbye, credit! The richest 10% of Americans are half as likely to have credit card debt. They are also 20% less likely to have installment loans.
3. Hot wheels? Many wealthy people don't spend a lot of money on cars as a percentage of their wealth. The richest 10% of Americans spend about 2.4% of their net worth on cars. Translated: You won't likely go to a rich person's house and see 10 SUVs parked in the driveway!
4. Invest it! 62% of wealthy people own or contribute to mutual funds, pension plans and other investments.

It takes time to become wealthy. Most people look at a rich person and don't see the sacrifices he or she has made or the frugal lifestyle they have lived. Once you adopt that economical lifestyle, start investing and don't carelessly spend money, it will become less of a sacrifice for you because it will be habit.

7 Bad Attitudes that Lead to DEBT

Going into debt is the symptom of a larger problem. You don't spend excessive money on "stuff" unless you have a void somewhere in your life that you are trying to fill. If you don't have discipline and strong will, you will want (and buy) things that other people have even though you can't afford them.

So here are the 7 behavior, and how can they lead to being out of control with money?

• Envy — Seeing your neighbor drive up in a brand-new car can cause you to be envious of what they have (though they are probably broke and bought something they couldn't afford). If you are so desperate to feel equal or even better than those around you, you'll buy way too many things and destroy your chances of building wealth.
  
  
• Pride — This can happen when you try to do the "90 days same-as-cash" routine. You buy a TV or major appliance and promise to pay it off on the 87th day. Then something happens. You go on vacation and forget the deadline. You accidentally forgeot to make payment and can't afford the payoff. Don't try to use the system to beat the system. It will always come back and bite you.
  
  
• Sloppy— Not paying attention to your bank account, or the terms of a loan, or not being proactive with your money, will eventually cause you to not have any. Your spending will get away from you. Stay on top of your money.
  
  
• Greed — This one almost goes without saying. Many times we want what we can't have. Trying to get something before it's the right time will get you in big-time money trouble. You'll get a loan for a new car and make $600 payments for 5 years. If you don't make those payments, the car will get repossessed and you will have no peace of mind.
  
  
• Anger— This can happen when you talk to debt collectors. Their job is to make you mad, embarrassed or scared. If they scream and insult you, and you pay them before the light bill, you are not prioritizing well. Work hard, work overtime and be smart with money. Keep a cool head when the heat is on, and you'll survive.
  
  
• Stingy — you feel loss if you give. Money can buy fun, but not happiness. If you try to keep all of the money you make for yourself and only spend it (never giving it away or helping others), then money will only bring fun and not happiness. Fun things aren't as fun after a while. If you eat enough lobster, it tastes like soap. Helping others brings happiness, but if you never give then you'll never learn that lesson.

• Lust — There has never been a rich addict. If you have a problem with any sort of vice (drinking, gambling, pornography, etc.) or anything else, your addiction will cause you to spend, spend, spend. That will lead to more than just a ruined bank account; it will lead to ruined relationships, careers and lives.

Why Debt is Bad?

Here are some points to ponder before you decide to borrow money or use credit card.

Physically...

• You are a slave to your creditor. You have to pay them first before you can buy anything you want. You are not in control of your income, other people determine where your money should go.
  
• You may go into hiding if your monthly payment for debt is more than your income. You will lose ties with your family and friends. All creditors are looking for you. Even worse you may even lose your job!
  
• You will lose your family members and friends if you borrow money from them and you did not pay them back.
• You will lose your dignity and respect from your friends and family.
• You are afraid to answer the phone. Creditors are calling you again and again.
• Your life is at mercy of others. What kind of life is this?

This is what happen if you have debt.

Financially...

• You are broke. You don't have money in hand. That is why you borrow money or use credit card. Don't find excuses such as I want to invest my money, I want to get credit card cash back, this is only temporary, and on and on, just admit that you don't have enough money to pay.
• You can not contribute to charity or to community. You will keep thinking "I don't have money enough to pay my debt, why should I give it to you."
• You don't have saving for emergency or for your future.
• You may dig into deeper hole by engaging activities such as gaming and gambling hoping for quick fixes.
• You will become greedy, calculative, and selfish. What kind of person is this?

Emotionally...

• You have no self confidence. You are afraid to talk about yourself or your achievement.
• You may think that it is impossible to turn thing around.
• You may think that you have screwed all your life.
• At the end, you may even think to end your life.
  

