Remember last summer when gas prices went through the roof? It was horrible! In some parts of the county prices actually topped $4.00 a gallon. At those prices you could quickly max out your credit card just to settle your debt at the pump. So what caused that spike in prices?

1. Supply and demand will always be the major driving force behind the price point of any product. If supply is low and demand is high, prices will go up.
2. Speculative trading is common with oil futures. In this case it has been estimated that this practice may have added up to $25.00 per barrel of oil.
3. Hoarding did take place. When prices started to rise, people panicked and flocked to gas stations to fill up fearing that prices would continue to rise.

But this summer prices did not rise significantly. Those pieces that fell into place last summer to create the perfect storm did not raise their ugly heads this year. So this summer while you are driving back and forth to work or anywhere else, it is costing you less money. In many cases this adds up to a very significant amount of money too.

So what are you going to do with all of this extra money? You could go buy yourself a nice new flat screen TV. Or maybe you could get that cool new iPhone so you can keep up with the Jones. Perhaps a new wardrobe is in order? While those are certainly fun ideas, they are likely the reason you felt the pinch last year when prices rose. Paying off your debt is the best decision you'll make this summer. Do you really need that flat screen? I think not.

The money you are saving on gas might just be one of the best debt solutions you have right now. You could use the money that you are saving on gas right now to help pay off debts that you have incurred. For example, use this extra money to pay off one of those high interest credit cards. Or use the extra money to help pay off your car loan quicker. By doing this you will truly be compounding your savings in the long run. Not to mention the long-term savings felt by a reduction in the overall interest you pay.

How long can a state operate without a budget? It seems like an absurd question, but let’s take a quick peek at California. Their fiscal year came to an end on June 30th. And they did not have a budget approved for the following fiscal year at that time. So when it comes to services that are funded by the state, where is the money going to come from to pay for it all? That’s a good question, and only recently was answered. California was, up until a week or two ago, literally writing IOU’s to its creditors. Talk about poor money management?

In government, here is how things are supposed to work: you can only spend the money you have. It’s called a balanced budget. Unfortunately this year funding from the State and Federal government has decreased and many programs are requiring cuts. Each government official has a vested interest to keep as many programs on the budget as they can, but without the funding something has to give.

The only options: either raise taxes or lower costs by cutting programs. Unfortunately, in our economic climate, no one can afford to have their taxes raised. So to balance the budget, what programs should they cut? That’s a tough question! But it is one that needs to be answered quickly because without a budget eventually even essential services like fire and police will fail. The budget is such that it calls for a reduction in spending to the tune of $15 billion. Cuts included $6 billion from K-12 schools, $3 billion from the University systems, $1.3 billion for healthcare, and $1.2 billion from the state prison system.

So what can we as individuals gain from this? Well, how many of us actually have a personal budget? And for those of us that do, is it balanced? The best budgeting advice is to simply have a budget! Generally people are not entirely in complete control of how much money they make. Few people can give themselves a raise! So we have to control our spending. Ideally we never want to spend more than we have or we end up in debt. And ideally we would like to actually spend less than we make so we can save for the future. This is an opportunity to learn from the fiasco that California is facing. Having a balanced budget is every bit as important for individuals as it is for a state government.

Looking to reduce debt? Debt consolidation maybe the option for you. When excessive credit card debt has occurred debt consolidation should be the first option you look into. The term “debt consolidation” nowadays is universally used to describe many different processes. Technically, it is the process of obtaining one large loan to pay off lots of small loans with the intention of lowering your interest rate, your monthly payments, and the length of time till the debt is paid off. Although there are many ways to consolidate debt, 3 basics forms come to mind.

Balance transfers are one way to consolidate credit card debt. This is when you can obtain a new credit card with a larger credit limit and a lower initial interest rate, then transfer the balance from several other cards over to the new card. While this may lower your payments and help to pay off the debt sooner, it can also be a “role of the dice”. If your situation financial position gets worst, that consolidation method may hurt your ability to seek other debt relief options.

Taking out a personal loan is another way to go and is more recommended than consolidating with another credit card. Going to your local bank and/or credit union and applying for a small personal loan to consolidate can be a great option if you can qualify. What may people are seeing, especially nowadays, is that the debt they have is hurting their ability to qualify for additional lines of unsecured credit.

Lastly is refinancing a home mortgage to consolidate debt. This can be done through refinancing the principal loan or taking out an equity line of credit secured against the home, sometimes known as a HELOC (Home Equity Line of Credit). This is a great way to consolidate excessive credit card debt; however (as with anything) there are always holes that can be poked in the process. Most importantly, and this only applies to people in a more severe trouble, you are taking an unsecured debt and turning it into a secured debt. One of the main reasons people are looking into other means of debt relief in today’s market is because housing prices have made it difficult (if not impossible) for many people to tap into the equity in their homes. Additionally, if you already have excessive credit card debt, you may be in a position where you need a subprime mortgage, and with the collapse of the subprime mortgage market your options have dwindled; if not disappeared.

