For years I’ve been telling my readers there are two kinds of debt: safe debt and toxic debt.
Safe debt is secured debt―it has collateral connected to it. Your home mortgage is a safe debt. You had to qualify for it, so at least one person somewhere looked at your financial situation determined that you can afford it.
If things change and you can’t or you change your mind and want out of the debt, there’s a way out. You can sell the collateral or just hand it over to the lender and call it even. Safe debt gives you a way out. You have the equivalent of a safety net so you don’t ruin your life.
Toxic debt, on the other hand, is stupid debt you get on your signature alone without qualifying, without anyone caring about whether or not you can afford it.
Toxic, poisonous debt comes from allowing credit purchases to revolve on a credit-card account, opting to pay only the minimum monthly payment. It’s the terrible reality of spending sprees and frivolous decisions.
I just did something I have not done in years. I took the weekend—plus the holiday—off. It was wonderful. Had friends over. Moved our backyard barbecue inside as it was terrifyingly hot and windy.
And I made salsa. From scratch.
I used my absolutely favorite kitchen gadget, the Vidalia Chop Wizard to chop the stuff that needed chopping (tomatoes, onions, bell pepper, jalapeno, garlic, cilantro). This thing is amazing.
It chopped the tomatoes fast and uniformly—without launching seeds and pulp across the room or turning the whole thing into a squished mess.
Then the onions, peppers, jalapeno, cilantro, garlic all mixed together with lime juice, salt and pepper—done in about 5 minutes start to finish. Yum!
I love my Chop Wizard. I look for things to chop just because it’s so much fun. I’m a chopping fool! And the results are always so amazing. I even took Chop Wizard to the office a while back and held a demonstration for my tolerant staff.
More people are taking loans from their retirement accounts (401(k), 403(b) or what have you) than ever, simply because they can. Here’s the problem: Seeing one’s retirement account as a savings account or worse, a personal ATM machine. That’s so ridiculous I cannot even tell you. Sure it’s your money, but it’s not your money now. It’s for later. It is out of your reach, so you need to get it out of your mind.
The beauty of an IRS-approved retirement account is that you get to save pre-tax dollars. It’s no secret that what you see in your paycheck is not the full amount you earned.
In fact, the amount in your paycheck is shrinking and many of our elected officials are trying to shrink that even farther by increasing taxes. You know what I mean if you live in California one of the most heavily taxed state with a governor who is threatening to once again increase sales tax, personal income tax, and taxes on small businesses. (Did I mention my husband and I left California for this very reason?) But I digress ….
A retirement account allows you to save your money before it gets taxed. If you take your money home, you have to earn about $1.00 to see $.75 in your paycheck. But if you put it that dollar into a retirement account instead, you get to deposit the entire $1.00. You get to invest the $.25 that belongs to the government. It’s not a gift; you will have to pay that $.25 to the government eventually. But for now you get to keep all the growth you will achieve by investing the government’s money! Get it? And it’s all locked up so it is safe from YOU. That’s the beauty of a retirement account.
Banks and retailers benefited greatly over the past decades by promulgating the cashless lifestyle. They convinced us that it’s much safer to carry plastic and more convenient, too. Cash, they declared, is old-fashioned and clunky. Plastic is hip and cool. Gradually, Americans fell for the pitch and, in turn, got more than we bargained for. Going cashless has turned us into a debt-ridden society.
But things are changing on the consumer front. Cash is making a comeback.
Some people, like reader Martin B., are moving to cash to avoid credit-card companies, collection agencies and others. Susan J. and her husband wrote that they’ve closed their bank and credit accounts because of past problems with overdraft charges and identity theft.
Still others like Bill and Jan W. are using money orders to pay bills. They cash their paychecks at their company credit union because it doesn’t impose high fees like check-cashing stores.
All of these people have gone to cash to avoid specific problems. But there’s another reason—perhaps even more noble than any other—that individuals are making the shift to a cash lifestyle: To reduce spending and improve savings.
Somewhere in my life, I picked up the behavior of worrying. About money, mostly, but I can worry about anything, really.
I don’t believe I was born worrying, so I must have learned to worry from past experiences and from watching people worry—probably my parents. Actually that’s good news. If you, like me, have struggled with learned worry, that means that we can unlearn this debilitating behavior.
I can’t report that I’ve completely won the battle against worry, but I have turned the corner where worry no longer controls me. If worry is wreaking havoc on your life, there really is something you can do to put worry in its place.
Worry is useless. It doesn’t do anything. Worry cannot control the future or change the paste. It can’t pay a bill, solve a problem or cure an ill. But it can throw you into emotional paralysis.
Worry weighs heavily on your heart. And it is a very heavy, crushing weight.
To say that I am impressionable would be to put it mildly. And when I say impressionable I mean prone to take on the circumstances and the weight of people, places and things around me. Here’s an example: I watched the movie “Castaway,” and for the next seven nights in a row, dreamt that I was drowning.
I’m like a giant sponge. I absorb whatever I allow myself to be exposed to. Of course I can’t always control my surroundings and life situations so as to avoid anything negative, but I’ve had a giant wakeup call in the past week or so. I’ve allowed myself to become overly saturated with the cares of the world and the prophets of doom (and gloom). It’s time to reboot my spirit.
Here are the five things I will be doing on a daily basis over the coming 30 days:
1. Turn off the TV. I rarely sit and watch TV. But I am one to have it on in the background, all the time. I’m drawn to news and talk shows and you know what that means―all of the troubles of the world playing over and over again. I am taking a 30-day break from politics and news.
There you are, a college graduate with your newly-minted degree in one hand and new job in the other—or confidence that you will have one soon. For years you’ve waited for a real job with a real paycheck so you could get a decent car, apartment and a respectable wardrobe. After all, these are the things you so richly deserve for having nearly starved to death for lo these many years.
Well, not so fast, Buckaroo. Before you do a thing we need to go over the fundamentals of managing a paycheck―a small detail that may have been overlooked in the courses you took to prepare you for the real world.
When net is gross
You may have figured your annual salary―a number that has you seeing dollar signs. That is your gross salary. Do not fall in love with it. A $35,000 annual salary when reduced by 30 percent for “withholding” for taxes, Social Security, etc., then divided up into 52 weekly paychecks suddenly looks more like $470.
Late fees, punitive interest rates, over-limit fees, loading up your credit report with negative information—it’s enough to make you scream!
It’s not that your creditors are doing anything illegal. You just didn’t understand the power you gave them when you accepted that credit card (it was buried in the fine print). And now it seems like they’re staying up nights looking for new ways to stick it to you. If you’ve just about had enough, maybe it’s time for you to turn the tables and get back at them.
Pay early. Nearly 30 percent of a credit card company’s profits are derived from fees—annual fees, late fees and over-limit fees. You’d think they would be pretty satisfied with all that interest you send them each month. But no. They want more. The days when issuers allowed 10 or 15 days for a payment to arrive after a due date before charging a fee are long gone. Now those fees kick in if you’re even five minutes late, and can range from $20 to $39 per occurrence.
Get back at your credit card company by making a decision right now to never pay another dime in late fees. Be quick with your payment. Send it in the preprinted envelope that came with your statement (or pay online). Don’t enclose a note, use a paper clip, decorate with stickers or do anything that will pull it out of the fast track and into manual processing.