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The ABCs of Getting Out of Debt : Turn Bad Debt Into Good Debt and Bad Credit Into Good Credit PDF

213 Pages·2013·0.96 MB·English
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THE ABCs OF GETTING OUT OF DEBT Turn Bad Debt into Good Debt and Bad Credit into Good Credit GARRETT SUTTON, ESQ. The ABC’s of Getting Out of Debt reveals the strategies for avoiding and overcoming bad debt, as well as using good debt to your advantage. Clearly written and featuring real-life illustrative stories, as well as contributions from Credit Expert Gerri Detweiler, this very useful book provides the necessary knowledge to navigate today’s challenging credit environment. The ABC’s of Getting Out of Debt will teach you to: • Beat lenders at their own game • Repair your own credit • Deal with debt collectors • Take charge of your finances • Avoid credit scams • Win with good debt **~ “The absolute best book for clearing up your credit and moving forward.” Robert Kiyosaki “Garrett Sutton’s can-do lesson is an excellent lesson on how to rise above debt.” Audio File “I strongly recommend that every consumer reads this book.” Curtis Arnold, Founder of CardRatings.com **~ This publication is designed to provide competent and reliable information regarding the subject matter covered. However, it is sold with the understanding that the author and publisher are not engaged in rendering legal, financial, or other professional advice. Laws and practices often vary from state to state and country to country and if legal or other expert assistance is required, the services of a professional should be sought. The author and publisher specifically disclaim any liability that is incurred from the use or application of the contents of this book. Copyright © 2004, 2012 by Garrett Sutton, Esq. All rights reserved. Except as permitted under the U.S. Copyright Act of 1976, no part of this publication may be reproduced, distributed, or transmitted in any form or by any means or stored in a database or retrieval system, without the prior written permission of the publisher. Published by RDA Press An imprint of BZK Press, LLC Rich Dad Advisors, B-I Triangle, CASHFLOW Quadrant and other Rich Dad marks are registered trademarks of CASHFLOW Technologies, Inc. BZK Press LLC 15170 N. Hayden Road Scottsdale, AZ 85260 480-998-5400 Visit our Web sites: BZKPress.com and RichDadAdvisors.com First Edition: November, 2004 First BZK Press edition: June, 2012 ISBN: 978-1-937832-41-4 ~~~ Acknowledgments First and foremost, I would like to thank Gerri Detweiler, our contributing editor, for her valuable input, assistance and specialized knowledge, all of which have significantly improved the content of this book. I would like to thank Brandi MacLeod for all her efforts in shaping, reviewing and moving the manuscript forward. As well, I would like to thank Robert and Kim Kiyosaki, Scott Bilker and Tom Quinn for their beneficial thoughts and stories. To all, your contributions are greatly appreciated. Finally I would like to thank the producers, directors and prop guys of the Universal Pictures’ released film “Wanted,” starring Angelina Jolie and Morgan Freeman. Your choice of this book to help shape James McAvoy’s character was a brilliant bit of casting. ~~~ Contents Foreword by Robert Kiyosaki – I Love My Credit Cards Part One—Credit and Debt Chapter One – An Introduction to the Credit System Chapter Two – The Psychology of Debt Chapter Three – Health Effects of Debt Chapter Four – Beat the Lenders at Their Own Game Chapter Five – Debt Consolidation Chapter Six – Getting Help Part Two—Emergency Measures for Crisis Debt Situations Chapter Seven – Car Loan Troubles Chapter Eight – Mortgage Troubles Chapter Nine – Student Loans Chapter Ten – When You Owe Taxes Chapter Eleven – Military Matters Chapter Twelve – Debt Collectors Part Three—Great Credit Introduction Chapter Thirteen – Credit Reports Chapter Fourteen – Credit Scores Chapter Fifteen – Credit Repair Chapter Sixteen – Common Credit Report Problems Chapter Seventeen – Scams Chapter Eighteen – Winning With Credit Appendices: Appendix A – Sample Letters Appendix B – Worksheets Appendix C – Resources About the Author References ~~~ Foreword by Robert Kiyosaki I Love My Credit Cards In the late 1980’s, I went to a seminar on financial success. The instructor, a young charismatic speaker, went on and on about the perils of debt, saying repeatedly, “Debt is bad. Debt is your enemy. Get out of debt as soon as you can.” Looking around the room at approximately fifty attendees, I could see most heads were nodding in agreement. Just before the break, the young speaker asked, “Okay, are you ready to cut your ties with the bondage of debt?” Most attendees nodded. “If you are ready to break the bonds, then stand, get out your credit cards, and hold them up high so everyone in the room can see them.” Most of the class stood immediately while there were several people, like me, who were looking around waiting to see if we should follow or not. Slowly, everyone stood, myself included. I figured that since I had paid money and invested this much time, I might as well go along with the process to see what I could learn. As I held my gold credit card in front of me, a smiling assistant handed me a pair of scissors. As I grasped the scissors, I knew what was to happen next. “Okay, class, cut your credit cards in half,” said the instructor. As I heard the sounds of scissors cutting through plastic, there were actually several cries of shock, some groans, and even a few people crying. After cutting my card in half, I just stood in silence, mostly numb, waiting for some form of educated enlightenment to sweep over me. Nothing happened. I just felt numb. Although I had been in credit card trouble in the late 1970’s, when my nylon and Velcro wallet business was caving in on me, I did