This blog post is an essay submitted by a college student that is participating in the Golden Financial Services scholarship contest. To apply for a scholarship, students must come up with a new debt relief program to help consumers who are behind on their credit card payments. Their idea for a new debt relief program cannot be like any of our existing debt relief programs here.
Debt in America has reached egregious levels in the past several decades. It is common practice as well as an expectation to be in debt. It builds a good credit score, creates an opportunity to apply for other loans, and purchase items outside the budget range of an individual. We are also constantly bombarded with countless advertisements that guarantee the best rate for credit cards. The average person may not know a lot about economics, and it could land them in trouble. Leading families in financial disarray while corporations reap the benefits. To reduce the burden of debt in our nation, an effective program must solve the emotional and educational aspects of personal finance—a program based on simple math that many can quickly grasp. A program that shows Americans can have money work for them instead of it working them.
For any program to be successful, it needs to address the core issue. Emotions can skew our logical decisions, alter our perceptions, and disseminates other areas of our life. First, discuss what landed them in this situation in the first place. Are there role models pressuring them. Is it being triggered by another aspect of their life? Do they have a solid understanding of the difference between simple and compound interest? Do they proceed to make purchases that they know they should not purchase? No matter what their emotional state is, we never judge them. Clients come to us for help, not to be humiliated. Just remember they carry the weight equal to the amount of debt they carry. Sometimes it can push them off the edge into the endless well. When we do not address the cause, we see destroyed relationships that end in divorce. The harsh reality is what many people avoid, and is the last thing anyone wants to hear. They must hear that they are not living within their means, and if one continues down this path, they will never experience the euphoria that comes at the end of the tunnel. One way to get them off that path is to encourage them with a message of hope. Explain in detail how sometimes the worst life experiences prepare them for the best parts of their life. Leave the impression that lasts even after the consultation by showing them compassion.
The next component of this program contains a concrete series of implementing strategies, such as budgeting. Before we delve into the specifics, we must know that knowledge is power. However, without any action, there can be no progress.
First, we need to pay more than the minimum payment. Why? It will take three years to pay off the original amount, and by then, the odds of accumulating additional debt is rather high, making it difficult to pay off conclusively. Saving can be hard to do when money is not available in the first place. Write a list of the total amount spent in a month and find unnecessary expenses to cut. For example, Netflix, Spotify, and cable can add up quickly. Whatever is available to cut, should be. Again, the reality is unforgiving but compensated when there is no more debt to pay off. Realize that it connects to emotions, what needs to be given up to make more than the minimum payment because interest is not on our side. Adhering to the program will solve the issue of paying interest.
Next, the program discusses the variations of different types of interest, specifically simple verses compound. Define unfamiliar terms that may confuse others. Create a spreadsheet they can easily refer to create a sense of relief in the overwhelming amount of information thrown at them.
Lastly, another simple yet effective solution to reduce and eliminate debt is budgeting. Our program creates an all-inclusive, interactive spreadsheet to automate and keep track of payments. It solves the feeling of unpredictability of finance and, at the same time, teaching discipline. Do not buy products that are outside that realm of cash flow. That fancy car purchased will have depreciated monetary value and in spending thousands of dollars in interest on top of the original cost.
Uniquely designed and custom made to the client addresses core ideals that effectively solves the devastating effects of debt. While although debt will be in our culture for the next decade or more, we eventually educate many individuals on financial stability. There are hundreds of programs that offer debt relief, none of which can solve but only cover up the symptom. There is no educational content they can carry with them to pass on to future generations.