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The Fulcrum and the Lever

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    I turn the key and unlock the deadbolt. It’s been a long day’s work. I have been working three jobs for weeks now. I come through the door of my tiny one-bedroom house and stare at the desk, piled high with debris: old junk mail, magazines, and a few bills. I keep thinking maybe on my day off I’ll clean this mess up, balance my check book and pay my bills. “But what’s the use?” I think to myself, “I have $210 left on my credit card, that’ll get me through another week.” Independence is what I wanted and that’s what I got. I have a car, a house, furniture, stocked cupboards, and plenty of I-can-do-what-I-want free will. I was working a lot, and sure was doling out a lot of dough, yet I felt atrophy kicking in. When I was dying to leave my parents house, I didn’t think that it would be like this. Going and doing whatever I wanted all the time was not something I did. Life cost money and the reality was kicking me in the stomach every time I walked in my front door and looked at my desk. “Where is that Consumers bill? How much money is left in my checking account? Do I even have any in my savings?” These thoughts break-danced in my head often.

    In a day where I see more commercials advertising credit cards, debt consolidation, and home mortgage lenders, one might find it hard to believe that debt can actually be a problem. Seeing those poor saps dance in a conga line screaming, “Freedom!” makes it that much harder to notice. With three maxed-out credit cards, and other debt in the thousands of dollars, I was one of those people screaming, “Save me!” My life could go nowhere while I was struggling to make payments on three credit cards that I hadn’t even used in two years. One of my frustrations stemmed from the fact that all of this money was going to the credit card companies for things that I don’t even remember buying. With my student loan in deferment, I had only to worry about everything else. Working three jobs was not my cup of tea. The “American Dream” was killing me. A lot of Americans are drowning in debt, with predators just waiting to add to the pile. Dave Ramsey, New York Times best selling author and financial advisor, says: Debt is dumb. Most normal people are just plain broke because they are in debt up to their eyeballs with no hope of help. If you’re in debt then you’re a slave, in the sense that you do not have the freedom to use your money to help change your family tree. According to a recent USA Today article about debt, “78 percent of Baby Boomers have mortgage debt, 59 percent have credit card debt, and 56 percent have car payments.” Imagine how much you could put toward retirement if you just didn’t have a stinking car payment? This is how the wealthy really build their wealth. Debt is dumb. Welcome to the real world!He also speaks of the eternal car payment, saying, “Most people carry a car note for their entire lives, paying about $378 a month. That same amount invested from age 25 to retirement would, on average, amount to more than $4 million by age 65. You do the math.” Americans do not stop and think of how all of this debt they are carrying hinders their freedom to be wealthy, safe and have peace of mind.

    Darren Waggoner of Credit & Collections World says, “There’s little doubt Americans 18-to-34-years-old are addicted to plastic. Many are burdened with hefty student debts, too. Struggling to keep from sinking deeper into a financial abyss, they often turn to credit cards to bail them out. They don’t understand that their buy-today, pay-whenever behavior could doom them to a lifetime of debt (21).” This is yet another example of how prevalent the problem is.

    Richard Sylla, writer for the Houghton Mifflin Company says, “When the national debt was created in its current form in 1791, it stood at $75 million. Nearly two centuries later in 1988, the debt stood at $2,600.8 billion. It’s amazing to think that it all started so long ago with just a little bit of borrowing. According to the Bureau of the Public Debt, the national debt as of May 20, 2005 was $7,768,431,198,132.21! We should look at this, and see it as an indicator of how it really is a slippery slope that anyone can fall down, even the smart almighty U.S. government. Paul J. Lim and Matthew Benjamin, of U.S. News ; World, inform us: Of course, the credit card issuers, the auto lease firms, and the sub prime lenders who peddle mortgages for 105 percent of a home’s value, understand the American psyche all too well. Last year, though the average cardholder already carries nine cards in his or her wallet, card companies mailed out an estimated 3.3 billion credit card solicitations. That’s about 30 per household. Their goal: snag a greater share of the $3 trillion in credit lines already extended, or $30,000 a household.

    What an astonishing number! A lot of Americans today barely make $30,000 per year. People that mortgage their home, especially every time they get any equity into it, rarely realize that if you cannot keep up with the payments, the lenders get to take their home away. Especially if you have those nine credit cards in your wallet, it will be hard to keep up with the payments. While you are racing to the bank to deposit the money in your checking account that you got from a pay-day advance, to cover the check that you wrote two days ago, consider this: credit cards only make up a portion of this huge amount of debt, but often serve as a “gateway” to other debt such as car loans, home mortgages, and even payday advances.

