Category: Debt Page 1 of 2

The Bankruptcy Paradox: Why Financial Failure Often Creates Millionaires

On September 5, 2025

In Blog, Debt, Entrepreneurship, Finance, personal, Tom Leydiker

When Catherine lost everything in 2008, filing for bankruptcy after her small business collapsed under the weight of the financial crisis, she didn’t realize she had just significantly increased her odds of becoming a millionaire. Yet a decade later, her net worth exceeded $2.3 million—a transformation that exemplifies what financial researchers call “the bankruptcy paradox.”

This counterintuitive pattern—where complete financial failure becomes the catalyst for extraordinary future success—appears repeatedly in wealth creation studies but remains largely unexamined in mainstream financial discourse. The statistics are striking: individuals who have previously experienced bankruptcy are nearly three times more likely to eventually accumulate seven-figure net worth compared to demographically identical individuals who never face financial collapse.

This pattern challenges our fundamental narratives about financial success and failure. We typically view bankruptcy as a terminal financial event—the point where wealth creation ends rather than begins. Yet for a significant subset of bankruptcy filers, it represents something entirely different: a transformative psychological and practical reset that enables wealth building on an entirely new foundation.

Understanding this paradox requires examining the unique psychological and practical changes bankruptcy often catalyzes:

Psychological Recalibration

For many, bankruptcy eliminates the paralyzing fear of financial ruin. Once you’ve actually experienced your worst financial nightmare and survived, money anxiety often diminishes dramatically. This fear reduction enables rational financial decision-making previously blocked by emotional responses.

Catherine describes this shift: “Before bankruptcy, I was constantly paralyzed by financial anxiety, making desperate moves to avoid failure. After bankruptcy, that fear was gone—I’d already faced the worst. This emotional freedom let me make calculated risks with clarity I never had before.”

This psychological reset often triggers what researchers call “post-traumatic growth”—a profound values recalibration that follows significant life disruption. Bankruptcy survivors frequently report complete transformation in their relationship with money, materialism, and status markers. They develop financial values focused on security, sustainability, and true wealth building rather than consumption or external validation.

Skills Development Under Pressure

Bankruptcy creates extreme conditions that forge rare financial skills. Operating with damaged credit, limited resources, and heightened scrutiny forces the development of exceptional cash management capabilities, negotiation skills, and resource optimization strategies that most people never develop in normal financial circumstances.

“When you can’t use credit and have limited cash, you develop different muscles,” explains Michael, whose post-bankruptcy journey took him from financial devastation to an eight-figure business. “I learned to negotiate everything, manage cash flow with extreme precision, and evaluate opportunities based solely on fundamentals rather than optimistic projections.”

These hard-earned skills provide significant competitive advantage when applied in more favorable circumstances after financial recovery. The bankruptcy survivor often possesses financial capabilities and perspectives that others never develop without similar crucible experiences.

Elimination of Unsustainable Structures

For many, bankruptcy functions as a forced unburdening from fundamentally unsustainable financial structures. Debt obligations, lifestyle commitments, business models, and financial patterns that were mathematically destined for eventual collapse are eliminated in one decisive reset.

While painful in the moment, this clearing of financial deadwood creates possibility for rebuilding on more sustainable foundations. Many bankruptcy millionaires report that their previous financial trajectory had no viable path to genuine wealth—they were trapped in high-income, high-expense cycles that created apparent success without actual wealth accumulation.

Network Reconfiguration

Perhaps most significantly, bankruptcy often forces complete reconstruction of social and professional networks. Research consistently shows that our financial behaviors are heavily influenced by our reference groups—we naturally calibrate spending, saving, and investment behaviors to match those in our immediate social circles.

Financial collapse frequently necessitates leaving social environments that encouraged destructive financial patterns. This network disruption, while initially traumatic, creates opportunity to deliberately construct new reference groups that support wealth-building behaviors rather than undermining them.

