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HELLO MY FRIENDS,
Financial Freedom Articles
Debt is Detrimental to your Financial Health
It usually happens around January 30th of each year. Our anxiety level rises dramatically as we read over our December credit card statement and realize we did it again—charged up the credit cards with too many holiday gifts, dining out, movies and other holiday self-indulgences. Each year we promise ourselves that we will never do this again, but somehow, year after year, we do.
Total Wellness
We are the Wellness Company, and a full understanding of that claim requires that we teach, practice and promote wellness in every area of life, including the area of financial “health” (as illustrated on the Melaleuca Total Wellness Wheel). Consumer debt is one of the most dangerous human habits. Your future, your peace of mind and your posterity are at risk.
Culture of Debt
Consumer debt is at an all-time high, breaking new records every quarter. Between November 1st and Christmas Day, 2004, Americans charged nearly $220 billion in retail purchases. That is 4.5 percent more than in 2003. The Federal Reserve just reported that the National Consumer Debt is currently at $9.95 trillion. That’s up more than $3 billion dollars from 2000! Write that first number down and look at it. (Hint: it has 10 zeroes.) Divided by every man, woman and child in America, that comes to about $38,000 dollars each (the number includes mortgage debt).
We all know children are responsible for very little of that debt, of course, so the true ratio is even more astounding. Adults are responsible, and their favorite tools for financial abuse are major credit cards (Visa,Master Card, American Express and Discover) and subprime loans: high interest-rate loans to consumers with impaired or non-existent credit histories. These latter products include zero-down loans, interest-only financing and home equity borrowing of up to 125 percent of a home’s appraised value.
Interest-only mortgage loans have become very appealing because the monthly commitment is lower than that of a typical 30-year conventional loan. However, with the interest-only loan you establish absolutely no home equity and place yourself at risk of serious financial hardship in the years to come as the established term comes to an end. Likewise, home equity loans that grant funds above the actual appraised value of your home may seem like a great idea at first for getting some extra money. But if you still owe on the home equity loan when you decide to sell your home you may find that you are “upside-down” financially: you owe more on your home than it’s worth. How does that ‘great idea’ look now?
Like the credit card industry, mortgage companies are pushing their products through television commercials, pop-up ads on the Internet and mailings (daily!) to your home. Their message is, “Even if you have poor credit and have been turned down, we want to help you”. Did you know that college students can obtain a credit card with no prior credit history, no current job and no parental cosignature? And most students are happy to have access to this world of credit without fully understanding the risk and responsibility of credit card payments, late fees, finance charges, annual fees and the multitude of other hidden costs. Far too often parents are stepping in to bail out their college student in order to keep him or her from creating a poor credit rating and jeopardizing a financial future. Students today are graduating from college with an average of nearly $3,000 of credit card debt.While that is the average, a small percentage of students have as much as $16,000 of credit card debt. This is over and above any student loan!
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Kathy/simikathy.com
253 277 1238
simikathy@comcast.net
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