Is A Bad Credit Rating A Good Thing?

Could a bad credit rating save you from bigger problems? It has done just that for many young people. How can this be? I'll start with a true story.

A Good Credit Rating Story

A friend, whose name I will withhold, started his adulthood with good credit. He soon was able to get credit cards at will, and finance cars, snowmobiles and more. He managed to make the payments on his debt, and went deeper and deeper into debt while he was at it. By the time he was 30 years old, he had over $20,000 in credit card debt, plus loans on cars and business tools.

It was too much to handle. He considered bankruptcy, but was convinced that the credit card companies would reduce his balance due if he just threatened to do so. First, though, he had to stop paying on the cards, or the credit card companies wouldn't believe he was in financial trouble. He did this, then drafted a nice letter to the companies, explaining his situation. Most of them cut at least 30% off what he owed, provided he paid the remaining balance immediately. This he did with a home equity loan.

In the end, his bad credit rating wasn't as bad as if he had actually declared bankruptcy, so he was able to rebuild his credit score. He has also begun to rebuild his credit balances. His good credit rating has enabled him to begin again the stressful process of overburdening himself with debt.

A Bad Credit Rating Story

Another friend of mine had her first credit rating based on the phone bill in her first apartment. She didn't ever pay the phone bill on time, and it was eventually disconnected. This, and a few other minor credit infractions when young destroyed her credit scores. What has this meant?

She can't borrow, so she hasn't had the pleasure of being at the edge of bankruptcy. She can buy things for cash when she has it, or wait until she does. Has this inability to have a bunch of things around that are worth a fraction of what she owes on them made her a less happy person? The opposite is true, in my opinion. She just doesn't have the debt-stress that is so typical today.

Is Bad Credit Good?

I am not recommending that you purposely try to get a bad credit rating, but if you already have one, it isn't all bad. The habits that got you there would probably get you into even more trouble if you could borrow more. Look at it as an opportunity to stop going further into debt, and a chance to learn better habits.

Start paying cash for everything. Pay down those credit card balances (the higher interest ones first). The moment you get those cards paid off, start setting aside money to buy a good used car for cash. When you've done that, start putting what would have been a car payment into a savings account, for a future down payment on house or a business (the only things you should borrow for). A bad credit rating can be good thing, if you take it as a lesson and an opportunity.

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How To Get Free Stuff

How To Get Free Stuff

Yes you can get free stuff, and yes, sometimes there are strings attached. For example, when we were at universal studios I got a free backpack. The catch? I spent six minutes filling out a credit card application. On the other hand, we ate pretty well for free on free sample days at local food stores when we lived in Tucson, and there really weren't any strings attached. Here are some other easy freebies

How to get Free hollydays

Somebody in Hawaii, Costa Rica or Colorado is just waiting for you to come and stay in their house while they are away. You may have to water the plants, and even get the mail for them, but you get to stay in a beautiful home in a sunny place. Sometimes you even get paid for these vacations. The only catch is that to find these opportunities, you may have to subscribe to one of the newsletters that list them.

We camped in our van for ten days at Williams Landing, east of Tallahassee, Florida, on Lake Talquin. It's a beautiful place, with hot showers. Our cost? Zero, and you can stay up to two weeks. There are free campgrounds scattered around the country. Ask an RVer about this, or buy a Woodall's directory from any large RV dealer. Camping can be an essentially free vacation if you do it right, because you may spend less than if you stayed home.
Free Entertainment

Some libraries now carry movies on DVD, and most at least have documentaries. We have even seen music videos on DVD in one library. The only cost is the time to get a library card.

Want to go to free concerts? Most festivals have some free musical entertainment. The National Cherry Festival in Traverse City, MI, for example, has free entertainment every night during the week-long festival, including many recognizable bands and (often) a Beatles tribute band. Go to any search engine and type in "festival" and the name of towns around you to find these freebies.
More Ways To Get Free Stuff

Most states give away free road maps. Some give away free legal forms too, like statutory wills. Check the state's online sites.

Free dental x-rays are available at some dental colleges. You have to be patient, as the students are just learning, but an experienced technician is always with them. You get the x-rays to take to your own dentist, which can save you $30 to $80. Some schools charge a small fee.

