It’s important to realize that stock brokers and commission based advisers don’t make money by investing. They make money selling investment products…whether you make any money or not.　

Unfortunately most people believe these types of advisers have some specialized knowledge that will somehow “magically” make their clients money. They mistake apparent reality for reality.　

The reality is that most commissioned advisors aren’t concerned about you making money. They are only concerned with whether they make money or not, and they only make money when youyou buy their products. Trusting them to help you make wise investment decisions is like trusting the fox to guard your henhouse.　

Here is a great quote from the book, “Empire of Debt” by Addison Wiggins:　

“Wall Street is doing nothing evil; it is merely doing its job – separating fools from their money.” “The root of the misconception is the nature of investing, at least, the public form of it. The idea of it is that a man can get rich without actually working. All he has to do is put his money “in the market” by handing it over to Wall Street, and through some magic never fully described, it comes back to him ten fold. There must be some science to it, he imagines, some wisdom that investment geniuses came up with years ago that – like penicillin or quinine – is now available to him. But it is not so. Instead, the whole edifice of Wall Street is built on a hollow wish: that you can get something for nothing.”　

My advice is before you invest in something you don’t understand, take some time to educate yourself. Remember, no one will care as much about your financial security as you will. In the meantime, invest in your debts by paying them off as fast as possible. That way you are guaranteed a rate of return equal to the interest you would have paid.

But what about secured debts like mortgages, cars, student loans, etc.? Can debt settlement help a person burdened with these debts as well? You may be surprised to find the answer to that question is a resounding…YES…but not in the way you may think.

Let me explain. You see, secured debt can’t be formally included into any debt settlement plan because the loan is secured with collateral. Your mortgage is secured by the house. If you don’t pay your mortgage as agreed, the lender can simply foreclose. In the case of an auto loan, the lender can repossess the car and sell it at auction, leaving you owing any deficiency balance.

This is why most people see debt settlement as being limited to only unsecured debt. Unfortunately, those who see debt settlement in a limited way includes the consultants in the debt settlement industry. Their training has been limited to focusing on just unsecured debt, as opposed to a more holistic approach.

The goal of the Debt to Prosperity Power Plan TM is to help you become totally debt free, including your secured debts as well. So how can you use a settlement plan to pay off secured debts? Let me show you:

You may have heard of a concept known as “power payments.” This is sometimes referred to as a debt snowball strategy, which works like a snowball rolling down hill. As the ball continues to roll it gains speed and momentum.

The concept is simple, you focus your energy and resources to pay off one debt at a time, while paying just the minimum on all the others. When that first debt is retired, you add the resources you had been paying on it to the next one in line until it is paid off. Then you keep repeating the process until all your debts are gone.

Here is how you can use this strategy with debt settlement.

Let’s assume you are paying $400 each month into a settlement account. The plan shows that all your unsecured debt will be paid off in 36 months. At the end of the 36 months you will have $400 to do with as you wish. Now let’s say you add that $400 a month to your car payment. If your current car payment is around $400 you are in essence doubling up on payments (the $400 you were already paying on the car, combined with the $400 you are now adding to the payment equals a new monthly payment of $800). This means your car loan will be paid off twice as fast (the snowball is gaining momentum).

Once the car loan is paid off, take the $800 and add it to the next debt you want to focus on. This might be your second car, student loans, you mortgage or any other debt you select. Continue to repeat this process until all of your debts are gone and you are totally debt free!

By following this process you can use your debt settlement plan as a springboard to a totally debt free and prosperous future. You may be amazed to find that the average person using this process can be totally debt free (including their mortgage) in just a few short years as opposed to the decades it will take using conventional repayment plans.

To find out how quickly you could be totally debt free using this strategy, try the calculator you will find at:

http://www.prosperitypowerplan.com/calculators/accelerate.html

On the other side there was a tremendous spike in the number of people who feel they will need to keep working (at least part-time) once they retire. 

So why are so many people facing the prospect of spending their “golden years” working under the “golden arches?”

The problem for many is that they have no plan, and if they do have one it isn’t working. Because their plan isn’t working, they themselves will need to continue working well past traditional retirement age.

It doesn’t have to be that way.  The simple reality is:

“You won’t have to work forever, as long as your financial plan does.”
 
The D2P plan is a proven financial plan that really does work to make sure you can retire with dignity, and even retire early if you want.  So how does this financial strategy work? 

The D2P financial plan follows 3 Simple steps:

1 – Get completely out of debt.  Debt is probably the single biggest killer of any financial plan.  Unfortunately, most debt relief strategies only deal with credit card and unsecured debt.  The D2P plan focuses on eliminating all debts, including your cars, student loans and mortgages.  This strategy alone will cut your living expenses by well over 50%, with no reduction in lifestyle.  Just imagine how less vulnerable you would be to economic downturns if your expenses were half of what they are now. 

