Time is money

Jul 162008

I want to talk about the idea that time is money.

Take from phrases.org.uk

TIME IS MONEY – “While this familiar maxim may seem like an invention of our hectic and impersonal modern society, it actually comes to us from the ancient Greeks. Antiphon, an orator who wrote speeches for defendants in court cases, recorded the earliest known version of the saying in ‘Maxim’ (c. 430 BC) as ‘The most costly outlay is time.’”

If time is money then lack of time means lack of money. In turn lack of money means more debt. So this can be read in another simpler way – lack of time equals more debt.

Now let’s turn this equation on its head – more time equals less debt.

So in theory if you had more time you would have less debt? Not quite but very close. The best application of the idea more time equals less debt is that the longer you give yourself to pay off your debts the more likely you are going to achieve that goal.

Often when we are in debt the urge to escape can be immense. We want to be free from this burden as soon as possible. Unfortunately the remedy for debt usually takes a long time. It is this fact that most people over look when they are designing debt management plans which in turn is one of the main reasons those plans fail. The ‘have it all now’ attitude that got them into debt in the first place is still present in their desire to get out of debt. They want to get out of debt in an instant.

If you have been in debt for any time at all you will know that it does not work that way. Going back to the time is money concept or more specifically more time equals less debt, the longer you work on reducing your debt the quicker it will happen. Ironic I know but the people who make a crazy dash to pay off all their debts in three months generally end up frustrated and disillusioned while at the same time their debt burden still exists.

Slow and painful? Yes and no. Yes it can be slow and painful but it doesn’t have to be if you plan it well and most importantly give yourself plenty of time. Time is of the essence in that you must act fast on taking action on your debt but my advice is not to expect to get out of debt fast. Slow and steady wins the day every time. You need to consistently apply the things you learn on this and other websites. If you do then you will come out of your debt a lot faster than you thought possible.

Life plans instead of debt management plans

Jul 112008

One thing that use to get me as I struggled with debt is the idea that all debt management plans seem to be focused on the financial side of life. Duh! I hear you say ‘Of course debt management plans are going to be focused on the financial side of your life’. You see initially I made that mistake too.

For years I would struggle with the one sided nature of the debt management plans that I created or that were created for me. The huge problem with the debt plans was that while they very adequately covered my need to repay debt they offered absolutely no guidance on how I was to live my life on a day to day basis. All that debt management plans ever showed me was a bunch of numbers on a page and a set of targets that needed to be reached.

Now I don’t know about your experiences with debt management plans but in between all those numbers on the plan you have to squeeze in a life somewhere, somehow.

Honestly do they want us to become monks? Live a life of servitude to the banks? Ok we got ourselves into this and we are the only ones that can get us out of it and I wholly accept that. I have written about taking responsibility before but the point I am trying to make is that the vast majority of debt management plans are unrealistic and excessive. People don’t change overnight – old habits die hard.

Why are debt management plans so oppressive?

It primarily depends on who designs them.

If you design your own debt management plan, initially at least you will tend to be over optimistic with what can be achieved. Trust me on this. I have done it over and over again. I start out with what I think is a tough but achievable debt management plan but it suddenly turns into a punitive anti social whip which I use to beat myself if I strayed from it. I never allowed for everything and even when I thought I had been thorough I would miss something. After a couple of weeks on the plan I will slip back into my old routines and habits. I would come away from the whole experience dejected, disillusioned and still in debt.

If someone else creates a debt management plan for you then they tend to be even tougher still. Let’s say for example you decide to use a debt consolidation company. The person on the other end of the phone does not know you and unfortunately probably does not care too much about you as a person. They will see your income and expenses and using the latest debt management software optimize your spending. Needless to say the software will simply take every spare cent you have and put it against your debts not taking into account the softer things in your life like the daily newspaper or the occasional trip to the cinema. No it’s off to live in a cave for you.

What’s the alternative?

I found through hard fought experience that the best debt management plan is the one that incorporates a life plan.

What this basically means is that you cannot and should not create your debt management plan in isolation from your life. By life I mean the elements that make up your day to day living – things like your daily routines and habits, the time you spend and how you spend it with your friends and family, how you relax and unwind, how you have fun.

You have to look at the WHOLE picture of your life when you are creating a debt management plan. There is no point in sitting and hoping that you can stick to some ultra rigid debt management plan that will help you pay off your debts quicker but will mean that you will sacrifice a lot. Don’t get me wrong there WILL have to be sacrifices if you want to get out of debt. There WILL be changes if you are to shake off the shackles of debt. BUT you need to get perspective on the whole process. No debt management plan will succeed unless you make allowances for who you are.