The amount of debt solutions available these days seems almost limitless. If you are a home owner with equity in your property and have excessive personal debt, refinancing could be your best option. Interest rates have been low for years, but right now they are really low! Using a refinance as a means of debt consolidation can be extremely beneficial.

Picture this. You bought your home 10 years ago for $200,000 with a 7% interest rate and a 30 year note. Your monthly payments, not including your taxes and insurance, are $1,330.60. After ten years of making your monthly payments on time every month, your principal payoff balance on your mortgage should be at about $171,295. Over the years you have a couple of bumps and bruises (financial speaking) and maybe spent a little too much on some clothes or a vacation! As a result, you’ve amassed $20,000 in credit card debt. Your monthly minimums on the credit card debt should be around $400 per month (assuming a 2% minimum). Between your mortgage and your credit card debt, you are spending $1,730.60 a month.

Let’s assume that you qualified for a new 30 year loan at 5%. You were able to consolidate your credit card debt into your home loan along with your old principal loan. You’d now have a principal balance of $191,295, assuming that you didn’t role your closing costs into the loan. Your new monthly payments are $1,026.91, once again not including your taxes and insurance.

Now are you ready for the really cool part?! If you hadn’t refinanced, it would have taken you another 20 years to pay off your mortgage, and the credit card debt (depending on your interest rates) could have cost you upwards of $30,000 - $40,000 to pay off! Let’s assume that the $1,730.60 monthly payment was an affordable payment for you. If you were to pretend that you still had that for a monthly payment, and just put it towards your mortgage payment each month, your new 30 year loan would be paid off in 13 years and you would save tens of thousands of dollars! As you can see, when in the correct financial position, refinancing can be a terrific debt solution!

Our industry, debt settlement, has been scrutinized as a problematic industry. Commonly, consumers complain that a settlement company did nothing for them. The company charged excessive upfront fees, never spoke to their creditors, and as a result, the consumer eventually dropped out of the program after being sued by one or several creditors. How could we be sure that this portion of people was the rule and not the exception? Sometimes, negative press can alter the actual results because upset people are much more likely to voice their opinion, therefore skewing the actual or correct data.

A proper study of Debt Settlement Plans was recently conducted by Richard A. Briesch, PhD; an Associate Professor at Cox School of Business, for the ACCC (Americans for Consumer Credit Choice). In his report, “Economic Factors and the Debt Management Industry”, Briesch stated that Debt Settlement Plans (DSPs) had many positive attributes. When comparing Debt Settlement to other services in the Debt Management industry Dr. Briesch said “…the consumer welfare analysis suggests that DSPs create the greatest consumer welfare of any approach.” Consumer welfare typically refers to the benefits derived from the services provided. In other words, consumers got the most benefit from Debt Settlement programs vs. other programs in the Debt Management Industry.

For a copy of the report, go here.

We have all been tightening our belts in this recession. The money never seems to go as far as one would like. Our daily living expenses as a whole just never seem to go down. Now imagine how difficult money management becomes if you have a very large family, like Jon and Kate Gosselin from Jon & Kate Plus 8.

Obviously raising kids can get expensive. Anyone who has children can attest to this. But the actual cost per child may shock you. A recent government study sponsored by the USDA actually put a dollar figure on this. The study involved looking at what the average middle class household would spend to raise a child to the age of 17. The major expenses the study looked at in order of cost from highest to lowest were:

1. Housing
2. Food
3. Child care and education

Based on their findings the average middle class household will spend $221,000 per child from the time they are born until they turn 17, and that's not even including clothing or medical care!

If we go back to the example of Jon and Kate, that is a whopping $1,768,000! That’s right, Jon and Kate can expect to spend more than one and three quarter million dollars raising their children! How can the average family possibly manage money in a situation like this, especially when you don't have a fancy television deal to help with expenses?

One thing that families with many children have going for them is that the housing costs decrease exponentially as the number of children increase. So long as the children don't mind sharing rooms with each other. But the other factors like food, child care and education will not decrease, but rather increase with time, due to inflation. Money management is a challenge for any family, but for large families the challenge is even greater. Here are some tips for managing these expenses:

1) Create a budget, and start planning now for your future expenses from school clothes next year to college in ten. Being prepared could be the difference between tens of thousands of dollars.
2) Look to save wherever you can: buying in bulk when it's a good deal, cutting coupons, shopping on certain days (like Tuesdays when stores introduce their weekly specials), and bargain shopping at thrift stores, Goodwill, and others will help reduce spending.
3) Save on childcare: from employer childcare flexible spending accounts to enrolling your children in pre-kindergarten, there are many ways to save without forfeiting the quality of care.
4) Everyone helps: create chores and tasks for your children to help around the house. As they get older set a budget for their expenses and if they want to go above and beyond that budget make them contribute monetarily. This includes clothing, shoes, haircuts, makeup, sports equipment, and vehicles. Babysitting for other neighborhood kids, cutting grass, having a paper route, or dog walking. These are all things children can do to make some extra money.