    Analysis of Potential CausesPotential Cause: Overindulged DesireSusan Carpenter writes, “She earned $27,000 a year but owned 300 pairs of shoes. Now the self-proclaimed Imelda Marcos (the world’s best-known shoe collector) of Marina Del Rey’ is paying for it.” I can relate to this, myself having 50 pairs of black shoes alone.

    Potential Cause: Lack of Self ControlLack of self-control is the number one cause of debt, stated by Dave Ramsey in his book The Total Money Makeover: “90 percent of people in our culture buy things they cannot afford (5).” Most experts believe that overspending and the need for instant gratification are some of the main causes to this problem. “Part of the problem with our debt obsession is that, for some, it is close to an addiction (Lim).” “Our money behavior is actually a big expression of who we are inside,” notes Tahira Hira, professor of human development and family studies at Iowa State University. “It shows how much we are willing to accept reality and how much we want to be something that we are not.” If a person has a core lack of self-control, and the reality that they live in says, “I need this $80 pair of jeans, and I can afford it,” then that says something about what is going on in their life. It manifests in all of their actions, including how they spend their money. Potential Cause: Predatory CreditorsMore than 80 percent of college students have at least one credit card by the end of their freshman year, according to Robert Manning, author of the just-published Credit Card Nation (Basic Books). Of those, 25 percent received their first card in high school. According to Manning, the credit card companies are trying to get people as young as possible to establish corporate loyalty.

    Possible Solutions As far as blaming the credit card companies, it’s easy. They do deserve some of the credit’. Some Americans in debt think: “Just lower my interest; that will get me out or I’ll just transfer my balance to another credit card. It’s so easy to lower my payments!” The American way is to blame someone else. But in order to really fix this problem, one must look at his or her face in the mirror and accept responsibility. Don’t blame anyone else for what you have done.

    There are many solutions offered by many advisors about how to “get out of debt.” One should be weary those offering to help you “get out debt fast!” This is better known as debt consolidation. Debt ConsolidationDebt consolidation is “to combine several loans or liabilities into one loan. Put another way, taking out a new loan to pay off a number of other debts. The most common reason for debt consolidation is to attain a lower interest rate, but it might also be for simplicity ( Just like the commercial for Consolidated Debt Solutions raves, “I had so many credit cards and they lowered the rates on all of them. I can’t believe how easy it is to pay off all of my credit cards!” You can see the people in the background, dancing in a conga line. The company makes it sound so easy and glamorous, but beware.

    Debt consolidation has many problems associated with it, mainly that it cost so much, only fixes the symptoms and financially ruins you in many cases. “Debt consolidation lowers your payment but the problem is you could end up paying on the debt longer, thus paying more in the end (Jolley).” If a person stays in debt longer, they pay the lender more, which is why they are in the business of debt consolidation. “78 percent of the time, after someone consolidates his credit-card debt, the debt grows back (Ramsey).” Steps to FreedomMany legitimate financial advisors will agree on several main points to debt freedom. Calculate your spending. This Otherwise known as a budget. “You need to determine where all of your money is going. So write down exactly what you spend every day (Mintzer).”Start an emergency fund. You should do this first to avoid the pitfalls you will inevitablyincur when trying to pay off your debt. For instance: you start paying off your credit cards, when your car breaks down. Then you have to use that credit card you have been paying down to fix it. This emergency fund eliminates that need. Ramsey recommends $ 500-1000 depending on your income level.

    Pay off all debt. Several ways exists to accomplish this goal. Experts agree: prioritize debt somehow. Biggest to smallest amount or lowest to biggest interest rate. Larry Burkett, suggests on his website, Crown Financial Ministries, “Negotiate with creditors. Be courteous, but suggest that you might transfer your balance to a competitor with a better rate. They may agree to lower your rate; it costs them more to find a new customer than to keep you. ” Larry also suggests that you should consider selling an asset. Cut up those credit cards! “Sure it’s nice to get 10 percent off your kids’ summer clothes when you open a Gap credit-card account, but the more cards you have, the more likely you are to rack up debt (Parents 50).

