Friday, October 21, 2011


Okay. We're at the starting gate. Ready. Set. Push off.

After a month, your vision will improve as you put down your numbers daily and then add up what they total. Subtracting what you spend each month from your monthly income will show what you have left over to pay the creditors. If you have nothing, the creditors will have to wait just a few oh, say 2 months or several weeks depending on your situation. Remember, you're doing the right thing for yourself, your family and even the local economy.

Another point to remember is this is not to self punish, nor is it a means to live below the poverty level. If there's enough money for you to enjoy a massage, go to a movie, rent a DVD, or take a day trip to the Bahamas, put that into your spending account. If there isn't, just know the time will come. And for the duration, if the creditors don't get their money, this doesn't mean the downfall of civilization as we know it. There will be no pestilence or famine upon the earth. Just keep writing your numbers, going to work, and if it helps, say the prayer beads. You'll notice shortly because you're not paying huge amounts to the creditors - also known as usury - you will start to enjoy more money coming in. For those who haven't heard the term, usury is an exorbitant and unconscionable rate of interest charged the borrower for the use of money. Check your state's laws regarding the interest limits on credit cards.

So you're keeping your numbers and now you want to know how much to pay your creditors to keep them from calling and threatening you.

Here's the much awaited for nifty, thrifty formula that will keep things clear. We want clarity and no more vagueness. We want to see the written numbers so we can come clean and get healthier financially.

Gather all your numbers together: credit card debt, personal loans and the IRS debt if any. Seeing an enormous amount of debt should not trouble you because you're taking action. $35,000. is no more troubling than the person who owes $10,000, or $99 B for billion.

Proceeding with our formula, take one more look at your spending account to see if it is fitting your lifestyle and not limiting it.

1. List all the creditors and total the amount owed all of them.

2.To see what you will be paying each creditor, divide the total debt into each individual creditor's amount: Creditor's amount divided by Total Debt will give you the percentage of that particular creditor's share.

3. Next multiply the creditor's percentage by the total amount you have available (after all your necessary expenses have been paid). The total percentages should equal 100% and the total of payments to each creditor should total what you had available to pay them.

4. If some creditors only get $5.00, write a check for five dollars. The creditors will cash that check and will consider it a good faith amount. They're just not telling you that.

5. Now you can communicate with your creditors and tell them the amount you have available to send them. You may also want to say that when your financial situation improves, you will be calling them to advise them of that and of any changes to the amount you will be sending them. Keep it simple. Don't argue. They might try to dissuade you, but keep on track and thank them for their patience and follow up with a letter regarding the phone conversation. If you don't want to talk on the phone with them, use the mail. Good manners whether by phone or mail helps.

Pretty simple. "But wait they'll never accept a check for $5.00." Yes, they will. And if they don't, send it anyway. This little bit of taking charge will add up to feeling really good about taking charge over your finances and not allowing others to tell you what they will or won't accept.

"But they're taking me to court." No they aren't. It's not in their interest to take you to court unless they're a scam. You're paying them religiously and on time, and your record keeping is perfect. That, and the judge who looks at your paperwork will throw it out of court. "But I can't ever get out of debt with such a small amount." Yes you can and will. Because over time, the smaller debts will get paid off leaving more for you to pay off the larger amounts. You're communicating with them. You're sending them a check and we're not talking about debtor's prison here and we're not talking about your life which hopefully you've already started to enjoy.

Then later - after some time has passed - you'll gather up enough strength to ask that they remove all interest.

"What...?" That's right. I was never interested in them lowering my interest. I wanted it REMOVED. And after a few months that's exactly what they did. Remember the story I told earlier about the IRS? That's exactly what the IRS did. And they forgave $2800.

There's something magical about integrity and honesty and being forthright. Those values seem hard to find these days. But those are the very values that are having a comeback. From political leaders to stars and athletes, we see little in our media that highlights integrity and honesty. For everyday workers and citizens, we have an opportunity to show ourselves and our children that we can persevere and overcome debt. Wouldn't it be great to have a show titled I GOT OUT OF DEBT NOW YOU CAN TOO, CONGRESS as they zoom in on your life and the behemoth in Washington, D.C.?

That's the nuts and bolts of getting out of debt. Being honest. Saying what you mean and meaning what you say. Taking action and having fun in the meantime. My debt - while I was communicating with and paying the creditors from 1997 until 2010 - was on the back burner. It did not gain prominence in my mind nor did it affect my sleep. What happened was that my life blossomed into a wonderful professional life working for a three billion dollar company where my coworkers showed me things, like how to take a vacation once a month. And when I wanted to take another week's vacation than I had coming, the President of the Company cheerfully explained, "This is your job, not your life. Go and have a wonderful vacation." I was astounded by that bit of sound advice.

From them, I also learned how important it was to keep a prudent reserve. I didn't have a 3 million dollar prudent reserve, but I was able to put aside $248. a month toward my reserve account. I also had a category in my spending account titled FUN and another one called GRACIOUS LIVING. There were times when I didn't have the money to put into one or the other, but they grew over time into what would become seed money for an endowment.

You've done some soul searching and taken some action steps toward getting out of debt. It's a great feeling. Now lift your right arm up in the air, pull it just above your right shoulder and go up and down with your hand, giving yourself pats on the shoulder. You deserve it.

"I could end the deficit in five minutes. You just pass a law that says "Anytime there's a deficit of more than 3% of the GDP, all sitting members of Congress are ineligible for re-election." ~ Warren Buffett

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