eventually clean up my debt and had gone on to use my credit cards more responsibly; hence I did not have the same cathartic reaction some people in the class seemed to have when they cut their cards in half. In less than a week, my replacement card had arrived in the mail and I was happily on my way, using my gold card again. Although I did not have a blinding cognition after cutting my credit card, the process did make me more aware of how much of a problem credit, primarily its use and abuse, can be in a persons’ life. Today I watch many so-called financial experts saying the same things that young instructor was saying years ago, such things as “Get out of debt.” “Cut up your credit cards.” “Put your credit cards in the freezer.” The problem I have with much of their advice is that they tend to blame the credit card as the problem, rather than the lack of financial control and financial education of the card user. Blaming one’s credit card for their financial woes is much the same as me blaming my putter for my high golf score. Credit and debt are very important subjects in anyone’s life. Today, young people while still in school are actively solicited by credit card companies, which have often caused me to ask, why don’t we teach young people about money in school? Why do we have to wait till young people are deeply in credit card debt and in debt due to school loans before we realize there is a problem? If you ask most young people, “What is the difference between credit and debt?” I doubt many could tell you the difference, and yet we let financial profiteers educate our youth. Consumer debt has exploded in the United States and in countries around the world. In 1990, the U.S. consumer was $200 billion deep in credit card debt. In 2008 it rose to over $957 billion, and has now adjusted downward to over $800 billion, a huge number nevertheless. That does not include the national debt – the U.S. is the largest debtor nation in the world – nor the debt many financial institutions have exposure to worldwide. As we have learned, you can’t extend easy credit forever. When the world calls its loans, when people and organizations are not able to pay their bills and credit becomes tight, huge financial problems surface, which ultimately affect our individual credit card balances. So are debt and credit bad, as so many financial experts say? Absolutely not. Debt and credit are powerful financial tools that have allowed many in the world to enjoy the highest standard of living in history. Without debt and credit, we would not have such things as great cities, massive industries, airlines flying us to all parts of the world, resorts to relax at, excellent food at exciting restaurants, new cars to drive, comfortable homes to live in, and so many choices of entertainment. So if debt and credit are not bad, then what is? In my opinion, lack of financial education and fiscal responsibility are bad. I think it tragic that my parents’ generation, the World War II generation, has left massive debt for my generation; and my generation, the Vietnam era generation, has done the same to our kids. In other words, while personal credit card abuse is irresponsible, the massive bill each generation passes on to the next generation is even more irresponsible. How young people born in the new millennium will pay for multiple generations of fiscal irresponsibility, I do not know. One way to keep paying for all this debt is to keep expanding credit and encouraging people to spend more and more. The June 28, 2004, issue of Time magazine ran an article about schools now sending kids on field trips to shopping malls, car dealerships, supermarkets, and fast-food outlets. Why? One reason is that our cash-strapped schools cannot afford to send kids on field trips to zoos, museums, or cultural events. Yet many businesses are ready and willing to pay for these field trips to start grooming new customers while they are still in school. In other words, as long as each of us keeps consuming and keeps using our credit to acquire more debt, the economy will grow and the bills of past generations will be paid. While this may be good for business and will help keep our credit and debt economy afloat, to me it sounds risky and fiscally irresponsible. The good news is that even though most of us cannot control our national irresponsibility, we can take control of our own finances. One of the most important lessons my rich dad taught me was the wisdom of knowing there is good debt and bad debt. Simply put, rich dad said, “Good debt makes you rich and bad debt makes you poor.” Unfortunately, most of the people who were cutting up their credit cards in the financial seminar I attended only had bad debt. Even more unfortunate was that the instructor leading the class only knew of bad debt. He had no idea that good debt existed. To him, all debt was bad. Bad financial education is the cause of poor financial management. One of the reasons this book is so important is that it is important to be financially responsible and to use the power of your credit and debt intelligently. Before turning you loose into this book, I would like to pass on three bits of information my rich dad taught me years ago. They are: 1. Bad debt is easier to get than good debt. If any of you have ever tried to get a loan to buy a rental property or to start a business, you may know how difficult it is to get a loan for investment. Yet if you want a car loan or a new credit card, credit, debt, and money are easy to come by, even if you have horrible credit. 2. Bad debt makes it harder to get good debt. If you have too much bad debt, and you want to begin using the power of debt and credit more intelligently, like for starting a business or investing in rental property, bad debt makes it harder for you to get the good debt and hence to become

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