Some utility companies offer free energy audits. They come to your home and find the places where you are wasting energy. Some even give you a free kit for caulking windows and weather-stripping doors.


You can get free, confidential business advice from a business expert via email. Go to the website of "SCORE" (Service Corps of Retired Executives). These are successful business executives who volunteer their time to help others in business.
Some restaurants offer free dinners on your birthday. Others offer a free birthday cake. Many bars will buy your first drink for you if it's your birthday. How do you find the ones that do this? The same way you always discover how to get free stuff - as

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Debt Consolidation
Is It A Good Idea?

Why is debt consolidation necessary? Maybe it isn't. It seems like the easy way out of the problem of too many payments every month. When your credit card and loan payments add up to $900 every month, why not just get a loan that will pay all of these debts off and have a nice easy payment of say, $300? There are two reasons why this may be a bad idea.

Debt Consolidation Ignores The Cause

Too much debt? Why? Rarely is the cause due entirely unforeseeable circumstances. Most often, if you have debt problems, it is because you buy too many things on credit. In other words, it is due to bad financial habits.

Now what happens when you combine all that debt? Do you have less debt? Maybe you get a lower interest rate on average, but you still owe all the money, right? Your consolidated debt is just easier to pay, because it is in one lower payment stretched out over a longer period. What else becomes easier now? Adding more debt.

This is exactly what many people do. They get their $900 of various payments rolled into a loan with a $300 payment, and now they have all that excess income. Time to go buy some things on credit. Obviously, debt consolidation can be a way to postpone reckoning with the real problem - bad financial habits. Postponing dealing with debt makes it much worse, of course.

Debt Consolidation Costs More

It may seem like you are saving money on interest with some consolidation loans, but this isn't always true. The problem is that you are converting short-term debt into long term debt. The longer you take to pay off the money owed, the more you pay in interest.

Let's look at an example. If you owed $6,000 on a credit card, with 18% annual interest, it would take a payment of $176.26 per month to pay it off in four years. You would pay a total of $2460 in interest. Suppose, in order to get the best interest rate and easiest terms, you rolled the debt into your 30-year mortgage on your home (many people do this). If it was a 7% loan, it would add only $39.92 to the payment. That's easier than $176, and a much lower interest rate, but how much total interest will you pay over the years? $8371 - more than the original debt.

Of course there are debt consolidation loans that are not for 30 years, but you get the point. Even with a 15-year, 7% loan, which would costs $53.93 per month, you would pay at least 50% more in interest than with the 18% 4-year payoff. Converting short-term debt into long term debt can cost you a lot more in interest.

Try hard to make those payments and get rid of that debt sooner. You'll be glad you did. Of course, it may be impossible to make those payments. That happens, but for a reason. At least work as hard on changing your habits as you do on getting that consolidation loan.

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Living Cheap

Living cheap doesn't mean being miserable, or giving up what you want. In fact, in my own case, it meant getting to do the things I really wanted to do. The less you spend on each thing or activity, the more of them you can have, right? So the key is to spend less and still get what you need and want. Here is how I managed it.

Living Cheap In A Mobile Home

My first house was a mobile home on a small lot. I bought it for less than $20,000, and had payments of $257 per month. Even with taxes, insurance and repairs, it cost less than rent. It had three bedrooms, an expanded living room, and a nice fenced-in yard. I eventually sold it for $45,000.

What really made it cheap, though, was two things that I did. First, I paid as much as I could on it when I was working. I owned it free and clear within five years, and from that point on it cost an average of $300 per month to pay for the utilities, phone, garbage collection, taxes, insurance, and repairs. That's living cheap.

The next thing I did made it even cheaper. I found that I could easily rent the other two bedrooms, and get $65 per week for one, and $75 or more per week for the other. I included all utilities, and found decent young guys to rent to. The rents added up to $600 per month, making this more than cheap living, and even better than free housing. I made $300 per month AND lived for free.

Living Cheap By Planning

I found that I could work less, so I could get by without a car. That saved a lot of money. The occasional bus fare, and the used bicycle I bought didn't add up to a fourth of what it cost to have a car. I had to plan my trips around town a little better, but it was worth it.