By using the “rollover” or “power payment” strategy you could be totally debt free (including your mortgage) in 7 to 10 years.  For a handy calculator that will show you how quickly you could be totally debt free visit:

http://www.prosperitypowerplan.com/calculators/accelerate.html

2 – Learn to manage your income and lifestyle.  Once you are debt free you will have a sizeable surplus each month.  This surplus income is your best tool for building true wealth.  If you use this surplus to buy assets, instead of toys and liabilities, you will not only increase your net worth but you can also create passive income.  Passive income is income that you earn without trading your time for.  It’s money you make by putting your money to work (so you don’t have to.)

This strategy will provide you with a tremendous increase in free time as well as income.  When you have sufficient income and sufficient free time to enjoy it you have achieved what most people only dream of.

3 – Build multiple streams of passive income.  Once you have gotten completely out of debt and started to build a passive income stream, the final step in the D2P plan is to build multiple income sources.  This is known as diversification and is critical to ensuring your prosperity in the future.

Think of it this way, if your only income source is your job and you get laid off, your total income just dried up completely.  However, if you had 10 sources of passive income, and one dried up, the negative impact on your total income would be minimal.

In future posts I will explore each of these steps in greater detail, but for now spend some time thinking about the logic of these 3 steps and how you can implement them in your life.  If you’ll do that, you’ll never have to worry about your future prosperity because you will have a plan that is proven to work…so you won’t have to!

My mother used to often tell me: “It’s an ill wind that blows no good.”  Unfortunately this economic meltdown will be nothing more than an “ill wind” that has left many as devastated as the Midwestern farmer in the “dust bowl” days if they fail to learn the critical lessons it is trying to teach.  But before you pack up your family and belongings and head to California in defeat, like some image from The Grapes of Wrath, read on.

Here are five important lessons you can take away from this recession to make your life better and more prosperous in the future:

 1)      Get Out of Debt – many people were needlessly hurt by this recession because they had too much debt when the economy turned bad.  Debt is easy to acquire but hard to pay off and it can be a heavy weight around your neck when money gets tight.  When you are barely treading water the extra weight of debt can drown you.  So if you want to avoid putting yourself in such a vulnerable position make a commitment to get out and stay out of debt now.  Your financial needs can be greatly reduced when you are debt free and that means you can more easily survive temporary cutbacks and lay offs. 

2)      Have an Emergency Fund – one of the biggest reasons people don’t build more savings is because they are carrying too much debt and have no money to save.  Once you are out of debt, build an emergency fund equal to 6 to 9 months of living expenses.  That way you will be prepared when the next financial crisis occurs (and it will occur.)  If recent history has shown us anything about our economy it is that cycles of growth and recession are continuous.  Every period of economic growth is followed by recession and if you are debt free and have sufficient savings you can weather the storm.  So get out of debt and then save, save, save.

3)      Invest in Yourself – the stock market can be risky business and if you have money in a 401k, or any other qualified plan, you have seen firsthand just how risky it can be.  Before you go throwing darts on Wall Street why not take some time (and your money) and invest in something you have more control over…yourself.  Benjamin Franklin once said: “Invest the coins from your purse into your mind and your mind will fill your purse with coins.”  A small investment in your financial education and skills can pay a huge dividend in income. 

4)      Diversify – If you want to insulate yourself from the devastation many people experienced when they lost their jobs you need to diversify your income streams.  If all your income is from one source, what will happen when that income source dries up?  Being totally dependant on one source of income is dangerous at best and this economy has shown just how vulnerable an income source can be.  While I am writing this, General Motors and Chrysler are dropping their dealership contracts with thousands of dealers across the country.  Some of these dealers have been with them for decades and never imagined that income stream would be shut off.  But it has, and it has left not only the dealers but their employees as well hanging out to dry.  It wouldn’t be so hard to accept if they had diversified income sources and weren’t solely dependent on GM.

5)       Reclaim the Entrepreneurial Spirit – in the nineteenth century the majority of Americans were self employed (or entrepreneurs).  Whether they were farmers, ranchers, sheep herders, or trappers their security was based on their own hard work and wits.  It was this spirit that built this country.  However, in the twentieth century the industrial revolution brought big business and people moved in to towns where they took jobs that promised “security.”  The concept was simple, work for a large company and retire with a pension.  That security was real, for a while, but it is an illusion today.  Large companies that were once considered too big to fail are dropping like flies.  The world and the economy have changed and you need to change with it if you want to survive.  