Practical Path Implementation

The bankruptcy paradox isn’t merely interesting sociology—it offers practical insights for wealth creation regardless of whether you’ve experienced financial collapse:

Conduct a simulated bankruptcy review: Periodically analyze which aspects of your current financial structure would be eliminated if you were forced to rebuild from zero. These vulnerable elements often represent the greatest barriers to wealth accumulation.
Implement strategic resets without crisis: The wealth-building advantages of bankruptcy can be captured voluntarily through deliberate restructuring of unsustainable obligations without awaiting forced liquidation.
Develop financial skills through artificial constraints: Deliberately operating with self-imposed resource limitations can build the same capabilities bankruptcy survivors develop under pressure.
Audit your financial reference group: Evaluate whether your social and professional networks predominantly model wealth-building behaviors or consumption-oriented patterns.
Practice post-traumatic growth without the trauma: Intentionally reassess material values and financial priorities without requiring actual financial collapse as the catalyst.

The bankruptcy paradox reveals something profound about wealth creation: often the greatest barrier to financial success isn’t external circumstance but embedded patterns in our financial architecture, behavior, and psychology. Bankruptcy forces reconstruction of these elements, creating space for something entirely new to emerge.

This doesn’t mean bankruptcy should be courted as a strategy—the process remains painful, restrictive, and carries significant long-term consequences for many. But understanding why it sometimes creates millionaires helps identify which aspects of our current financial paradigm might be secretly undermining our wealth creation potential.

The most valuable lesson may be this: sometimes what appears to be financial devastation is actually the necessary clearing for unprecedented growth. The question isn’t whether you’ve experienced bankruptcy, but whether you can capture the clarifying power of complete reset without requiring financial collapse to initiate the process.

The Millionaire Janitor: What We Get Wrong About Wealth Building

By Tom Leydiker

On August 2, 2025

In Blog, Debt, Entrepreneurship, Finance, personal, Tom Leydiker

Ronald Read lived an unremarkable life by conventional standards. He worked as a gas station attendant and then a JCPenney janitor in Brattleboro, Vermont. He drove a used Toyota, lived in a modest house, and wore flannel shirts held together with safety pins. His neighbors saw him as the quintessential blue-collar worker, getting by but certainly not thriving in America’s competitive economy.

When Read died in 2014 at age 92, he shocked his community and made national headlines when his estate revealed an $8 million fortune. The janitor had outperformed most professional investors through decades of disciplined saving and simple, consistent investing in blue-chip dividend stocks.

Read’s story isn’t an anomaly. It exemplifies a pattern repeated across countless “secret millionaires” who build substantial wealth despite modest incomes—a pattern that contradicts nearly everything our culture teaches about wealth accumulation.

Our financial media ecosystem bombards us with messages suggesting wealth comes from:

Discovering the next hot investment opportunity
Implementing sophisticated investment strategies
Following charismatic financial gurus
Timing market cycles
Pursuing high-status, high-income careers
Leveraging debt to accelerate wealth building

Yet the empirical evidence reveals a different reality. Analysis of first-generation millionaires consistently shows that sustainable wealth typically comes from:

Extreme Savings Rates While financial advisors typically recommend saving 10-15% of income, most self-made millionaires with modest incomes save 30-50%. This dramatically outweighs investment return differences over time.

Consider this mathematical reality: Someone earning $50,000 annually who saves 50% will accumulate more wealth than someone earning $100,000 who saves 10%, regardless of investment returns. The savings rate is the dominant variable in the wealth equation for most income levels.

Extended Time Horizons The true secret of Read and others like him isn’t market-beating returns—it’s extraordinary patience. He invested consistently for over 65 years, allowing compounding to work its full mathematical magic.

At a 10% average annual return, $1,000 becomes $1,610 after 5 years—not particularly impressive. But that same $1,000 grows to $117,390 after 50 years. The wealth creation happens in the later decades, yet most investors focus exclusively on short-term results.

