Thursday, January 8, 2009

Debt Denial...

Waiting for something to break? Living in hope? Or just in denial about your circumstances? Sometimes it’s difficult to determine what motivates those on the brink of disaster. These folks haven’t necessarily been affected by the slowdown or at least as much. But they are carrying an inordinately large debt load and in many cases they are using cash advances to keep up minimum payments on other cards. Another factor is that they probably haven’t seen their rates get “jacked” or the minimums get raised.

I talked with a lady out west who is recently divorced. She got the house; with little to no equity because of a "refi" done several years back (he got the cash). She also got all the credit cards and bills that came along with them. She says she was managing to make ends meet for her and her two daughters up until 5 months ago when her ex-husband decided to stop sending her child support. That along with the sluggish economy and slow down in her business caused her to start using her credit cards to pay for necessities and to juggle payments for her mortgage and unsecured obligations. She's just about at the end of her rope, but probably doesn’t know it.

In light of what’s going on in the economy the “bad” debt has to go and savings is prudent and necessary. Pecking away at credit card debt by making minimum payments is not going to cut it. The truth is that within a short period of time you will see those minimum forcibly increased. So if you can’t make double or triple payments of those cards now along with setting some savings aside and maintaining everything else in the household, you need to consider something a bit more proactive.

What is your situation? What does your household budget look like? Are you setting aside a nest egg to cover your monthlies, just in case? Is “bad debt” interest eating your lunch? What are you doing about it? Shoot me an email and let me know what you have done or are thinking of doing to position yourself for the months and years to come. Be yourself, be anonymous, be your dog and let me know how ruff it has been for you.