It’s time to reclaim the entrepreneurial spirit that built this country.  You don’t have to quit your job, you can start a part-time home based business if you want and keep your job in the meantime.  Everywhere you look you can see this spirit catching on.  In fact over 60% of all the businesses in the U.S. today are actually home based.  However, be careful before you buy into some “get rich quick” business opportunity.  Instead find a business you can start for little or no money and invest your time rather than money to get it going. 

These are just a few lessons that can be learned from this economic crisis.  Remember, “It is an ill wind that blows no good.”  Don’t let the lessons from this bad economy be lost.  If you heed them you can make sure that all the struggle this meltdown has caused was not in vain and you can look forward to being better prepared for the next storm.

For many, the images of mom, apple pie, baseball, and Chevrolet conjure up images of American life in a simpler, more stable and predictable time.  It was a time when families enjoyed picnics, summer barbeques in the back yard, and cross country drives on Route 66.  It was a time when you went to school, got a good job, and started a family.  You knew if you worked hard you would earn a decent living, be able to provide for your family, and your company would reward you in your retirement years.

These icons have become known as “Americana.” 

What does debt settlement have to do with all this?  Well, let me explain.

Over the last several months there have been numerous stories about how Chevrolet, or more specifically General Motors, has fallen on serious financial hardships.  They now find themselves in a position where they are unable to meet their debt obligations to bondholders and are facing the likelihood of bankruptcy.

How is this icon of “Americana” trying to avoid that? 

They are employing a strategy that has become known to many as debt settlement.  In essence, they are trying to pay down a substantial portion of their debt to bondholders by offering a reduced settlement.  Their offer equates to a settlement of about .50 cents on the dollar, and they are not the only auto manufacturer doing this.  Chrysler is also offering to settle their obligations with bondholders in an effort to avoid bankruptcy.  Their proposal is to settle 6 billion dollars of debt with a cash payment of 2 billion dollars, which is a settlement offer of about .33 cents on the dollar.

So what is my point in all this? 

Many Americans today are facing much the same financial situation as General Motors, however, many have been led to believe that debt settlement is somehow “Un-American”.  Creditors, collectors, and credit counselors alike have been very effective in making debt settlement seem unethical or immoral.  The truth is that if you can’t pay all that you owe, it is entirely ethical to repay what you can in accordance with your means, as opposed to paying nothing or simply filing bankruptcy. 

If you are struggling financially and can’t meet your obligations to creditors don’t allow those creditors, or their agents, to deceive you.  Debt settlement is an ethical alternative.  In fact, it’s not only ethical and moral…

“Debt Settlement is as American as Mom, Apple Pie, Baseball, and Chevrolet”

Now a new wrinkle is developing.  Many so called experts recently started encouraging consumers to avoid trying to get out of debt, and instead to pay just the minimums on their credit cards.  This advice was embraced by some very popular “experts” including Suze Orman, among others.  Even Steve Rhode, the founder of GetOutOfDebt.org, is encouraging it.  And if that’s not bad enough advice,  we have a respected columnist from the Wall Street Journal (Brett Arends) encouraging people to use the available balances on their credit cards to bolster their emergency savings accounts.  All this leaves me with just one question…”Have they gone absolutely stark-raving insane, or is their an ulterior motive?”  Surely there must be some logical reason for such illogical advice.

Before you take their advice, let’s give this some careful thought.  Our economy is in shambles, as if it had been hit by a tsunami.  From all accounts the cause seems to be linked to irresponsible behavior on the part of lenders, borrowers, investment banks, and government regulators.  That being the case, how will more irresponsible action solve the problem? 

I am just a humble blogger, not some world renowned economist, but it seems to me the solution to our economic problems would lie in returning to responsible behavior, and making just minimum payments or taking substantial cash advances could be considered highly irresponsible.  So why would “experts” give such irresponsible financial advice. 

 Here are just a few quick thoughts:

Our economy depends almost 70% on consumer spending.  When the economy slows down it’s to be expected that tremendous efforts to encourage spending would take place.  This “encouragement” (also read as manipulation) would likely come from merchants, advertisers, lenders, economists, and even the government.  But should it come from the financial “gurus” we trust to help us improve our personal station in life?  Not unless they are in some way compensated by the companies that benefit by our increased spending. 

In the case of Suze Orman it’s no secret that she has used her position to “hawk” products for one major car manufacturer (whose sales are slumping) and is certainly compensated by FICO who generates our credit scores.  However, in the case of the head of a debt relief organization, the reasoning seems less apparent…Unless you stop to consider that the end result of the advice would be an increase in debt load and hence a broader market for debt relief.  In that case the advice starts to make sense, even though it would still be very self serving.