During these years I never paid more than $40 for a piece of furniture. You have to know what is important to you. I paid $220 for a high-tech sleeping bag, because I liked ultralight backpacking. On the other hand, I couldn't tell the difference between a nice, clean used couch for $30 and one that cost $900.

One thing I found was that when I worked less, I had time to look around at my options. Time can save youa lot of money. I paid half of what others paid for groceries. When I did get a car, I found a repossessed one that was worth much more than I paid. I went to Ecuador for a month for $1,040 total, including all airfare, hotels, meals, a guided climb up a 21,000-foot mountain, and more. It was possible because I had the time to search for the deals.

I worked part-time jobs for years. I read books, played chess, wrote poetry. I traveled several times a year,

and met the love of my life in South America (happily married for over eight years now). All this was possible not because I made a lot of money, but because I spent less than I made, and used the difference for the things that mattered to me.

This isn't a how-to guide. I explain how I traveled and bought things so cheaply in other articles. This example is simply to get you thinking about the possibilities, and point out some principles. The principles? Don't buy things you don't need. Find ways to pay less without getting less. Spend a little less time working and a little more time thinking. Stay out of debt. Know what is truly important to you, because this is what you can have more of by living cheap.

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Excessive Credit Card Debt

There are many things you can do to resolve your excessive credit card debt. The first thing though, is to stop creating more. I have seen more than one person get out of debt briefly, only to fall back into it again. So start changing those habits. Of course, you have the debt, so what can you do to knock it down? here are some ideas.

Discount Your Excessive Credit Card Debt

Settle debts for a discount. When I collected debts for a living, we regularly took 50% as payment in full, if we thought it was the best we could do. If you really can't handle your payments, you may be better off to borrow the money from family to settle your debts for 20% to 60% of face value. Credit card companies regularly take 50% or less as payment in full if they are convinced you are headed towards bankruptcy.

Write a nice letter explaining your situation, and how you will get the money for the pay-off. Explain that you will most likely be filing for bankruptcy, but would like to settle up with any willing creditors before that happens. This let's them know they may be left with nothing if they say no, and you split your remaining assets between other creditors.

How To Pay Debt

If you are trying to dig out of your debt, always pay high-interest cards first. For example, if you have $200 budgeted to apply to your cards each month, pay the minimums only on all others, then put the rest of the money towards the card with the highest interest rate. Once that one is paid off, work on the next highest.

This is a powerful technique that saves a lot on interest charges. If you have three cards, for example, you would pay the minimum of (let's assume) $40 on two of them, and apply the other $120 to the highest interest card. Once that card is paid off, you continue to put $40 towards one card, and now apply $160 to whichever of the two remaining is the higher interest credit card. This is the fastest way to pay down credit card debt.

Excessive Credit Card Debt - Other Tricks

Don't buy the credit card insurance. This typically stops your payments when you are injured or unemployed. It is one of the most over-priced insurances out there, and doesn't eliminate the debt, but just delays it.

Avoid credit card security insurance. It pays for unauthorized charges when your card is stolen, but you are only liable for the first $50 if you report the theft in any case, and many cards already have 0 liability.

Avoid consolidation loans. Don't consolidate debt into a home refinance unless you have a definite plan for paying the loan off early. 6% isn't cheaper than 18% when it is for 30 years instead of 5.

If you have tried some of these techniques without success, contact a nonprofit credit-counseling service. They may be able to help you negotiate lower rates with your banks, and otherwise counsel you on how to reduce your excessive credit card debt.

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Bargain Finder Secrets

Would you like to be a bargain finder? Wouldn't it be fun to be one of those people that always finds a good deal? You can start by learning the secrets of opportunism.

For example, did you know that you can eat a wider variety of fruit than your neighbor, and spend only half as much to do so? How? By buying fruit in season, when it is at the lowest price. As a bonus, it is also of the highest quality at these times. This is opportunism.

You'll notice that this means not always getting exactly what you want when you want it, but you get more variety this way, and you spend much less. You go with the flow. If oranges are cheap, you'll be eating oranges. If apples are in season, you'll be eating apples. Whatever the case, you'll always be finding bargains.