My advice is simply this – don’t push the boat out too far when you are creating your debt management plan. Yes I know you have an urgency to get rid of this horrible debt that has been tormenting you but please be patient. You need to take a measured and realistic approach to it. If that means that it will take an additional year or two longer than you hoped then so be it. The end goal is the same. What you are trying to avoid is the endless start stop cycle that so many people trying to get out of debt get stuck in.

It’s like starting any new venture – you’re going to make mistakes – lots of them. The key thing is to try to do as much preparatory work by educating yourself so that you can try to avoid as many of them as possible. Can you avoid all the mistakes and make a perfect debt management plan? – No chance. You’re going to make mistakes but that’s a good thing. I’m just asking you to try to map out a plan that will help you avoid the main mistakes that people make as outline above.

The end of your debt is nearer than you think you just have to focus your time and energy on it.

Debt management plans – can someone please explain?

Apr 232008

I’ve been hearing a lot of about debt management plans lately and how they are touted as a cure for the ills of people in debt. Taken at face value the debt management services on offer sound great – take all your loans, credit cards, overdrafts and store cards and turn them into one easy to afford single monthly payment. Wow this sounds great – that is until you dig a little deeper.

How it works

You as a potential customer contact a debt management company. The debt management company will ask you for information in relation to your debt, your monthly income and your day to day expenses. The debt management company will devise a plan for you based on your monthly income and on the amount of unsecured debt that you have. Please note that the debt management company can only devise a debt management plan for you in relation to your unsecured debt, this includes credit cards, overdrafts, store cards and personal loans. Mortgages and car loans will not be covered by the debt management plan.

Straightaway this is what I would regard as a negative since you will still have the monthly car loan and mortgage payments on top of the debt management plan payment.

Ok so the debt management company has the necessary information about your debts and your income. The debt management company calculates and agrees a realistic monthly payment that you can make to pay off your debts while at the same time allowing you enough money to pay for your day to day expenses.

Once you have agreed the monthly amount the debt management company will approach your creditors looking for more favourable terms for you. They may in some cases be able to negotiate a lower interest rate and/or reduced monthly payment amounts.

When the debt management plans starts the debt management company takes the monthly payment that you give them and distributes it to your creditors as agreed with them under the new repayment terms.

That’s it in a nutshell.

What’s in it for the debt management company?

Funny you should ask that. Why a nice juicy fee of course. Depending on the organization the fee will vary from being a one off admin fee to a recurring percentage based fee.

What’s in it for the creditors?

For the creditors it is a case of something is better than nothing. If you default on all your debts then the creditor will eventually have to write off your debts as a bad debt and they will not get any more money out of you. If the creditor agrees to your debt management plan they know that you will be in a better position to repay your debts and the creditor will get some if not all their money back.

Advantages and disadvantages of a debt management plan

Advantages:

1. Only one monthly payment.

2. The debt management company may be able to negotiate lower interest payments and lower monthly repayments for you.

3. You no longer have to communicate with your creditors as your debt management company deals with them on your behalf.

4. You can avoid getting a loan to consolidate your debts as a debt management plan does not involve consolidating your debts.

Disadvantages:

1. Creditors may not necessarily agree to participate in your debt management plan.

2. Your credit history may be affected. It’s not so much the debt management plan that will affect your credit history rather it’s the fact that you were unable to keep the original payment schedule as agreed in the original contract.

3. If you have less than $10,000 in unsecured debt you may not qualify.

4. It will take longer for you to repay debts as the debt management company will most likely try to negotiate lower monthly repayment amounts.

It is up to you to decide if the advantages outweigh the disadvantages. It will depend entirely on your personal situation.

Do it yourself debt management program

The one point I will make is that if you are thinking about using the services of a debt management company why not try to create your own debt management plan first? There is nothing from stopping you dealing directly with your creditors and trying to renegotiate your debts with them yourself. Use the information on this website and on the internet to empower you to take control of your debt.

One of the fundamental problems with the services offered by a debt management company is that they do not offer services that cover secured debt. This means that you will have to deal with your car loan and mortgage yourself anyway so why not simply apply what you learn to all your debts? In the long run it will serve you better to create your own debt management plan and deal with your creditors yourself. You will gain incredibly useful skills and knowledge that will serve you a lifetime. Not only that but it is you who is in full control of the situation. You will be empowered.

However if the thought of creating and running your own debt management plan intimidates you and you are more interested in using the services of a debt management company then please do your research carefully. Do not sign up to any debt management service until you have read the following information about debt management services from the government contained in this link. Debt Management Plans

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