Lifestyle Stability Perhaps the most overlooked aspect of wealth building is resistance to lifestyle inflation. Secret millionaires typically maintain stable living standards regardless of income increases, creating an expanding gap between earnings and expenses that accelerates wealth accumulation.

This pattern appears consistently in research on first-generation wealth builders. While their income might increase 3-5 times over a career, their core lifestyle expenses often rise only 20-30%, with the difference flowing directly into investments.

Investment Simplicity Contrary to the financial industry’s emphasis on sophistication, most self-made millionaires with modest incomes utilize remarkably simple investment approaches—often basic index funds or diversified blue-chip stocks held for decades with minimal trading.

This simplicity confers significant advantages: lower costs, fewer behavioral mistakes, reduced tax consequences, and minimal time commitment. The mathematical advantage of this approach compounds over time, particularly when combined with high savings rates.

Identity Independence Perhaps most fundamentally, financial overachievers like Read separate their identity and social status from their consumption patterns. They remain indifferent to the implied social hierarchy of brands, experiences, and possessions that drive much discretionary spending.

This psychological independence creates immense financial leverage. By redirecting status-seeking expenses toward investments, they effectively convert zero-return social positioning into wealth-generating assets.

The most profound aspect of Read’s story isn’t how he invested, but how these principles worked synergistically. His high savings rate meant substantial capital deployment. His simple, low-cost investment approach minimized drags on performance. His extended time horizon allowed full compounding. His lifestyle stability prevented wealth leakage. His psychological independence from consumption-based status protected his strategy from social pressures.

None of these principles required exceptional intelligence, insider knowledge, or statistical outlier income. They required something simultaneously simpler and more difficult: behavioral consistency that defied prevailing cultural norms over decades.

This reality presents both challenge and opportunity. The challenge: wealth building for most people isn’t primarily a knowledge problem but a behavior problem. The opportunity: true wealth remains accessible regardless of income level or professional status for those willing to adopt counter-cultural financial patterns.

Financial education that focuses exclusively on investment tactics while ignoring these behavioral foundations addresses the least important aspects of wealth building for most people. It’s equivalent to teaching advanced piano theory to someone who hasn’t yet developed the discipline to practice scales—technically accurate but practically irrelevant.

The financial services industry has limited incentive to emphasize these realities. There’s minimal profit in advising people to save half their income, ignore financial media, invest simply, and hold forever. The business model depends on activity, complexity, and continuous engagement—precisely what successful wealth builders like Read typically avoid.

Perhaps the most empowering aspect of Read’s story is how it democratizes wealth building. The janitor with an eighth-grade education outperformed most PhDs on Wall Street not through privileged knowledge but through behavioral advantage. That same opportunity remains available to anyone willing to embrace similar principles.

The question isn’t whether you can build wealth—Read and countless others have demonstrated that’s possible from nearly any starting point. The question is whether you’re willing to adopt the behaviors that make it inevitable.

Emotional Investing: Why Your Feelings Are Your Portfolio’s Worst Enemy

By Tom Leydiker

On June 1, 2025

In Blog, Debt, Entrepreneurship, personal, Tom Leydiker

When Mark, a typically rational software engineer, liquidated his entire retirement portfolio in March 2020 as the pandemic crashed markets worldwide, he wasn’t making a calculated financial decision. He was responding to a primal emotional impulse—fear. By the time he cautiously reentered the market eight months later, he had missed a 45% recovery rally, potentially costing him hundreds of thousands in long-term retirement funds.

Mark’s story isn’t unusual. It represents one of the most well-documented yet persistently ignored realities in finance: our emotions are often our portfolio’s worst enemy, systematically undermining returns through predictable psychological patterns that feel rational in the moment but prove devastating over time.

