Hey debt fighters! Today’s dear debt letter offers a fresh perspective, from someone who has to clean up debt’s mess. Today’s letter is from Ted Michalos, a bankruptcy trustee and co-founder of Hoyes, Michalos & Associates Inc. Hoyes Michalos was founded as a firm that takes a respectful and personalized approach to debt management and recovery, to help people gain a lasting fresh financial start.
We need to talk. I’m the guy that has to come along behind you and clean up the mess you create. Credit is a “good” thing – we congratulate people for having achieved enough status in their life to qualify for credit. Unfortunately, as soon as someone uses credit it turns into you, Debt. And sorry, but you sir are “bad”.
I am not holding you wholly responsible – there is more than enough blame for everyone involved, but someone needs to warn people about you.
You start out harmless enough. A person qualifies for their first credit card or loan. You make them feel so proud, so grown up. However, from that magical moment forward you put them at risk of having you take over their life. Until the card gets used there is no debt, so there is no problem, but you’re always waiting for your chance to grow. You entice them with the concept of having it all now, and you’re pretty quiet about the cost.
Here’s the thing that you don’t remind them about, so I will – credit should be a replacement for cash. It is not a replacement for money. You should only use credit when you have sufficient money to pay off the balance so Debt doesn’t find you. If you don’t pay off the balance every month then Debt takes over and he asks for something in return. He charges interest.
Interest is the cost of using someone else’s money – the cost of incurring debt. The truly crazy part (of course you know this Debt) is the more debt a person has the more expensive the interest charges become. So just when a person needs a break or a little help, you tell them, “sorry, but you owe so much now that I’m afraid you may not pay me back. I’m going to have to charge you even more to use my money…” Shame on you.
Why am I writing you this letter? What do I want you to do?
I guess I’m just venting. You won’t change. The only solution is to change the behaviour of your consumer.
The problem with this is our entire economy is built around the use of credit, the incurring of debt. The newest greatest gadget comes on the market and people want it today. No money? No problem. You slyly pre-approved them for more credit. It’s your way of keeping people tied to you. You must be proud of yourself – you’ve done one helluva job getting everyone onside with your program.
I thought after writing you this letter I‘d feel a little better – I don’t. Tomorrow I know I will have that senior citizen couple in my office that incurred a bunch of debt to help their family members out, and you’re not really there to help them.
I’ll get to see the single mom that incurred a bunch of student debt to make a better life for herself and her children, only to find out, she can’t earn enough to make you go away and pay her living expenses each month. Or maybe it will be the guy from the plant that has had all of his overtime cut. He was living the good life based on the overtime never ending – now he makes 25% less and you want a bigger share of the pie.
Well, hopefully just one person reading this will be wary of you Debt; before it becomes too late. Before you consume so much of their pay that they are one of the people I meet with every day. Perhaps we can tackle you with education, one person at a time.
Co-founder of Hoyes, Michalos & Associates Inc.
Debt Management Experts