Wednesday, June 9, 2010

Investing with money you can't afford to lose...

Many people who are interested in investing but have some sort of unsecured debt, like credit cards, personal loans or medical bills, are eager to jump in the markets. It's a very attractive world when they hear how much money can be made. They hope with the possibility of a high rate of return they quickly can pay back all their debts and live debt free after that.
Wait, you are worried about your credit card bills and you are thinking about investing?

Possibly one of the biggest mistakes you can make. You should use the 'extra' money to make bigger payments on your credit card bills to pay them off quicker. In almost every single book I have read about investing there is a chapter devoted to the number one evil for your wallet: high credit card debt or any other unsecured debt. They write about it like it is Satan himself...and I happen to agree with them. Credit card companies should be outlawed if you ask me.
Credit cards only work when you are able to pay them in full every month and take advantage of the air miles, points or other benefits that come along with it.
Unfortunately that is not always the case, the 'instantly owning money' gratification to pay off other bills or get that item you always wanted right now instead of saving up for it, is what lures many people in to applying  for a credit card.
However, if you make only your minimum monthly payments, unsecured debt essentially bleeds your finances dry over the course of your lifetime. Of course, this depends on how much debt you have and at what interest rate. Calculate how much you have paid in interest so far by having a credit card and you will be unpleasantly surprised. All that money could have been saved or invested. Sure you got a great deal when you first signed up for a credit card, but once you accumulated enough debt on the card to a point where it is difficult to pay back the full balance every month credit card companies pretty much can do whatever they want with you (Yes, even with the new credit card laws that are in effect). They work their way around, in order to make it still a very profitable business for them. After all, shareholders are knocking on their doors to see the quarterly results every time, and that can't be less then what it used to be, right?
Some debt is good. Secured debt, that is: a mortgage, a car loan, etc. Those are things we need in life and are in a sense 'healthy debts'. And some unsecured debts as well, if you can afford to pay off the balances every month.

Depending on your APR and how much credit card debt you owe, it can take up to 40 years or beyond to pay them all off in full! Think how much money you are throwing away paying interest alone! It should be illegal, in my opinion. But there is a solution!
Debt settlement (another word is debt negotiation or debt arbitration)  is an attempt to settle debt with the creditors. There are companies out there that specialize in settling unsecured debt, personal loans and medical bills. Companies like Exodus America. What they do is negotiate the debt with the creditors, which at that point the creditors are more likely to co-operate to settle the debt for less. In the event of bankruptcy no one gets any money. If you have a lot of unsecured debt, and in the short- mid term you don't see you financial situation change or getting worse because of the debt, you may want to consider debt settlement. A better option than bankruptcy, which can go on your credit report for 7 to 10 years.
Example, if you owe $10,000 in debt, they may be able to negotiate it down to $7,000 or less and make the payment into one lump sum, payable over 3 years. Of course each individual case is different, a reason why debt settlement companies do free consultations.
However creditors are likely not willing to negotiate the debt if you make your minimum monthly payments. But if you have fallen behind and late fees, overdraft fees and other charges have accumulated, debt settlement may be a good option for you since they are more likely to work with you.
One company I recommend you should consider settling your debt is Exodus America like I mentioned before. They have debt relief programs available, free consultation and free credit reports. What have you got to lose? Exodus America does debt consolidation and free credit counseling so you can pay off your debt with 3 years for example instead of 40. Think about it. Debt free? Starting over, saving the money you normally would have paid a credit card company? Then you can invest that money, and you can make lots more of it, instead of paying the credit card companies. If you have a lot of unsecured debt and you are having trouble making the payments, don't even consider investing. Rather put the extra money you have and pay off the balance of your credit card. Then come back to trading and investing. Exodus America may be able to help! Really.
Check them out on http://www.exodusamerica.org/

Disclaimer:

All opinions expressed, trade recommendations/advice on this website are solely of John van der Munnik and are not affiliated with any investment firm or any other organization. You should not make an investment only based using this website VDM Trading for your trading needs without seeking help from your own financial advisor.