    3-6 Months of Expenses in Savings. This will extinguish all need for credit cards. Even for “emergency situations”. If you lose your job, have a baby or anything happens, you will have enough money to live on for a few months without going into debt again. After these steps, one can start investing, saving for their children’s college fund, retirement and pay off his or her home early. ConclusionsFirst, admit there is a problem. It’s a cliche, but debt counselors like Steve Rhode say, “You can’t correct dangerous behavior unless you recognize that it is harmful. An easy way to tell if you’ve got a debt problem is if you don’t have enough money to pay all your monthly expenses plus your minimum credit card obligations.” Other warning signs include not knowing your credit card balances or even how many cards you have.

    Steps following are (2) calculate your spending; (3) start an emergency fund; (4) pay off all debt; and (5) save three to six months of living expenses.

    One cannot deny that there is such a widespread problem. Based on this research, there are countless causes, but the most likely causes for the debt problems Americans have are: lack of self-control, over-spending, not planning ahead, and most of all, the fact that many people don’t even think there is a problem. While you may not agree or necessarily have to do everything the exact way someone suggests to you, we should try to implement some of these ideas in our own life. Those that teach that debt is tool, a fulcrum and a lever, don’t understand the slippery slope that debt leads to. The mind set that that line of thinking produces is dangerous.

    We cannot make it on Discover Card Points. Dave Ramsey said it best:Debt is not a tool; it is a method to make banks wealthy, not you. The borrower is truly servant to the lender. Your largest wealth-building asset is your income. When you tie up your income, you lose. When you invest your income, you become wealthy and can do anything you want. How much could you give every month, save every month, and spend every month if you had no payments? Your income is your greatest wealth-building tool, not debt.

    Until everyone sees the causes of debt, many will continue to endure the penalty of living this lifestyle sooner or later. If we live by the slogan in My Total Money Makeover, The solutions are simple: “If you will live like no one else, later you can live like no one else.”Works CitedCarpenter, Susan. “Bankrupt at 24.” Los Angeles Times. Los Angeles, CA. 23 January 2001: E1+. SIRS Researcher: SIRS Knowledge Source. Online. 31 May 2005.

    Chien, Yi-Wen ; Sharon A. Devaney. “The Effects of Credit Attitude andSocioeconomic Factors on Credit Card and Installment Debt.” Journal of Consumer Affairs. 35.1 (2001): 162. Infotrac: General Reference Center Gold.

    Online. 31 May 2005.

    Crown Financial Ministries. “Getting Out of Debt.” 25 October 2004. 10 June 2005.


    Epstein, Gene. On Borrowed Time?. Barrons, 13 January 1997: 15.

    FAQ: What’s wrong with Debt Consolidation? 2002. 8 June 2005.


    Glink, Ilyce R. 100 Questions You Should Ask About Your Personal Finances: and theAnswers You Need to Help You Save, Invest, and Grow Your Money. New York,NY: Times Books/ Random House, Inc. 1999.

    Lim, Paul J. and Matthew Benjamin. “Digging Your Way Out of Debt.” U.S. News & World Report. 19 March 2001: 52+. SIRS Researcher: SIRS Knowledge Source. Online. 1 June 2005.

    Manning, Robert D. “Perpetual Debt, Predatory Plastic.” Southern Exposure. Summer2003: 48-53. SIRS Researcher: SIRS Knowledge Source. Online. 2 June 2005.

    Mintzer, Rich & Kathi Mintzer, C.P.A. The Everything Money Book. Holbrook, MA: Adams Media Corporation. 1999.

    Sylla, Richard. “American History Information About National Debt.” The Reader’s Companion to American History. Houghton Mifflin Company. 20 May 2005.


    Ramsey, Dave. The Total Money Makeover: A Proven Plan for Financial Fitness. Nashville, TN: Thomas Nelson, Inc., 2003.

    —–. More Than Enough: The Ten Keys to Changing Your Financial Destiny. New York, NY: Penguin Books. 1999.

    “The Debt To the Penny.” Bureau of the Public Debt: United States Department of the Treasury. 20 May 2005. .

    Waggoner, Darren. “Going Broke?: Younger Americans have a serious debt problem. Not surprisingly, lenders and consumer advocates propose different remedies for the credit crunch.” Collections & Credit Risk. 10.5 (2005): 21. Infotrac: General Reference Center Gold. Online. 31 May 2005. Webster, Noah. Noah Webster’s First Edition of an American Dictionary of the EnglishLanguage. San Francisco, CA: Foundation for American Christian Education, 1995; Reprint edition 1 June 1967.

    Yaqub, Reshma Memom. “Swipe at Your Own Risk.” Parents. July 2005. 49-53.

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