The data tells a sobering story. While the S&P 500 delivered an average annual return of 10.2% from 2001-2020, the average equity fund investor earned just 5.4% annually during the same period. This gap—often called the “behavior gap”—represents the massive cost of emotional decision-making. That seemingly small difference compounds dramatically: $10,000 growing at 10.2% for 30 years becomes $180,000, while the same amount growing at 5.4% reaches only $48,000.

Why does this persistent gap exist despite widespread financial education? The answer lies in the mismatch between our evolutionary psychology and modern financial markets.

Our brains evolved to detect patterns, seek safety, and respond quickly to threats—traits that served our ancestors well when avoiding predators but create systematic errors in financial contexts. Several emotional patterns consistently sabotage investor returns:

Loss Aversion: Psychological research shows we feel the pain of losses approximately twice as intensely as the pleasure of equivalent gains. This asymmetry creates a powerful bias toward avoiding losses rather than maximizing gains, often leading to selling promising investments after short-term declines while holding underperforming assets that never recover.

Recency Bias: We instinctively overweight recent events when making predictions, causing us to project current trends indefinitely into the future. This explains both panic selling during downturns and irrational exuberance during bull markets, with investors consistently buying high and selling low—the opposite of successful investing strategy.

Confirmation Bias: Once we form an investment thesis, we naturally seek information confirming our existing beliefs while discounting contradictory data. This creates dangerous blindspots, like ignoring fundamental weakness in beloved stocks or dismissing genuine opportunities that don’t match our narrative.

Herd Mentality: As social creatures, we find comfort in group consensus and instinctively fear isolation. This manifests financially as performance chasing—investing in whatever performed well recently because “everyone else is doing it”—typically ensuring entry at peak prices just before reversals.

Overconfidence: Multiple studies show that 74% of drivers consider themselves above-average—a statistical impossibility. This same overconfidence appears in investing, with individuals consistently overestimating their ability to pick winners, time markets, and evaluate information better than others.

The financial industry, whether deliberately or not, exploits these psychological vulnerabilities. Media headlines amplify emotional triggers with apocalyptic scenarios during downturns and euphoric projections during upswings. Investment platforms gamify trading, encouraging frequent activity despite overwhelming evidence that higher trading frequency correlates with lower returns. Even well-meaning financial advisors sometimes reinforce emotional biases to retain clients rather than challenging flawed thinking.

Recognizing these emotional patterns is necessary but insufficient for improvement. The most successful investors implement systematic countermeasures that specifically target emotional vulnerabilities:

Automated Investment Systems: Pre-commitment to regular investment regardless of market conditions, removing emotional decision points entirely
Investment Policy Statements: Written guidelines establishing rules for buying, selling, and rebalancing before emotional situations arise
Decision Journals: Documenting investment rationales and expected outcomes to enable objective review of decision quality separate from outcomes
Media Diets: Deliberately limiting exposure to financial news, particularly during market extremes
Designated Decision Days: Scheduling portfolio reviews at regular intervals rather than responding to market events
Strategic Accountability: Partnering with advisors specifically tasked with challenging emotional decisions

These mechanisms create distance between immediate emotions and investment actions, allowing rational analysis to override emotional impulses. The investors who implement such systems consistently outperform their peers—not because they’re smarter or more knowledgeable, but because they’re better at managing their psychological vulnerabilities.

Perhaps the most powerful approach involves reframing market volatility entirely. Rather than viewing market declines as threats to be avoided, disciplined investors recognize them as natural features of functioning markets that create opportunity. This perspective shift transforms the emotional experience of investing from fear to cautious optimism.

The ultimate irony is that investment success requires us to act counterintuitively—buying when our instincts scream “danger” and maintaining discipline when everything feels safe. This psychological challenge, more than any technical knowledge of finance, separates successful investors from the perpetually disappointed.

As Warren Buffett famously observed, “The most important quality for an investor is temperament, not intellect.” The investors who recognize and manage their emotional responses don’t just achieve better financial outcomes—they experience less stress, greater confidence, and more consistent progress toward their goals.