Maybe the lesson in all of this is that no one cares as much about you and your well being as you do, and because of that you should be very careful about letting anyone do your thinking for you.  If you think the experts are right then by all means follow their advice, but do it because you have thought it through and have reached your own conclusions.  If you think they are losing their minds, or worse, they are serving their own agenda, then maybe it’s time to stop listening to them.  

Ask yourself this question “Do you believe that the lenders, merchants, investment advisors, economic experts, and even government agencies that caused this mess are the ones you should trust to fix it?”

I recently received an email that contained a simple story that does a great job of explaining the concept, unfortunately I don’t know who the original author is to give them credit.  If anyone knows who wrote this story please let me know so they get the credit they deserve, in the meantime here is how the story goes:

One day, the father of a very wealthy family took his son on a trip to the country with the express purpose of showing him how poor people live.
 
They spent a couple of days and nights on the farm of what would be considered a very poor family.

On their return from their trip, the father asked his son, “How was the trip?”
 
“It was great, Dad.”
 
“Did you see how poor people live?” the father asked.
 
“Oh yeah,” said the son.

“So, tell me, what did you learn from the trip?” asked the father.
 
The son answered:
 
“I saw that we have one dog and they had four.
 
We have a pool that reaches to the middle of our garden and they have a creek that has no end.
 
We have imported lanterns in our garden and they have the stars at night. 

Our patio reaches to the front yard and they have the whole horizon.
 
We have a small piece of land to live on and they have fields that go beyond our sight.
 
We have servants who serve us, but they serve others.
 
We buy our food, but they grow theirs.
 
We have walls around our property to protect us, they have friends to protect them.”
 
The boy’s father was speechless.

Then his son added, “Thanks Dad for showing me how poor we are.”

Now I like to think that I am a fairly open minded sort of guy, so I decided to consider the possibility that maybe I’m not always right.  Maybe their argument has some merit.  In order to give their argument the serious consideration it deserves I asked myself a simple question:

“What would really happen to our national economy if we all saved more and spent less?”

Here are some of the answers I found:

Most experts tell me that it would have catastrophic effects and entire industries could be wiped out.  Sounds scary doesn’t it?  Well before you start digging a survival shelter in your back yard let’s look at this with a cool head.

The fact is the economists are right, it would have a devastating effect on our economy…at least for a while.  But what if the economy we are trying to shore up is outdated and unsound.  What if the very foundation of that economy – consumer spending – is unsafe, or too weak for the structure it supports?

If you have an old rickety building that is too big for it’s foundation what do you do?  You tear it down and build a new and workable building that is structurally sound.  Ultimately, I believe that is what would happen to our economy.

Without a doubt the economists are right…entire industries would be wiped out.  But exactly what industries are we talking about?  Who are these companies that would cease to exist if the entire country was focused on saving?

Here are a few that immediately come to mind:

Pay day lenders – if everyone started to build their savings, instead of spending everything they make, they would quickly have an emergency fund.  They would then have no need for quick and easy pay day loans.  All of those storefronts would disappear from every street corner they occupy now.  They would no longer outnumber the combined total of all Mcdonald’s and Burger King franchises combined (as they do today).  And Mr. and Mrs. Average Joe wouldn’t have to pay over 400% interest on a payday loan anymore.

Credit card lenders – this industry too would be hard hit.  Since consumers would have money in savings they would actually be able to pay off their debts and would be able to buy the things they want with cash.  This may be hard to imagine but it was the way our economy operated up until the 1970’s when credit cards started to proliferate.

In fact, any industry that lends money at high interest rates would probably cease to exist because consumers would have sufficient reserve capital. Those usurious loans wouldn’t be needed.  Just imagine how destructive that would be to our economy, not to mention our security and welfare.

Just think about it, if American’s actually started to save more, they would eventually have substantial reserves and might even start looking for ways to invest.  What would all the foreign investors that we so heavily rely on now to fuel our economy do?

I don’t know about you, but I have a hard time seeing the problem here.  The idea of affluent Americans (created by sustained saving) investing in America sounds like a good thing to me.  If investment capital was locally available, it would reduce our dependence on foreign investors.  New industries would be created and so would new jobs.  If we had American investors creating new jobs for Americans, wouldn’t that help our economy in the long run.     

Call me an idealist if you want, but the way I see it we may have some fall out in the economy if everyone saved more and spent less, but ultimately we would be a lot better off.

What do you think?

Some people are cutting back on spending out of necessity, others by choice.  Whatever the reason, our economic problems have served as a wake up call that has helped bring us to our senses.

