Saturday, September 29, 2012

Go on a Money Strike

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The teachers in Chicago were on strike for a week and a half due to the inability to agree on renewal of the teachers’ contract.  To solve a problem or crisis you may have to make hard sacrifices.  This same principle can be applied to your finances. 

Over 2.5 million homes were foreclosed in 2011. Over 1 million Americans file for bankruptcy every year. According to, there are over 700 million credit cards in use in America more than any other country in the world. 

Everyone wants to live the American dream but the American dream is not possible unless you make sacrifices. Money is a tool that should be used to generate wealth but most Americans use money to go into debt. 

It can be difficult to resist the temptation of the instant gratification culture of America.  Advertisers make it easy for consumers to buy everything instantly by creating online shopping, instant meals, and the ability to make credit card or debit card purchases anytime anywhere.  Most Americans buy an item immediately when they see it in a store or online.  This bad habit has caused many Americans to overdraw their account, pay overdraft fees, spend more money than they have, damage their relationship with their bank and may lower their credit score.

One solution to solve your financial problems is by going on a money strike.   A money strike will help reduce spending and assess your spending habits. Going on a money strike requires participation from the entire family.  A money strike will require discipline, sacrifice and will-power.  A money strike will help you to save money, increase your savings, pay down debt, free up time and improve your overall financial situation.  You can do a money strike for 30, 45, 60, 90 days or for an entire year.  The time period is up to you but the minimum time period should be 30 days because it takes 23 days to break a habit.  Here are 33 things to do when going on a money strike. 
  1. Acknowledge that are not where you want to be financially or that you are struggling to manage your money.
  2. Create a budget.  Write down everything you spend money on for the next 30 days.
  3. Buy only needs – food (generic when possible), clothing (no –brand name), prescriptions, gas for car, car maintenance, toiletries, etc. The barber, hair salon, spa, massages, gym trainer, etc. are not necessities.
  4. Pay for everything with cash. Don’t buy an item just because it is on sale.
  5. Avoid going to the mall or department stores and don’t go window shopping.
  6. Avoid eating out. Cook all meals at home and take your breakfast and/or lunch to work. Also avoid vending machines and snack bars.
  7. Avoid Starbucks and other place to buy coffee, soda, juice, shakes, smoothies, bottled water or alcoholic drinks.
  8. Avoid buying gifts and greeting cards. Send a free e-card.
  9. Donate items to charity or have a yard sale.
  10. Use arts and crafts to make gifts.
  11. Avoid shopping online or shopping retail catalogues.  Avoid browsing sale items.  Avoid reading the newspaper unless you are clipping coupons.
  12. Avoid going to the movies and renting movies.
  13. Don’t engage in conversations about shopping.  Walk away or change the subject.
  14. Pay all of your bills on time or before the due date.  Use online bill payment or automatic paycheck deduction when possible.
  15. Find at least 1 way to save money each week (carpool, take public transportation, eat at home, rent movies, use coupons, buy items on sale, etc.).
  16. Don’t loan others money. If someone owes you money get your money back.
  17. Buy packaged foods, canned goods, household goods or paper products from discount stores such as Walgreens, Wal-Mart or Target.
  18. Buy fruits and vegetables from Omish markets or local farmers to save money.
  19. Reduce your cable and cell phone plan to the cheapest plan possible. Call every 6 months to ask about specials and discounts.
  20. Buy generic instead of brand names.
  21. Combine nearby trips on the same day when driving.
  22. Skip the high octane. If your car can run on unleaded gas purchase it.
  23. Skip the dry cleaners.  Buy home dry cleaning kits or air clothes out.
  24. Entertainment. Skip the happy hours, nightclubs, parties and other entertainment.
  25. Avoid watching TV especially the shopping channels. A 30 minute show includes 6 minutes of advertisements.  An hour show includes 9 minutes of advertisements.
  26. Throw away all junk mail without reading it. Use a shredder or cut up before throwing away to protect yourself from identity theft.
  27. Unplug appliances and electronic devices when not in use.
  28. If you out of a room for more than 20 minutes turn lights off or use night lights to light the room. Leave blinds open during the winter to heat rooms. Close them in the summer to cool rooms.
  29. Adjust thermostat to 68 degrees Fahrenheit to heat your home.
  30. Rent music movies at the library for free.
  31. Wash clothes on the weekend or after 7pm.
  32. If you smoke try to quit.
  33. If you have a food addiction or are an emotional eater eat 3-5 small meals a day to lose weight and save money.
See how much your spending habits have changed during your money strike.  Be a role model for others and encourage them to improve their spending habits.  Live for tomorrow instead of today and plan for your future and your children’s future.