My humble advice before you borrow money or use credit card consider this check list:

• Is the purchase is a necessity or a want (such as hobbies, toys)? You will never satisfy your wants even if you get the whole department store. Your wants are endless, you need to control them.
  
• Is it really necessary to borrow? May be I can just delay the purchase until I have enough cash.
• Do I have enough mean to pay back within a month?
• Try to live on less than you make. If you spend everything you make, then you are financially a fool.
  
• Learn to give. You will get a lot more through giving. Ever wonder why philanthropists are keep giving and they never become poorer?
  
• Just remember one debt will lead to another debt. It's not the bank or the creditor that will help you to settle your debt. It is YOU.
  

The simple art of budgeting

Like most people, your monthly income never goes far enough. After shelling out for food and house payments, it seems there's little leftover for things that matter most to you -- weekly dinners out, nice dresses, a college savings plan for your kids. Here are some tips that might help for budgeting your income.

• The 6 budget bombs
• 7 steps to creating a budget

Credit Card Goodies, What is the catch?

Free merchandise points, free bags, free tools, free airline miles and a lot more. Sound familiar. It seems like every time you turn around, the credit card companies are thinking of new ways to bait you into signing up for their cards.

According to MSNBC report, the average person that carries credit card has a debt of $2,000! If you sign up for an 18% credit card and pay $50 a month on it, you will pay $1,002 of interest in addition to the $2,000 of debt. That means, you will spend $1,002 for a $15 bag or tool that you'll probably never wear or use!

That's not the only way cards can mean trouble. Check out these other credit card tactics:

• Annual fees can eat your credit card benefits for lunch. Let's say your card offers airline miles and has an $50 annual fee. If you spend $5,000 on the card every year and pay it off each month, you'll have accumulated enough to get the free ticket may be in 5 years. The only problem? You'll have spent $250 in annual fees alone...and you can buy a plane ticket straight up for $250.
  
  
• Expiration dates are another "gotcha" in the credit card world. A credit card company was surveyed by a customer advocate group a couple of years ago. It advertised up to 4% cash back on purchases (not every purchase will qualify, though). The catch is that after 2 years, the points start expiring. Even, if you spend $10,000 a year on the card, you'll only get back an average of $40 a year. Even more, you can't redeem the rewards until you build up at least $100, which will never happen at that spending rate.
  
  
• Low caps are still another way that credit card companies hook you in. They may promise you cash back, but they impose a limit on how much you can get. If they promise 1% cash back and have a $200 cap, then you'll need to spend $20,000 to get $200. That's too much effort for too little reward. Do you really want to spend $20,000 unnecessarily just to get $200?
  

Think about this for a second. When you open up a credit card account, you are likely to pay thousands of dollars in interest over the years as you carry a balance. Even if you promise to pay it off every month, all it takes is one lost or missed payment. If that happens, your interest rate is jacked up, you get slapped with fees, and it dings your credit. Either way, you'll make a big money mess.

Keep your money simple, and you will win with it. When you climb steps, you climb them one by one and go straight up. Using other people's money and making things complicated is like tying your feet together and trying to jump up the steps. You'll only hurt yourself. Don't make things complicated.

Credit Card or Cash

Many people think that they can get ahead by using credit cards. By paying off each month, they pay no finance charge, gets 2% cash back, and use the credit card company's money for free. They think the credit card company is losing money on them. Is this right?

Theoretically is yes, but practically is a big NO! First, every time you use the credit card, the credit card company is already making 2% from the merchants. But this is not the issue. The real issue is are you really making money or saving your money by using credit card.

Studies done on consumer spending shows otherwise. Dunn and Bradstreet say that spending cash hurts and registers psychologically. They also did a study proving that people who spend with plastic, even disciplined and responsible people, spend 12%-18% more. Those same people spend 37% more when using plastic at a fast food restaurant and 78% more at a vending machine.

Even if you’re conservative and only over-spend by 6%-12%, you’re still not winning and you’re taking a risk. You’re risking that the credit card company will post your payment late and that you’ll get charged with late fees and interest on that balance. Even if it’s their mistake, you’ll spend the next five months arguing over $20 because these people break federal law everyday.

Some merchants even require minimum spending limits before credit card transactions are allowed. This requirement may even lead to unnecessary purchases.

As responsible as you are, you could probably continue in your credit card spending habits and break even – maybe even make a little bit of money. But as long as you’re playing with snakes, you’re going to get bitten. This may not be a big deal for you personally, but it is a big deal for millions of people. We have yet to meet a millionaire who says that the cash back they got on their credit card was what made them wealthy.