Americans in Debt: A Growing Problem.

We all know that managing debt is a big part of living a wealthy life. But what about those of us who don’t – or can’t – manage our debt? What happens to us?

Well, there’s a great article on today’s NYTimes.com about Americans who are way in over their head in debt. And what they’re doing about it.

The piece by Gretchen Morgenson digs deep into the problem of personal debt in America. And it looks at the big questions, such as “Why do lenders give loans/mortgages to those who will probably have a problem paying them off?”

There’s also a great debt calculator, so you can see where you stand debt-wise in relation to others. For instance, did you know that if you have $25,000 in debt, you have more debt than 50% of families? I didn’t know that.

So, do yourself a favor and check out this article and calculator. And if you’re in debt, find ways to get out of it. It’s a very important part of living a wealthy life.

Don’t Declare Bankruptcy.

I’m sure that you’ve read the articles that talk about how Barack Obama wants to pass laws that make is simpler for certain citizens to wipe away their debts. But beware of bankruptcy – no matter how simple it is – because it can hurt you for decades.

Yes, decades!

If you want the inside scoop on this, read Lauren Tara LaCapra’s article on today’s TheStreet.com. In it, she shows you how bankruptcy – even a simple one – can really effect your life.

I guess this whole bankruptcy discussion began back in 2005 when new laws made it tougher and more expensive to file for Chapter 7 or Chapter 13 personal bankruptcy. And Chapter 11 is no picnic, either. But now, Obama wants to give a “fresh start” to about half the people who declare bankruptcy – military families and those hit with medical bills – but making it easier to wipe out their bills.

One thing B.O. doesn’t seem to be looking at is the long-term effect of going bankrupt. According to Lauren, it can take over 20 years for bankruptcy filers to reach the same financial status as their peers who did not declare bankruptcy.

So, the “fresh start” just might not be so “fresh” by the time a bankrupt person can get back on his or her financial feet again.

If you’re thinking about filing for bankruptcy, please check out this article before you go any further. And let us know what you think.

6 Ways to Improve Your Credit

One of the important keys to living a wealthy life is to have a healthy credit rating in the form of a good FICO score. But as important as your FICO score is to your financial life, it’s also confusing to understand how it’s calculated and how you can improve it.

So, to help us out, let’s begin with a few basics. According to Creditboards.com:
• Your FICO score can range from 300 to 850. And you have 3 different FICO scores from three different credit rating bureaus – Equifax, Experian and TransUnion.
• A score below 500 is bad, a score in the 600’s is OK, a score in the 700’s is good and a score above 720 is basically great.
• The following factors basically determine your FICO. The percentages are how influential each factor is in determining your score.
- Your Payment History: 35%
- The Amount You Owe: 30%
- The Length of Your Credit History: 15%
- The Types of Credit You Have: 10%
- The New Credit You’ve Applied For: 10%

OK, so now that we have an overview of what your FICO score is and how it’s determined, what can you do to improve it?

1. Pay your bills. On time.
With about 35% of your score based on your payment history, late payments can destroy your score, especially recent late payments. So, always send in at least your minimum amount due, on time. If you know your payment will be late, call your lender and explain why. They might accommodate you once. Read more

Credit Card? Debit Card? What’s Best?

Are you as confused by the differences between Credit Cards and Debit Cards as I am? Do you wonder which one you should use in which situation? And which one is costing you a load of money?

Well, if you’d like to really know what’s going on in the Credit vs. Debit Card battle, then take a few minutes and take look at Peter McDougall’s article on today’s TheStreet.com. Right after you pay for your coffee and donut with a Debit Card. Or is that a Credit Card?

Peter clearly shows the difference between the 2 types of Cards. And some of the things I learned were pretty eye-opening. For instance, I always thought that one of the benefits of using a Debit Card at a checkout was that I wouldn’t be charged a fee, like I would if I used it at an ATM. But now, I see that some banks actually charge a fee – from a dime to a dollar or more – when we use our Debit Cards at a checkout. That’s crazy!

Check out Peter’s article and let us know what you think. Who knows? You just might find that some of those little pieces of plastic that you’re carrying around are really doing a number on your finances. And your nerves.