The question isn’t whether emotions will influence your investing—they will. The question is whether you’ll let them operate unchecked or implement systems to harness their energy while protecting yourself from their worst excesses. Your financial future may depend on the answer.

The Silent Wealth Killers: Everyday Financial Drains You’re Ignoring

By Tom Leydiker

On May 4, 2025

In Blog, Debt, Entrepreneurship, Finance, personal, Tom Leydiker

In the pursuit of financial independence, we often focus on the grand strategies—investing in the right stocks, maximizing our 401(k) contributions, or hunting for the perfect real estate opportunity. Yet while we’re occupied with these big-picture moves, insidious wealth killers operate quietly in the background, draining our financial potential one small transaction at a time.

These silent wealth killers aren’t dramatic or obvious. They’re the financial equivalent of a slow leak—barely noticeable in isolation but devastating in aggregate. What makes them particularly dangerous is how easily they disguise themselves as normal, acceptable parts of modern financial life.

Consider the subscription creep phenomenon. What begins as a single streaming service gradually expands into a portfolio of monthly subscriptions—streaming video, music, news, productivity apps, meal kits, clothing boxes, and specialized services for every interest. Individually, each might seem reasonable at $9.99 or $14.99 per month. Collectively, they can silently extract hundreds of dollars monthly from your accounts.

A recent financial behavior study found that the average American vastly underestimates their subscription spending by 143%. When asked to estimate monthly subscription costs, most participants guessed around $80, while their actual spending averaged $193. That’s a $1,356 annual difference between perception and reality.

Equally pernicious is the banking fee ecosystem that most consumers have been conditioned to accept. Maintenance fees, ATM charges, overdraft penalties, foreign transaction surcharges, and wire transfer costs aren’t just annoying financial speed bumps—they’re systematic wealth transfers from your accounts to financial institutions. The average American household pays $329 annually in bank fees, with that figure nearly doubling for those who occasionally overdraft.

Consider this stark reality: $329 invested annually for 30 years at a modest 7% return would grow to approximately $33,000. That’s a decent car or a significant portion of a college education, sacrificed to fees that could be largely avoided through more attentive financial management.

Perhaps the most insidious wealth killer lurks in our everyday shopping habits. The convenience premium—paying significantly more for essentially the same products or services due to laziness, poor planning, or status-seeking—silently erodes wealth building potential. This manifests as:

Paying 300% markup for coffee shop visits versus brewing at home
Last-minute grocery shopping at convenience stores versus planned trips to lower-cost supermarkets
Impulse purchases triggered by strategic store layouts and digital marketing
Brand loyalty without price comparison
Delivery fees and surcharges for minor conveniences

The financial impact of these convenience choices compounds dramatically over time. Someone who spends $5 daily on coffee shop visits versus $0.50 for home-brewed coffee isn’t just spending $4.50 extra daily—they’re sacrificing over $46,000 across 20 years, assuming that money had been invested with modest returns.

Impulse purchasing presents another particularly dangerous wealth killer because it operates at the intersection of emotion and sophisticated marketing science. Retailers and online platforms have perfected psychological triggers that bypass rational decision-making, leading to unplanned spending that feels good momentarily but creates no lasting value.

The average American makes three impulse purchases weekly, totaling approximately $5,400 annually. For perspective, that’s enough to fully fund a Roth IRA for most eligible participants, potentially growing to $500,000 or more over a 30-year career with consistent contributions.

These wealth killers share a common trait: they rely on financial autopilot—the tendency to make recurring financial decisions with minimal conscious thought. Breaking free requires developing systems that introduce friction and consciousness into these transactions:

Conduct a subscription audit quarterly, requiring each service to justify its continued cost
Configure automatic alerts for any transaction under $20, bringing consciousness to small purchases
Implement a 24-hour rule for non-essential purchases
Switch to financial institutions that minimize or eliminate common fees
Pre-commit to specific shopping parameters before entering stores or browsing online
Calculate the “true hourly cost” of convenience purchases (your hourly wage versus time saved)

Perhaps most importantly, recognize that these wealth killers aren’t just financial issues—they’re often manifestations of deeper psychological patterns. The person who consistently pays convenience premiums may be overvaluing their time or avoiding discomfort. The subscription hoarder might be seeking identity validation through consumption. The impulse shopper could be using purchases as emotional regulation.

