I know, I know, when money’s tight you have to do some strange things to survive financially. But there’s a BIG difference between eating mac & cheese every night … and buying a new big screen hi-def TV to watch while you eat your mac & cheese!

So you owe it to yourself to correct as many of these mistakes as possible – as quickly as possible – in order to get yourself back on track:

1 - Playing by the creditors rules
Ever wonder why you are paying 19.99% interest on your credit cards? Because it’s a lot easier to pay than to call them up and ask for a break. And because it’s a lot easier than shopping around for a new credit card with a lower rate (if you do this, make sure to cut up the old card – you don’t need to cancel the old account, for credit score purposes, but you don’t want to add to your debt, just lower your interest).

2 - Not paying yourself first
These days setting up a savings account is very easy. Just go online, search for “online savings account”, find the highest interest rate, and set up an automatic withdrawal every month. Even if it’s just $25 or $50 a month, at least it’s a start. And before long you’ll have your own emergency fund (see below).

3 - No rainy day emergency fund
Without an emergency fund, it seems like every expense is an emergency – and then finds it way onto your credit card. You need to find a way to put aside 1-2 months worth of expenses into a bank account that you only use for emergencies (and getting that big screen hi-def TV is NOT an emergency!)

4 - Keep spending what you don’t have
Sure, when you need to spend more than you make just to buy groceries, life is tough. But then you need to look really deep (deep inside your heart AND deep inside your checkbook) for ways to cut your expenses. Do you really need cable TV more than you need food? Rather than driving to the mall, how about driving to the consignment store to shop for clothes? See, you get the idea - if you just try hard, you can find ways to save money.

     

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Even though I've been using the Bank On Yourself program for over a year, it still didn't make complete sense to me.

Most articles I've read that bash BOY say things like "use insurance to insure yourself not for saving" and "use investments like mutual funds" for investing and saving.

So even though I pay my premium every month, and I know it works, it still didn't quite sink in.

Then last week I got an email from Jeffrey Reeves, the author of "Money for Life...In Good Times And Bad". He sent me a copy of his book, I read through it in a few hours - and then it all made perfect sense!

When you borrow money from a traditional bank (or finance company, credit card, auto dealer, retailer - you get the idea) you pay them the principal AND the interest. And at the end, assuming you every pay off the debt completely, you have the product ... and that's it.

But when you create your own bank, at the end you have paid yourself the purchase price - and the interest (and NOT the bank or lender) so you end up WAY ahead!

Of course, it takes a while (and the right set-up) to get your bank to the point of having enough money to make this work. So it's no "miracle cure" for all your money problems.

But each time you "bank on yourself" you're making yourself richer and NOT the banks! So you should definitely check out this book.

It costs $29.95 - but if you're thinking about banking on yourself, it's worth every penny! Jeffrey's been giving financial advice for over 30 years, and makes a great case for being your own bank - and tells you exactly why and how to do it (which was the best part for me!)

Here is the book: Money For Life...In Good Times And Bad

What do you think about this idea of "banking on yourself"?

Did you spend too much during the holidays?

If so, you certainly are not alone! January is usually the busiest month for the debt reduction industry, as people try to "dig out" after spending too much money on gifts, parties, and holiday fun!

So now it's time to get serious about your money. But it's also the time to BE CAREFUL - so you don't get ripped off! This guide will help you compare the debt reduction programs, and find the right option for your financial situation.

Free consumer guide to debt reduction programs

There are lots of choices out there for consumers. Which makes getting out of debt confusing for a lot of people.

Once you decide on the right program, then you need to research a company. And this is where it gets really hard. So make sure to do the following:

- ask lots of questions
- read the fine print
- check with the Better Business Bureau
- if it sounds too good to be true, it probably is!

Free consumer guide to debt reduction programs

Kris

With the recent mortgage crisis, Fair Isaac (who makes the popular FICO credit score used by most lenders) will be using a new system for calculating credit scores this year, called FICO 08. Here's an article from the Wall Street Journal that explains the new credit score better:

Basically, if you've only had a few "blips" on your credit report, your score might improve a little. And if you're a "repeat offender" it may go down a little.

But does your credit score really matter if you're trying to get out of debt?

I've heard this statement many times over the years from people struggling with debt: "I want to get out of debt, but I don't want to do anything to hurt my good credit rating."

That's what I used to think, too. Then when I had enough, I just said "screw this, I'll get out of debt first then fix my credit later". Guess what? It worked.