You don't have to eat things you don't like or deny yourself pleasure. You just shop for those things that you like among those that are cheaper now. There will be other, different, great deals next week or next month. Unless you are extremely picky about what you eat, you'll almost always find delicious foods that you like on sale.

This is the premise of opportunism - that you get more by going with the flow. A true bargain finder gets more variety in the long run, and more for the money. This can be applied to many areas of life.

Some Bargain Finder Examples

Before I went to Ecuador a few years ago, there were many interesting places I wanted to go. I chose Ecuador because it was a thousand dollars less to go there than to any other country. I had a fantastic time for a month for $1040 (including airfare). I also met the most wonderful woman I know there, and eventually married her, so you never know what riches you'll find when you go with the flow.

My wife and I go to the movies here in Tucson on Tuesdays, when we can get in for $2.00 each. Others are paying $8.75 a couple miles away. What are they getting by paying four times as much? They get to see the movie six weeks earlier. The movies don't change in those six weeks, by the way, and enough friends have seen them by then to let us know if they're good or not.

Opportunism means not paying more unless you are getting more. It also means making honest choices. Will you actually enjoy that movie more by seeing it now? More than you'll enjoy the FOUR movies you can see in it's place? Do you have to take that fishing trip now? If you're planning to take both a fishing trip and a gambling trip, why not do each when it's cheapest?

When William Danko and Thomas Stanley wrote "The Millionaire Next Door," they found that MOST millionaires bought used cars. They bought BMWs and Mercedes, not old Ford Pintos, but the lesson was

clear: They understand opportunity. Cars often lose half of their value in the first three years, but they're not half used-up, are they? Is it worth an extra $6,000 to say you have a new car (And you will have to tell people, since it's hard to tell a three-year-old car from a new one)?

To be an opportunist doesn't mean just settling for whatever is easy and cheap to get in life. We all have our areas that are more important to us. If you really love those $15 cigars, why not buy them? On the other hand, if you really can't tell the difference between the $5 and 50 wine, why not buy the former? Opportunism is one of the keys to being a true bargain finder.

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Funny Ways To Save Money

I saw a list of funny ways to save money on a "frugal living" website. I'm not sure they were necessarily meant to be funny, but were gleaned from real suggestions sent in. Some cheapskates don't seem to notice that an extra hour at work might put them further ahead than many hours of penny-pinching.

The following are real suggestions, and then there are some funny ways to save money that you really shouldn't try.

Funny Ways To Save Money - The Real Suggestions

One person suggested ways to save money on weddings that included picking up the leftover flowers at a cemetery. I'm not sure how you can tell which are "leftovers."

Another creative penny pincher found a way to save money on a car wash. He washed his entire car using the squeegee at the gas station.

A woman confessed that she has the kids stuff their pockets with the free ketchup, salt and other condiment packets every time they were in a fast food restaurant. That's not all, though. She actually had the kids squeeze ketchup and mustard from the packets into regular jars of ketchup and mustard, and claims she hasn't bought these condiments in years.

To save money on an umbrella, one man suggests going to the lost and found department of any large public library. Tell them you lost a black umbrella. They will have several, from which you can pick the best one and claim it as your own.

Call people long-distance when you know they won't be home. Leave a message for them to call. That way, they pay for the long-distance call.

Funny Ways To Save Money - Don't Try This At Home

Don't pay baby sitters! Get young couples who are thinking about having kids to "rent" yours for the evening. They get to see what it will be like, and you can get paid instead of paying for sitters.

Turn off the TV and all the lights to save electricity. Tell the kids it's a game of hide-and-seek.

Train your dog to beg for food from strangers, so you won't have to buy dog food.

Rub pine needles under your arms instead of buying deodorant.

Take extra napkins from fast food restaurants to save on toilet paper.

Borrow your neighbors toothbrush instead of buying your own.

Visit friends around dinner time to get free meals.

If I write a book on ways to save money, funny or not, will I make much in sales, or will everyone take my suggestion and borrow it from the library instead of buying it?

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