Addressing these underlying patterns often yields benefits beyond financial improvement. Many people report greater overall satisfaction when they reduce unconscious spending, as it typically leads to more intentional choices aligned with deeper values.

The battle against wealth killers isn’t about deprivation—it’s about consciousness. By bringing awareness to these silent drains and implementing systems to manage them, you reclaim not just money but agency over your financial future. And unlike many financial strategies that require substantial capital to implement, fighting wealth killers is accessible to everyone, regardless of income or net worth.

What silent wealth killers are operating in your financial life right now? The answer might reveal your greatest opportunity for financial transformation.

Investing For New College Graduates

By Tom Leydiker

On June 7, 2019

In Blog, Debt, Entrepreneurship, Finance

Recent college grads are known for the massive amounts of debt they’ve taken on. They go to school for four or more years, and they hopefully have a degree to go with their nice monthly bill. Investing is usually one of the last things on the minds of recent college grads. Yet, because of the ability of money to grow into massive amounts the longer it’s invested, immediately after college is the best time to start investing. Here are a couple of great ways new college graduates can get started investing.

Smartphone Apps

It may seem like a smartphone app would be a strange place to start investing, but nothing could be further from the truth. Recent apps like Stash and Acorns allow investors to automatically save small amounts of money without much in the way of forethought. Stash allows for regular or periodic investments taken from a bank account. Both Stash and Acorns allow would-be investors to round up purchases and save the spare change in an investment account. Stash has a broader array of investments available while Acorns focuses on just a few funds that are intended to meet certain goals based upon a new grad’s risk profile.

Workplace Retirement Plans

Another great option that is open to many new grads who have jobs is a workplace retirement plan. These are great options because they offer tax-deferred savings. This means that new grads will pay less in taxes, which also means they will keep more of their money to pay off student loan debt while saving. Another great benefit of saving in a work-based retirement plan like a 401(k) is the matching funds that employers will frequently offer. Through workplace 401(k) matching funds, it’s possible to supercharge returns with no additional effort. Many employers will offer a dollar-for-dollar match up to a certain percentage of an employee’s pay. A common percentage is 6 percent. With a dollar-for-dollar match, an employee would effectively be savings 12 percent of his or her salary each year while only cutting their pay by 6 percent.

Even with student loan debt, it is not impossible to save for retirement. Through apps like Stash or Acorns and workplace retirement plans that allow for automatic savings, new grads can begin building their nest eggs. The perfect time to get started is the present.

Saving For The Future

By Tom Leydiker

On September 17, 2018

In Blog, Debt, Finance

It is important to save money at any point in your life. Life can be unpredictable, and everyone should prepare for the unexpected to some degree. Establishing a kind of financial “cushion” is a great way to help yourself from financial downfall in the unpredictable future. Saving money for future plans is essential for retirement, vacation, school, and anything else you can think of. This article will give you a few you can prepare and start saving for your future.

Establish Goals

The very first step is to establish your goals. Take a look at your current financial situation and set a realistic goal for yourself that you will be able to reach. Break down the goal into smaller digestible pieces that you can work on every day. Setting an overarching goal for yourself can be intimidating, but once it is broken down into smaller daily tasks that you can complete, the overall goal does not seem so daunting.

Spontaneity

Individuals who set financial goals for themselves find it difficult or unbearable to bind themselves to strict budgets. One aspect of your budget should be used just for spontaneous events that may come up during the week. Considering that last minute plans happen, it is a great idea to have a set amount of money that you can spend either each day or each week to help you stay on your budget. You will be less likely to falter on your budget if you have already budgeting frivolous spending!