However, it seems the more we save, the harder some people try to discourage that behavior.  If you have completed the D2P Lesson on the 4 Horsemen of Your Financial Apocalypse you should realize this is to be expected.  There will always be people trying to convince you to spend your money.

If you listen to economic journalists these days you have undoubtedly heard that what the economy needs most is for you, me, and every red-blooded American to start spending.  In fact one column I read went so far as to say that it is our “civic duty” as caring and responsible citizens to help others less fortunate by opening our wallets and start spending more. 

Their rationale was simple; the economy will pick up if you and I go out and start to spend.  If we will just start buying more things then businesses will start to hire again, and people who are unemployed will have a job once more.  This sympathetic plea to stop saving and spend more appears to have some merit, but let’s examine it a little closer.

Who really benefits from our increased spending? 

Many businesses have already cut labor costs and are focused on lean operations to maximize their profits.  Increased sales will go to their bottom lines for some time before they take on new employees.  This means it could be a while before any of that spending finds its’ way to the unemployed.

How would we sustain that economic model so people keep their new jobs?

Increasing our spending will provide some stimulus to our economic recovery, but how will that be sustained?  The only way to make sure those new jobs are secure is by sustained spending.  Once you start down that road you have to keep spending or the economy will falter and the jobs will be lost.  So to take this argument to its’ logical end, out of civic duty you must start spending and keep spending more, more, more…and do it forever.

That may help the national economy, but what will it do to your own personal economy? 

Now, don’t get me wrong, I’m all for economic recovery, growth, and job creation but buying something you don’t need is not going to help you, or your fellow man.  And it’s not going to save the economy, at least not long term. 

It seems to me that the cycle of economic ups and downs we constantly experience is a direct result of our desire to build a 10 story structure on a foundation only able to support 3 or 4 stories.  Every time we try to overbuild, or expand the economy too fast, the structure gets weak and crumbles.

We live in a world dependent on consumer spending, but we have gotten to a point where we only focus on whether or not people will spend money.   We have forgotten to consider if the product or service being bought is of real benefit to the consumer. 

Here is an idea, if economists and industry leaders want to see people start to buy again, how about creating products that are actually needed by, and beneficial to, their customers.  Let’s forget about selling Chia pets, gas guzzling cars, and other useless products.  Instead let’s make things that actually enrich people’s lives and contribute to society and our environment.  That is the only way to sustain an economic recovery based on consumer spending.

So before you spend your money on things you don’t want or need, here is what I think is a much better suggestion.  Stuff all that hard earned cash in a big envelope and mail it to me.  That way you will be fulfilling your civic duty of helping someone else improve their financial situation (namely me) and you won’t have all that junk you would have bought cluttering up your home, or your life. 

On second thought, you could just save your money and learn to invest it.  That would also improve the economy, help create jobs for your fellow man, and it would benefit you more in the long run by making you financial independent. 

Now that I think about it, saving and investing might be your best option.  Oh well, you can still send me money if you want. (Just kidding)

When it comes to matters of personal finance how smart would you say you are?  Are you smarter than a 5th grader?  How about a high school senior?  Be careful before you answer that question because there will be a test at the end of this post.

 Several years ago, I read an article from the Jumpstart Coalition which stated that financial literacy among high school seniors was dismal at best.  The average student who took their financial literacy test  scored just over 50% which equates to an F.  So how did the average high school senior fare this time around?  Well, the average score has jumped to a whopping 52% which is still equates to an F- (if there is such a grade). 

Obviously the need for better financial education in our school systems is evident.  If students aren’t learning to be smart with money in school, where are they going to learn how to properly manage their money?  The answer is…from their parents.  Studies show that most children learn more about managing money from the example and advice of their parents than any other source.  

So if you have kids here is a question for you.  How prepared are you to give your children the financial education they so desperately need?  If you don’t have kids that doesn’t mean you are off the hook.  You still need to be smart about money if you want to avoid the money traps that lenders like to set.

Let’s face it, financial institutions often benefit from our lack of knowledge when it comes to financial matters.   They profit by getting us into debt, as well as charging fees for just about everything (late fees, over-the-limit fees, transaction fees, etc). 

The greater our financial knowledge, the easier it is to avoid those traps.  Understanding your finances will make it easier for you to save money, get out of debt, stay debt free and build a secure financial future.  It will also help you teach your children how to be debt free and prosperous by avoiding the mistakes you may have experienced.

So how smart are you about financial matters?  Click on the link below and take the test:

   click here to take the test

After you take the test let me know how you did or feel free to leave a comment.