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Scott,
I am new to your web site and find your tips informative. I am,
however, interested in your opinion of other financial wizards and
their money management tactics, such as Suze Orman. She seems to be
very conservative in her methods and you seem to be more on the
risky side.
There are also the Consumer Credit Counseling Services
across the states that also lean on conservatism. How would you rate
your methods in comparison to theirs?
Sherry
Sherry,
Glad to hear that you like what you
see here at DebtSmart.com!
I've
always thought of myself as a credit card and debt vigilante, but the
media has always referred to me as the Debt Daredevil™. That
reminds me of Spider-Man. Remember how Peter Parker wanted to call
himself "The Human Spider" but the ring announcer
introduced him as "Spider-Man?" Yes, I just compared
myself to Spider-Man. It may be a stretch, but it keeps the topic fun.
(I'm guessing you can tell that I'm a fan of superhero comics.)
Anyway, credit counseling companies
may seem conservative. However, there are potential risks involved with
using their services. In fact, The New York Times once ran a
front page article titled, Not-for-profit
Credit Counselors Are Targets of an I.R.S. Inquiry. A credit
counselor's record must be carefully evaluated before choosing a
company. You should always check with the Better Business
Bureau (BBB.org).
Next, I'd like to tell you that I
really enjoy listening to Suze Orman. She's a straight-shooter. She
gets to the root of people's financial and even personal problems.
When I listen to her TV show, I've compared what I would recommend
for her callers with debt problems to what she's said, and for the
most part, our advice is very similar. I would say that 99 percent
of the time Suze and I are in complete agreement. I would personally
recommend any of her books!
It's interesting that you would
describe my methods to be "more on the risky side." I
completely understand how many people might see my approach to debt
in this manner, but on the contrary, I see my debt strategies to be
far less risky and costly--it just depends on your definition of
risk. The American Heritage version is, "The possibility of
suffering harm or loss; danger."
Actually,
I believe my strategies would be more accurately characterized as
unconventional, cutting-edge, bold, and effective, rather than
risky.
For example, many people would say
that the advice to "cut up your credit cards" is
conservative. Their reasoning is that if you cut up
your credit cards, then there is no chance of "suffering
loss" by using the cards in the future; therefore, cutting up
cards is conservative.
I don't see it that way at all. I see cutting
up your paid-off credit cards as being risky. When you cut up your
credit cards, you cut out your options! My advice would be to keep paid-off
accounts open, as long as they are not charging you an annual fee.
Why?
What typically happens is that
someone consolidates their debt onto one low-rate card then closes
all the accounts they paid off. Later, the one bank that
consolidated all the debt raises their rate to like 29 percent, and
the person is trapped at the high rate with no other banks which to
transfer their balance! In essence, there is a greater possibility of
suffering a loss by cutting up your cards!
Another recommendation I've made that
financial "experts" have perceived as
"risky" is to consider financing your car purchase with a
credit card. Your credit cards are simply another financial option,
and to neglect considering (that's the key word,
"considering") using your cards would be an error. I don't
mean going out and buying a brand new Hummer with your credit card
(although it may be possible). When I say "new" car I mean
a
new-to-me car, which is a used (pre-owned) car.
Just as there are advantages and
disadvantages with nearly everything you encounter in life, so
are there risks involved with your choices as well.
Risks when financing a car with a
dealer:
| 1) |
They
don't give you the best rate because they're splitting the
profit from the added interest costs with their financing
company. |
| 2) |
You
must carry specific types of insurance that are more costly. |
| 3) |
Car
can be repossessed if you miss payments. |
Risk when financing with your credit
card:
| 1) |
You
increase your credit card debt. |
| 2) |
.Rate
is probably not locked-in. |
More about this topic in my article, Consider
Financing Your Next Car with a Credit Card.
I've even been criticized for
advising
people to transfer their balances to a lower-rate credit card! There
are some people who feel that this is risky because, "it's
borrowing from Peter to pay Paul." What's the difference to
whom you owe the money? The way I see it is that if Peter is going
to give you a better rate, then pay Paul back with Peter's
money! Hey, Paul is getting paid back either way.
It's my belief that as people learn
about their options with credit, they will see that what I've done
and the methods that I talk about for reducing debt are not risky
at all. In fact, they are conservative approaches that are less
expensive and more effective when weighed against their
alternatives.
Keep watching DebtSmart.com for new
adventures of the Debt Daredevil™.
Regards,
Scott
Debt Daredevil™
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