Being a frugal family takes hard work, but if you implement just a few of our tips your family will surely benefit in the long run.

The Cash for Clunkers program was designed with two basic objectives in mind. The first: get old gas guzzling and pollution emitting cars off of the road and new more energy efficient cars with better gas mileage and fewer emissions on the road instead. The second: get people into empty car dealership showrooms to buy new cars thus stimulating the sluggish economy.

Originally our lawmakers approved one billion dollars for this program. That money was quickly exhausted in a matter of two weeks. So the lawmakers hastily approved another two billion dollars to refuel the program. This allows continuation of the program that gives consumers up to $4500 in federal subsidies if they trade in their old cars for new more energy efficient models that get better gas mileage.

So far the program has been a big hit with car buyers. In just the first ten days of the program 75% of the originally budgeted amount of one billion dollars was used up by consumers trading in their old cars for new ones. And according to our lawmakers this is a huge boost to the struggling automakers in Detroit.

Of course the critics point out that 36.5% of these auto sales are from Japanese auto firms like Toyota, Honda and Nissan. Not to mention the fact that the $3 billion adds to our already huge and ever growing federal deficit. These same critics argue that the lawmakers are acting as if they have received no budgeting advice whatsoever as they continue to spend money like it grows on trees. Many are upset with the additions to our federal debt when they feel lawmakers should create federal debt solutions.

But on the other side of the coin, money is being spent at dealerships here in the U.S. and that is good for our struggling economy. Plus it is hard to argue that getting these old gas guzzlers off of our roads is a bad thing. In the case of the Cash for Clunkers program the benefits do appear to outweigh the costs.

Watching President Obama, Professor Gates, and Officer Crowley having a beer at the White House reminded me that difficult circumstances can be avoided by taking your time and analyzing the situation more closely. Sharing a beer with friends is nice while sitting outside, in your backyard, on a nice summer day. Midweek, your buddies come by to share in some relaxing conversation regarding current events on the front page of the newspapers. I’m sure that this meeting didn’t emulate and equally tranquil atmosphere.

As you might recall, this meeting was a requested by President Obama. It started with a simple phone call to the Cambridge Police Department. A female witnessed two people breaking into a house in her neighborhood on a Tuesday afternoon. Because other houses in the neighborhood had been burglarized in previous months, she immediately phoned the police. What happened next is subjected to one’s personal view.

Harvard Professor Henry Louis Gates Jr., one of the nation’s preeminent African-American scholars, was arrested in his own home by Cambridge police investigating a possible break-in. This raised concerns that Gates was a victim of racial profiling. The arresting officer, Sergeant James Crowley is not only a certified emergency medical technician but also trains hundreds of police officers in avoiding racial profiling. Both parties had two different points of views regarding the incident. Then the President condemned the Cambridge Police Department during a White House news conference while openly admitting he didn’t have all the facts. The issue became front page fodder.

How did this issue get out of hand? More importantly, what could have been done to avoid the issue in the first place? Maybe the real problem lied in the approach by President Obama. When the President said the Cambridge Police Department acted “stupidly”, he made an assumption without knowing all the details. He should have considered all the facts of the situation prior to commenting to an opinion. He reacted emotionally rather than analytically. Don’t make the same mistake when looking for debt elimination options.

If you are having problems with your debt, don’t make an emotional charged and hasty decision! Conduct research. Speak to different companies. You should look at all options available to you. Is your particular situation best handled through debt consolidation, debt settlement, credit counseling, or bankruptcy? What are the costs associated with each service? What are all the positives and negatives of each service?

If you start by asking these questions, you’ll be well on your way to finding the right process for you. If you act emotionally and hastily, you’ll be telling your friends over a beer how you made the wrong decision on how to handle your debt.

The credit card industry is going through some changes. New government regulations are slowly being put into place. These new rules could help you pay off your debt more quickly. And they certainly offer some great consumer protections. These new regulations are part of the Credit Card Accountability, Responsibility and Disclosure Act which goes into effect bit by bit from now until February, 2010.

