Debt

Myth: Debt is a tool and should be used to help create prosperity.
Truth: Debt is not a tool; it is a method to make banks wealthy, not you.

Debt is dumb. Most normal people are just plain broke because they are in debt up to their eyeballs with no hope of help. If you're in debt then you're a slave, in the sense that you do not have the freedom to use your money to help change your family tree. According to a recent USA Today article about debt, 78 percent of baby boomers have mortgage debt, 59 percent have credit card debt, 56 percent have car payments.

It takes a lot of will, discipline, courage and help to slay the debt monster. But it can be done. Imagine how much you could put toward retirement if you just didn't have a stinking car payment? This is how the wealthy build their wealth. Debt is really dumb. Welcome to the real world! Start your Total Money Makeover Now.

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Debt Help

Myth: I can get quick debt help over the phone or internet.
Truth: True debt help is not quick or easy, and it starts in the mirror with you.

Where do most people go for debt help? Most people try credit repair companies, debt consolidation, debt management companies or bankruptcy. These services almost never help solve the true problem - behavior.  Companies touting quick, pain-free fixes are really scams that cause more harm than good.

So, my Total Money Makeover begins with a challenge. The challenge is you. You are the problem with your money. The financial channel or some tape sets aren't your answer; you are. You are the king of your future, and Dave has a plan.

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Debt Consolidation

Myth: Debt consolidation saves interest and you have one smaller payment.
Truth: Debt consolidation is nothing more than a "con" because you think you've done something about the debt problem.

Debt consolidation is dangerous because you treat only the symptom. The debt is still there, as are the habits that caused it. You just moved it! Our counselors will not recommend debt consolidation for a client.

The reason that we do not use debt consolidation to get out of debt is because it doesn't work. You end up paying about the same amount, which doesn't really help you pay your debts off faster.  Most people end up taking on more debt after consolidation and several end up in bankruptcy.

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Bankruptcy

Myth: I'll just file bankruptcy and start over; it seems so easy.
Truth: Bankruptcy is a gut-wrenching, life-changing event that causes lifelong damage.  Avoid bankruptcy if at all possible.

Bankruptcy is listed in the top five life-altering negative events that we can go through. Chapter 7 bankruptcy, which is total bankruptcy, stays on your credit report for 10 years. Chapter 13 bankruptcy, more like a payment plan, stays on your credit report for seven years.

Bankruptcy, however, is for life. Loan applications and many job applications ask if you have ever filed for bankruptcy.  Ever.  A common misconception is that you can use credit repair services to fix the damage from filing bankruptcy. If you lie to get a loan because your bankruptcy is very old, technically you have committed criminal fraud.

Find out how to avoid bankruptcy.

Debt Management

Myth: The debt management companies on TV, like Ameri Debt, will save me.
Truth: You may get out of debt but only with your credit trashed.

Debt management companies are springing up everywhere. These companies help "manage" your debt by taking one monthly payment from you and distributing the money among your creditors, with whom they've often worked out lower payments and lower interest, but at a price.

When you use one of these companies and then try to get a conventional, FHA or VA loan, you will be treated the same as if you had filed Chapter 13 bankruptcy. Mortgage underwriting guidelines for traditional mortgages will consider your credit trashed, so don't do it.  Get a Total Money Makeover instead.

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Debt Reduction

Myth: I should pay off the debt with the highest interest rate first to get out of debt quickly.
Truth: You should pay off the smallest debt first to create the greatest momentum in your debt reduction.

The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20 percent head knowledge and 80 percent behavior. You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.

We've developed a little process called the "Baby Steps" to do one thing at a time and keep the debt reduction process simple. The Baby Steps are the foundation for your Total Money Makeover.

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Budgeting

Myth: I don't have time to work on a budget.
Truth: You don't have time not to.

The dreaded "B" word. Budget. The only other word that starts with "B" that might generate a worse reaction in most people is the word bankruptcy. Unfortunately, the word budget has gotten a bum rap. It is basically just a plan. When you budget, you're spending on paper, on purpose, before the month begins. But many people view a budget as a straight jacket that keeps them constrained. Freedom and budget just don't seem to go together.

However, when you see that a budget is just spending your money with intention, you'll actually experience more freedom than before. Many people say they found even more money when they created a realistic budget and stuck with it.

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Life Insurance

Myth: Cash value life insurance, like whole life, will help me retire wealthy.
Truth: Cash value life insurance is one of the worst financial products available.

Sadly, over 70 percent of the life insurance policies sold today are cash value policies. A cash value policy is an insurance product that packages insurance and savings together. Do not invest money in life insurance; the returns are horrible. Your insurance person will show you wonderful projections, but none of these policies perform as projected.

Get more information on life insurance.