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Technically Insolvent



Could You Be 'Technically Insolvent'?

by Colin Mc Caig

It seemed a crazy question.
But there it was...staring at me from the page.
'Would you work for or invest in a company that was insolvent?'

'Not unless I had more money than sense I thought',
and even then, I'd be hard pushed!

'So why then', the article went on, 'do so many
individuals allow themselves to become technically
insolvent? Meaning that if you're carrying debts of any
kind, and can only making that minimum monthly repayment,
you're slowly becoming poorer every month.'

The statement sounded very simplistic, but there was
no denying the truth in it.
Far too many of us do seem to live in a state of willful
ignorance about the true state of our finances.

Many of us, I guess, would even become very defensive if
confronted with the harsh reality of our spending.

In fact, as I thought more I about it, I concluded that
the root of the problem lies in the illusion that credit
allows us to maintain.

You probably know where I'm coming from...when you're
handing over that little piece of plastic, it doesn't
really feel like you're spending *real* money, does it?

I've found myself guilty of this...even with my debit card!

I'd happily flash it at every opportunity, but when it
actually came to visiting a cash machine, i always seemed
just that little bit more aware of how much was really
sitting in my account

So to better illustrate the financial mind tricks we
sometimes play on ourselves, I compiled some of the most
common credit excuses I've come across and the replies I
might give to each.
,br> 'My credit card helps me out with things my debit card
can't afford.'
Answer: Why then, would you want to use your credit card?
Why not simply take the cash out?

'My card helps me out those months when I can't make ends meet.'

It's bad enough using your card on a whim to buy useless
consumer junk, but if you're extending your credit spending
to utilities and life's basic necessities, this is a
sure-fire fast-track to financial suicide.

'But I always pay it off every month anyway.'

I wish I had a dollar for every time I've heard this one.
Many of us claim to, but I've met very few who actually do.
Even if you were part of this rare breed, would it not be
more prudent to use your debit card?

'My card gives me reward points and bonuses as a loyal member.'

This is a trick employed by many department stores to get
you to sign up on the spot for a card that generally
charges you an extortionate rate of interest
(how does 29% sound for starters?).

On top of that, check the small print. In the UK, where
I'm from, you might find you have to spend, say 500 before
you can collect your 15 'bonus' voucher.

I could quote more examples, but all would have a fairly
common theme...a general desire to maintain a veil of
illusion and reluctance to confront the true reality
of our spending habits.

So try this little exercise...

Treat yourself like one of those companies you might
invest in or work for. Draw a line down the center
of the page and on one side record your profit and
on the other your loss (and DO include all outgoings
and monthly debt payments!)

It's an interesting exercise, which frequently shocks
many - especially many who thought they had a firm
hold on their finances!

But what about your profit and loss?

Are you a prospering company, or like so many, are you
slipping slowly towards insolvency?

Copyright 2004 by Colin McCaig colin@cmcaig.com

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