Save First

The very first thing you should do when you get paid is to put money away towards your goal. You can decide whether you should manually put away the fixed amount or have it automatically taken out of your paycheck, so you never see the money in the first place. Whichever method you decide to choose, paying yourself first is the most important key to planning for your financial future.

Consider putting one-time payments such as tax returns, bonuses, or raises into your savings account. If you can function well with your current cash flow, then you have the opportunity to save even more with the added cash flow that comes from raises, bonuses, and tax returns.

If you are comfortable with the idea of investing your money, it is a great way to potentially earn more money for your financial goal and future. As with any investing, there is a varying amount of risk involved. Look into ways that you can intelligently invest your money to ensure the best returns!

Tips To Avoid Financial Woes

By Tom Leydiker

On March 20, 2018

In Blog, Debt, Entrepreneurship, Finance, personal

At some point in your life, you may fall under hard financial times. This happens to many people and does not mean the end of the world for your bank account or credit score. There are ways to come back from financial hardship and be prepared to avoid them in the future. This article will talk about some common financial woes and how to avoid them.

Create a Budget

Most people think they have a good understanding of where their money goes. Taking a closer look at your monthly spending may surprise you. Where your money is going may not match up to what you thought you were spending. A good way to avoid financial hardships and even dig yourself out of one is to set a budget for yourself. Take your monthly analysis of your spending and formulate a budget that will keep you in the green each month. Make sure your budget is tangible. Try not to guess at what you spend on certain items, be precise and you will be more likely to stick to your budget.

Impulse Buying

A common mistake among consumers is to purchase something on impulse. If you come across an item and immediately think “I need to have this!” Take a step back and evaluate the reasoning behind the purchase. Is this going to get me to my financial goals? Is this item necessary for me to buy? These questions will help control your impulses and ultimately keep you connected with your budget. If after a month you are still yearning for that item then save up enough money to get it for yourself.

Alternatives To Spending

Instead of going out to a fancy bar or restaurant, aim for a day packed with homemade sandwiches and a hike near your local trail. Any alternative you can find to spending money on miscellaneous things like a bar or restaurant should be pursued to help you save money and maybe even find your new favorite activity.

Medical Insurance

Nothing can help you dampen the blow of a medical emergency like medical insurance can. Without insurance, you are at risk of paying high fees for medical procedures that can plunge you into financial hardship for a long time. Medical emergencies are unpredictable, and it is better to be insured no matter your financial situation to avoid destroying your financial credibility for good.

Avoid These Things That Can Harm Your Credit Score

By Tom Leydiker

On February 26, 2018

In Blog, Debt, Finance

Your credit score is incredibly important when it comes to making any big purchases. If you are thinking about purchasing a car or your first home, then banks are going to look into your credit score to determine what kind of loan you will receive. There is plenty of information on how to keep a good credit score, but it is equally as important to know what will drive your credit score down.

Missing Payments

Your payment history accounts for thirty-five percent of your credit score. Missing a payment over thirty days could drop your credit score one hundred points. Credit card companies may not report a late payment until sixty days after it is due. By the sixty day mark, your credit score may have suffered severe damage. Set reminders for yourself about when payments are due on your credit card. Never miss a payment, and your credit score will be just fine.

Cancelling Credit Cards

If you have a credit card that you do not use anymore, do not cancel it. Cancelling a credit card with a zero balance eliminates all the credit history you have associated with that card. Say you have had a credit card for four years and then cancel it one day. Those four years of purchasing items on that credit card disappear, making your credit history seem shorter than it actually is. Keep your old credit cards open to showcase your extensive credit history!

Collections

When a payment is overdue for an extended period of time, credit card companies will either sell or hire a third party to collect the payment. A collection usually occurs after six months of no payments. A collection can drastically reduce your credit score by one hundred points, sometimes more. A collection can stay in your credit history for up to seven years, affecting any future purchases or loans you apply for.

