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ICFE eNEWS #13-02 - February 4th 2013

A Lesson In How NOT To Pay Your Bills By Jim Garnett,
a/k/a Ask Mr.G, a member of the ICFE's Board of Educational Advisors.

People will do what they know, but once they know better, they should do better. - Dr. Phil

I heard a news commentator say recently, "America's credit card is maxed out at $16.4 trillion. Congress will soon be voting to raise the debt ceiling so we can have the ability to pay our bills."

Think about his statement: Do people actually believe that the "ability to pay our bills" is based on how much they can borrow? Is constantly going deeper into debt now the accepted method to stay current on our financial obligations?

Well, I know a group of people who believe that. They go by the name "politicians," and yes, they actually believe that it is okay for our government to pay its bills by going deeper into debt. "Paying our bills" used to mean paying down debt, but now it means recklessly adding to it!

You and I can learn something from Washington - we can learn how NOT to do it! We can learn from the school of hard knocks without having to actually go to class ourselves!

Can I suggest to you that the principles of sound finance are the same, whether applied to governments or to individuals. In both situations, constantly having to borrow is a sign of inability, not ability, to pay the bills!

The practice is similar to digging a hole in our front yard so we can get enough dirt to fill in the hole in our back yard! The back yard is going to look nice, but the front yard is soon going to look like a war zone.

But many are not learning from Washington's mistakes. Borrowing to pay bills has become an accepted practice for many American families: "About half of 3,000 Americans polled in a recent survey said that they're spending more than they earn..."
Source: Survey by Rasmussen as reported in the Huffington Post Money 1/23/13

This could explain why the average American family that does not pay its credit card balance off each month, revolves almost $16,000 of credit card debt each month! To pay that amount off at minimum payments would take almost 18 years and would cost over $11,000 in interest!

The "ability" to spend more than we earn comes about by using credit to make up the shortfall between what we spend and what we earn. It can be credit cards, bank loans, tapping into retirement, payday loans, or securing a second mortgage can be ways of going into debt to pay the bills.

Therefore, a good way to see if you are spending more than you make is to totally discontinue the use of all credit for a couple of months. Use only the cash you have available to pay your bills. If you run out of cash before you get them all paid - you are spending more than you earn!

How do you address that problem?

  1. Make a list of what you actually spend in a month.
  2. Compare that to your "take home" pay.
  3. If the expenses are more than the income - spend less or earn more.

The path to financial fitness is not achieved through borrowing, and raising our personal "debt ceiling" does nothing but enable us to continue our bad overspending habits.

The real fix to get our finances under control is to simply spend less than we earn.

©Jim Garnett. The information on this site should be understood to be a general discussion of the subject matter and DOES NOT constitute a legal opinion about the situation. For further information please consult a qualified attorney.

Ask Mr. G
© Jim Garnett, The Debt Doctor
AskMrG Consulting, LLC
2216 SW 35th Street
Ankeny, IA 50023
515-577-1799
askmrg@yahoo.com
AskMrG.com


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Sent by:

Paul S. Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)

About the ICFE:

The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation).  The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely. 
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.

The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org).  CASDRAP disbanded in 2010, shortly after the web site project was completed.  In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.

The ICFE is also an on-line help for consumers who spend too much.  ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.

Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org.  Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G,  a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.

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Home ] ICFE News Releases ] ICFE in the News ] Children and Money ] Financial Education ] Resource Center ] Credit Card Tips ][ Credit File Correction ] Mending Spending ] Links and Resources ]  [ Online Store ]

 

Copyright ©  1997 - by Paul S. Richard
and the Institute of Consumer Financial Education, All Rights Reserved.
View our
Privacy Policy Our Terms and Conditions

Institute of Consumer Financial Education
PO Box 34070
San Diego, Ca 92163
Paul S. Richard, Executive Director
Phone 619-239-1401

FAX 619-923-3284

Questions for www.financial-education-icfe.org Click to go to Website Contact Us or 
Website Design Donated by Desgn School Programs