When You're In Massive Debt

If the financial issues discussed, it is important to note that the situation is different for everyone and financial advice should be adapted to the conditions of a person with professional advisors.

Every day our mail boxes flooded with ads, catalogs, and pre-approved "credit offers hope to drain our savings and give us deeper into debt. In a recent study conducted by the Federal Reserve on consumer credit, expressed concern that the growing volume of the debt may be "excessively burdensome to families." The American Bankruptcy Institute personal bankruptcies in the near all-time high in 2004 more than 1.5 million reports stated.

Guilt is a terrible place to be, emotionally and financially threatened. This limits our ability to meet living, investing in the future, and creating a long chain of financial difficulties. Set the tension in our relationship due to financial pressures, it is vital that we find ways to effectively deal with debt. Like all problems that threatened the link, if you ignore, so you have the head of the conditions for a positive change in our lives.

Permanent settlement of our debt situation involves three things: increase the diversity of the debt, understanding the psychology and circumstances that led to this situation and designing an effective debt reduction, saving and wealth acquisition plan.


In short, the debt is divided into two categories: investment debt and consumer debt

Investment debt obligation, which we take to generate free cash flows, and create wealth. This is the influence of other people's money (OPM) to purchase goods, which can increase the value or produce income. Some examples of investments, including mortgage debt on housing, business loans, margin loans and stock. The best form of investment debt produce positive cash flows. When debt produces positive cash flow, more money to invest and not to reduce the disposable income generated.

Consumer debt is a financial obligation to use products that are not essential or resale value of the depreciation since the acquisition purchase. Examples of consumer debt are: car loans, personal loans, personal lines of credit, credit card debt, and much more. You may want to use one copy of the purchase and consumer credit, after tax return on investment is higher than the interest on the debt.

With this approach you more money to invest in a higher level again. This strategy is risky and should only be used by professional investors. It is also important to note that consumer debt is a debt investment. One spends money on debt service to go to help others build their wealth. Over time you should try to change the situation.