Settling Debt

If you settle a debt with a creditor and it is less than the amount you originally owed this can dramatically affect your credit score. People who have settles a debt with a creditor saw drops in their score ranging from forty-five to one hundred points.

Bankruptcy

Declaring bankruptcy has the most detrimental effect on your credit score. Filing for bankruptcy can stay on your credit report for almost ten years. A credit score can suffer up to a two hundred and forty point reduction from declaring bankruptcy.

Telltale Signs When It’s Okay To Borrow Money

By Tom Leydiker

On October 18, 2017

In Blog, Debt, Finance

tom leydiker telltale signs blog header

If you have ever consulted with a financial advisor, you know that borrowing money is one of the last things you should do, especially if you are trying to build up a strong credit history or investment portfolio.

However, there are certain exceptions to this rule. If you encounter a drastic or detrimental life event, are responsible for aiding your extended family in times of trouble, or suddenly find yourself inundated with bills, you should not feel as though you have no options or means of receiving help.

With that in mind, let us take a look at some telltale signs of when it is okay to borrow money:

When you cannot afford moving costs.

If you recently purchased a home, you may be faced with a plethora of expenses you had not even taken into consideration (i.e., storage, transportation, sudden repairs or renovations, etc.). Borrowing money in this scenario can give you great peace of mind while you are getting moved and settled into your new space.

When you are hit with large medical bills.

Unfortunately, no matter how young or healthy you are, facing medical expenses is an inevitability. Thankfully, there are ways to ease the burden of big medical expenses.

Now, credit bureaus allow patients 180 days to address their medical expenses prior to putting them on their credit reports. This gives individuals enough time to sort through their options and make the most educated decision possible – all without feeling rushed or uncertain of their financial standing.

When your car requires major repairs.

A lack of reliable transportation puts a major wrench in your plan to consistently earn and save money. However, if you are in a financial bind and require assistance to get your car back in working order, borrowing money is likely your best option. This will ensure you are still able to work and will even allow you to pay off your expenses at your own pace – a definite win-win scenario.

Regardless of your reason for borrowing money, it is imperative that you remember the importance of paying off your debt in a timely manner. Otherwise, you may end up paying more due to accrued interest than you would have if you budgeted your finances to make the largest payments you could manage – within the realm of feasibility, of course.

How Collections Can Affect Your Credit

By Tom Leydiker

On August 25, 2017

In Blog, Debt, Finance

tom leydiker how collections blog header

Debt collectors, according to both the Federal Trade Commission and Consumer Financial Protection Bureau, are one of the most complained-about businesses. When you hear about “debt collectors,” the first image to come to mind is an aggressive loan shark. Even a “nice” debt collector can be a pain – yet they aren’t going anywhere anytime soon.

A debt collection is a type of financial account that’s been sent to a third-party debt collector. Hiring a debt collector is usually more cost-effective for a company than to keep spending their resources pursuing payment. Most credit card accounts get sent to a collection agency after six months of non-payment, while other businesses send them out even sooner – it varies business by business.

Debt collectors will call you and your friends, send letters, and even show up at your home to collect money – all of which is perfectly legal. If a debt collector doesn’t have your phone number or correct address, however, you may never receive notice of the debt until you see it listed on your credit report.

How does this all affect your credit?

Whenever an account is sent to a collection agency, the original creditor or the collector updates the account on your credit report. A debt collection is one of the worst types of credit report accounts. It reveals that you have become seriously delinquent on an account. This will cause your credit score to plummet, causing you to be denied for credit cards and loans in the future, particularly if it’s recent or remains unpaid.

These accounts can stay on your credit report for as long as seven years, meaning that their negative effects can haunt you for a long time. One of the best ways to lessen the harm of a collection account is to pay off the debt so that it will affect your collection less over time. Another way is to continue to pay all of your additional bills on time.