Wednesday, September 26, 2012

America the Land of Debt

Over 1 million Americans file for bankruptcy every year.  Over 2.5 million homes were foreclosed in 2011. According to, there are over 700 million credit cards in use in America more than any other country in the world.  Over 10 million Americans have no bank account.  The average credit score is between 672 and 692.  These statistics indicate that Americans love consuming debt. 

America’s love for debt started at the beginning of the establishment of the country and has continued for centuries.  America is the land of debt and that value has been passed down for generations.
The public debt started during the American Revolution.  In 1776, a committee of 10 members created what became the Treasury, and helped secure funding for the war borrowing money from France and the Netherlands.  On New Year’s Day 1783, the public debt was $43 million. 

On September 2, 1789, Congress established The Treasury Department, naming Alexander Hamilton, as Secretary.  Hamilton estimated the public debt was $77.1 million and called for the issuance of new federal bonds to cover the debt. 

Debts incurred during the American Revolutionary War were approximately $75.46 million New Year’s Day 1791. The First Bank of the United States opened in 1791 with a total capital of $10 million. In 1811, the debt was reduced to $45.2 million.  The debt increased from $45.2 million on January 1, 1812, to $119.2 million by September 30, 1815. However, the public debt was reduced zero by January 1835, under President Andrew Jackson.

The United States went to war with Mexico in May 1846, over Texas and California. The total cost of the war was estimated to be $64 million. By the end of 1849, public debt totaled $63.1 million.
The Civil War resulted in more debt.  The public debt was approximately $65 million in 1860, but exceeded $1 billion in 1863 and was $2.7 billion after the war. It is estimated that the Civil War cost $5.2 billion. The debt grew in the 1900’s and was approximately $22 billion due to involvement in World War I.  At the end of the war the debt grew to $260 billion. 

Due to stock market crash in 1929 the economy declined. By 1933, the budget deficit was nearly $3 billion, and the public debt rose above $22 billion. In 1940, the public debt was $50.7 billion.  It has been estimated that the total spent during World War II was $323 billion.  

Approximately $211 billion of the estimated $323 billion spent fighting the war was borrowed. There was a budget surplus each year from 1946 to 1949, but the total debt never fell below $250 billion. With the outbreak of unrest in Korea in June 1950, defense spending went from $17.7 billion to $40.4 billion in 1953.

Due to the war in Vietnam, the country’s deeper involvement from 1966 forward, in addition to the Johnson administration’s "Great Society" programs, the budget deficit increased to $25.2 billion.  Due to a tax increase, the budget for 1969 had a surplus of $3.2 billion, which was the last time the federal government’s was "in the black" until 1998. By 1970, the total debt rose to $382.6 billion.
In 1973, the budget deficit was $14.3 billion. Due to the sharp increase in the price of petroleum products due to the OPEC shortage in 1973, the deficit reached $59 billion by 1980.

Between 1980 and 1990, the debt more than tripled and rose above $780 billion due to the government borrowing money to fund military build-ups and new policies, such as "the war on drugs." Americans began relying more on credit cards, jumbo mortgages become common, and being "in debt" became the American dream.

