CONSUMERS are carrying more debt than ever before and are behind on their payments in record numbers. According to the Federal Reserve, consumer debt has hit a record of $1.98 trillion. That’s an average of $18,700 in debt per household, which includes credit cards and car loans, but not mortgages.
The average American household currently owes about $7,000 in credit card debts. This is actually much lower than what I see everyday in my practice as a bankruptcy lawyer. Most people that consult with me owe A LOT MORE than the $7,000 average per household stated above. As a matter of fact, I would say that the average person or couple that comes to our office owes at least $20 - 30,000 in credit card debts. A lot of people also owe anywhere from $30 to $60K. Then there are those who owe more than $100,000! Now, that’s a lot of money owed!
Some people who owe so much money are so oblivious to the fact that nothing short of a miracle would get them out of debt anytime soon if they simply paid the minimum on their credit cards each month. Let’s be conservative: Let’s just say you owed $25,000 in credit card debts and the average interest rate was 22 percent. Because the credit card companies require you to pay only a minimum of 2% of the balance owed, your minimum monthly payments add up to $500 per month ($25,000 multiplied by 2%).
According to my calculator, it will take you 11 years and 4 months to pay off $25,000 at 22% interest. But that’s not all! Over 11 years and 4 months, you would also be paying at total of $43, 383.14 in interest alone!!! Isn’t that ridiculous???
Now this is where it gets even more interesting. The same amount of $500, invested every month and earning 8% per year, would amount to $104,150 over that same period of time (11 years)! Thus, in our above scenario, how you use your $500 per month results in either being more than $43,000 poorer in 11 years or more than $104,000 wealthier over the same period of time.
Did you know that seemingly unimportant choices we make about how we spend our money can easily make the difference between rich and being poor? To some people, $500 per month may not seem like a lot of money. So they justify being in debt by saying that they can always work overtime, get a second job or that they are “OK” as long as they are able to make the minimum payments each month. I hope the above example convinces you otherwise.
Unless you are aware where your money goes every month, you will never be able to plan well financially for the future. Years from now when you finally retire, you will be scratching your head and wondering why you weren’t able to save anything during your working years despite all the long hours you put in. During client consultations, I am shocked to see how many people are not even aware of how much of their income goes to paying debts. Some people don’t even remember how much their last paycheck was or how much their annual or monthly salary or hourly rate is! These people usually say that all they do is “work long hours and pay bills” but they are still always broke. Then one day, they wake up and realize how many years they have wasted. Don’t let this happen to you.
If you are seriously in debt, you may have no choice but to file for Bankruptcy in order to start fresh. If you do have other options, of course, you should explore those options first and consider Bankruptcy as a last resort. Whatever you do, the point is that the sooner you get out of debt, the better off you are going to be. If you need help understanding all your options, both bankruptcy and non-bankruptcy alternatives, call Toll-Free 1-866-477-7772 to schedule a free office consultation. We have offices in Glendale, Cerritos, West Covina and Valencia.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped over 4,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call Ray Bulaon Law Offices at TOLL FREE 1-866-477-7772.
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