Hey, if you have a lot of debt, and have had any trouble paying your bills in the past, you've already hurt your credit - sorry to tell you. So there's no sense worrying about good credit when you've got too much debt in the first place (and isn't good credit only important when borrowing more money and getting further into debt?)

I know, it's the American way to keep borrowing, keep spending, and keep buying - even when you can't afford something.

And I realize most people have future plans, like buying a house, and don't want bad credit to get in the way.

So, you'll need to decide for yourself:

- Is it more important for you to do whatever it takes (including hurting your credit) to get out of debt?
- Or is it better for you to be safe, and protect your credit while getting out of debt?

Kris

UPDATE: I just read this article on FICO scores - it's from a marketing newsletter I read, so you may not enjoy it, but it is eye opening!

If you're losing sleep over debt, and you're having trouble making ends meet every month, then take a look at this new video created by Mark Brinker, owner of the debt settlement firm Hoffman Brinker:

Free Video: How To Decide If Debt Settlement Is Right For You

With the holidays right around the corner, now is a great time to take charge of your finances! It's easy to think "well, I'll just wait until after the New Year, and then deal with all of my credit card debt."

Sound familiar? I can understand. Been there, done that.

So unless you're expecting a big lump of cash in your stocking this year, listen to what Mark has to say. Debt settlement isn't the right answer for everyone. But Hoffman Brinker is one of only 2 companies we recommend (http://www.debt-tips.com/debt.html). So if money is tight, watch the video, then decide for yourself:

Free Video: How To Decide If Debt Settlement Is Right For You

Kris

PS: If debt settlement is not right for you ... click here

One of the most common questions I get is "how do I know a debt settlement company won't rip me off?" or "how do I find a reputable debt settlement company?"

Hiring a debt settlement company is just like hiring any professional to do work for you - you need to do your "homework".

After all, you wouldn't hire a contractor to do work on your house without getting a few quotes and checking references, right?

Sadly, you hear many horror stories about debt settlement scams. In defense of the settlement services, I think many people jump into this process without really knowing how it works. And most people who say they were "ripped off" or "scammed" just didn't know exactly what they were getting into - and expected something more like "debt miracles" than debt settlement.

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The only thing worse than being in debt ... is having those annoying debt collectors calling you all the time.

Not only is it annoying, but if they call your employer, or your neighbors, it can be very embarrassing, too!

Sure, they're just doing their job. After all, you're the one who get into debt and got behind in your payments in the first place. So (unless there is a legitimate mistake) you do owe them money, and they have the right to try to get you to pay, right?

But how long can debt collectors try to get you to pay off an old debt?

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I just read an article about how hard it is for rich people - those making $250,000 a year - to save money. And for the first time since the Great Depression, the savings rate in the U.S. is actually LESS THAN zero (meaning that as a whole, we Americans spend more than we save).

Wow, what a sad story. If people making a quarter of a million dollars each year can't save properly, how in the world do the rest of us hope to build a nest egg?

Rising credit card debt ... skyrocketing numbers of foreclosures ... "rich" people having trouble making ends meet. Doesn't ANYONE know how to manage their money?

No. Plain and simple.

But there is hope. No matter how much - or how little - you earn, you can get ahead.

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A couple of weeks back someone asked me "What's the secret to getting out of debt?"

Wow, tough question, I thought.

Because so many people find it easy to get into debt. But getting out of debt, that's a whole different story. For many of us it's like going to the dentist - it's easier to pretend there's not a problem until the pain gets REAL bad, and you can't avoid it any further ... or else!

So, what is this secret to getting out of debt?

Is it debt settlement? Credit counseling? Getting lucky and winning the lottery? Investing in the stock market, or real estate?

Nope. Nope. Nope. And nope.

If there's one thing I've learned over the last few years, the secret to getting out of debt is ... well, it's the same as the secret to succeeding at anything in life:

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That's a question I get asked a lot. After all, there are lots of horror stories about this aggresive debt reduction strategy (that has become VERY popular with so many people in debt these days). It worked well for me, which is why I decided to share my experiences in the first place.

But I wonder - when you read about these unhappy customers, are the companies at fault? Or are their customers, who expect to get out of debt instantly after years of poor financial decisions?

The real problem is that many of these settlement companies don't educate their customers properly. Settling your debt is a lot different from credit counseling, which simply consolidates your debts and lowers your interest rates.

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