The terrorist attacks in New York, Pennsylvania and Washington DC on September 11, 2001, reduced the economic progress that was made. To counter the effects of the economic slowdown and the increased spending on national security that followed the attacks, president, George W. Bush created tax cuts and refunds, but the deficit grew, and the public debt increased from $5.7 trillion in January 2001 to $10.7 trillion by December 2008, due to decreasing tax rates and two unpaid wars. In February 2009, Congress raised the debt limit to $12.1 trillion. This list of facts shows that country has been in a debt a long time and will probably continue to be in debt for eternity.

Sunday, September 23, 2012

Are You Addicted to Debt

Are you addicted to debt? I used to be.  I was a shopaholic. I could not go into a store without buying something - a pack of gum, candy, candles, a pair of socks, I had to buy something.  After some years I later realized I was trying to fill a void.  It can be difficult to realize that you are addicted to debt; many people ignore the signs or are in denial.  You have to identify the root cause of the problem which usually stems from childhood or a traumatic experience.   Once you admit you have a problem and examine the cause, and then you can begin eliminating the bad behavior. 

It is easy for Americans to get in debt because America was founded on debt.  During the American Revolutionary War debt grew to $75,463,476.52 by January 1, 1791. The American debt reached $1 billion in 1863. Between 1980 and 1990 the debt reached approximately $780 billion.  Debt surrounds us.  According to the Federal Reserve, the total household debt at the end of 2010 was approximately $13.4 trillion - which meant consumers owed almost as much debt as the federal government.  According to John Ulzheimer of, more credit cards are issued in this country than another country, approximately 700 million.

People get into debt to fill a void in their life such as living paycheck to paycheck, loneliness, anger, poverty, overweight, sadness, depression, etc.  There are many kinds of debt addiction:  shopaholics, emotional spenders, compulsive spenders, gambling addiction, and more.  However, psychologists will disagree and state that being in debt is not an addiction.  I use the term “debt addiction” to highlight the problem with debt.  

If you constantly accumulate debt because you decide you won’t pay the bill, you don’t care about accumulating debt or you accumulate debt because of a negative situation that occurred such as getting laid off, being sick, or losing a loved one, you may be addicted to debt. Those addicted to debt don’t care about the consequences of their purchases, they are only concerned with the temporary instant gratification they feel when making a purchase.  Here are some signs that you are addicted to debt:

  1. Do you go shopping with money already set aside to pay a bill?
  2. Do you buy an item even if it is not in your size or buy items on sale that you will never use?
  3. Is your home filled with unused items you purchased or items that still have the tags on them?
  4. Do you pay your bills with a credit card, constantly pay late charges or spend extra money that could be used to pay a debt to buy something else?
  5. Do you rationalize your poor spending habits by saying things like "I work hard I deserve it", " I can buy whatever I want", "I just had to have it", "I don't have to answer to you", "I want it now", or "I can buy it with my credit card"?
  6. Do you buy items based on how you feel?
  7. Do you transfer credit card balances?
  8. Do you have a negative balance on your savings or checking account?
  9. Do you live paycheck to paycheck?
  10. Do you buy more than you need (home, car, clothes, boat, appliances)?
  11. Do you have multiple credit cards which are all maxed out?
  12. Do you take out payday loans or cash advances to pay your bills?
If you are addicted to debt here are some tips to help you.

1.  Being honest and admit there is a problem.
  1. Speak to family and friends so they can offer moral support.
  2. Contact a professional.
  3. Surround yourself with at least 3 people who are in a better financial situation.
  4. Pay your bills first.
  5. Get a receipt each time you make a purchase and keep it.
  6. Track spending.  Take all of your receipts from your credit card purchases and reconcile the receipts daily, weekly or monthly to see how you are spending your money.   
  7. Avoid shopping when you are emotional. 
  8. Go to the bank and take out the amount of cash you need for the week.  Once you spend that amount don’t get out any more money or use your credit card unless it is an emergency.