A large portion of the new rules revolve around a banks ability to change a cardholder’s interest rate. When a bank raises your interest rate it can drastically affect your ability to pay down or off your credit card debt. Many of the rules also address billing, fees and who may get credit cards. The new rules (that do not necessarily apply to credit cards with variable interest rates) include:

1. No raise in interest rate the first year the card is issued.
2. Issuers may not raise rates on existing balances.
3. Due dates may not change; they must remain on the same day every month.
4. Bills must be delivered to the customer’s mail at least 21 days before the due date.
5. Nobody under the age of 21 may get a credit card without a co-signer.
6. The bank may not raise the rate on someone under 21 without the co-signer’s approval.
7. Banks can no longer charge consumers a fee just for making a payment.

If for some reason you don’t manage your money very well and you miss a payment or two, then the bank may raise your interest rate even if you do not have a variable rate credit card. There is good news, however. If you get back on track, start to manage your money well and make payments on time for six months, then the interest rate must return to where it was originally.

So for those of you who may not be able to make the consistent payments over six months to get back to a lower interest rate, trying to settle your debt with credit card companies may be a viable option. The tomfooleries that banks were allowed to pull in the past are being eliminated. But just because the government changed these rules, savvy consumers will need to continue keeping an eye on their credit card issuers to see how they try to get around these new rules.

While there are many companies that offer real debt consolidation plans and debt settlement options, unfortunately there are also some companies out there that that outright scam customers. These companies offer to help settle your debt for a fraction of the debt amount. Then these companies have you pay all kinds of fees before they even start working to settle your debt. But in many cases these companies do nothing more than collect these fees. They never follow through on the debt settlement options, and you are left holding the debt!

So in response to the numerous complaints against these companies the Federal Trade Commission (FTC) is attempting to set new regulations that would govern companies who offer debt consolidation plans. The biggest change proposed will limit, or completely eliminate, upfront fees and charges.

This of course would nip the problem right in the bud. The fly by night companies that are making money by charging these fees and then providing no service would have their business model destroyed. These unscrupulous businesses would literally disappear overnight.

But there could be another unintended consequence. The same new rules designed to help consumers could backfire. The new proposed rules could actually keep consumers from having any debt settlement options at all.

Companies that do offer genuine debt consolidation plans could be put out of business too. After all, these are businesses and any business needs to make money. These new rules would essentially mean that the legitimate companies would be prohibited from charging their customers for the services that they provide.

While the legislation is needed it does propose a Catch 22 situation. We're hopeful that these shady companies disappear, and are ready and willing to step in to help consumers with our debt settlement solutions.

At the root of economic theory is a simple principle; people make smart and responsible financial decisions. Given the choice to spend their money paying debt that is owed, or to spend it on let’s say going out to dinner, the responsible consumer will spend their money on paying down the debt. Unfortunately that is not always the case.

For those of you that choose to go out to dinner, you should begin to focus on what you’d like to accomplish in your life. With every dollar you earn, you choose whether to responsible or to be irresponsible. Responsible people do not spend money on non-essential items they cannot afford. Additionally, I am constantly amazed when people have hundreds of dollars in cash in their pocket, and a nice new cell phone with a custom ring tone, but haven’t sent any money to their creditors in 6 months. What’s more important, your bills or your ring tone? Do you expect to pay your bills or do you think you can magically make them disappear?

Don’t get me wrong, there are always people that are just in that tough of a spot. They just don’t have enough money coming in each month to deal with all their bills. That’s not the person I’m referring too. I’m referring to the person that makes the conscious decision to avoid their creditors and spend money on worthless items instead. What these people must understand is that spending their money on themselves instead of dealing with their bills will only injure them in the long run. This behavior hinders credit scores and can even cause depression because of financial instability. You are either in denial about your situation, or you should seek professional help.

If you want to be responsible, my recommendation would be to look into a debt consolidation program, a debt settlement program, or start to automate your bills. Create an income and expense budget to understand what you can afford. Possibly pay all your bills through your bank accounts. Set up an automatic deposit for your paycheck to go into your checking account. Total up your monthly bills for each month. Have that amount remain in your checking account and have the remainder of your funds be transferred into a savings account. Forget about your checking and allow yourself to use the money in your savings as you see fit. This will ensure that you begin to live within your means and your bills will get paid on time.

Warren Buffett, nicknamed the Oracle of Omaha, is possibly the greatest investor the world has ever seen. Once during a CNBC interview , Mr. Buffett mentioned that he could never make money if he borrowed at high interest rates. Mr. Buffett excels at capital allocation. It’s his profession and he is very, very good at it. This brings a very important question to mind. If Warren Buffett, a man (when I last checked) whose net worth is around $37 billion, says that he can’t benefit from borrowing money at high interest rates (for example 15%, - 30%), then how can an average, everyday Joe such as you and I benefit from borrowing money from a credit card that charges us 20%?

The answer is we can’t.

Let’s explore this a little further. Let’s assume that you have $20,000 in credit card debt and an annual interest rate of 20%. Usually, a creditor will have around a 2% minimum monthly payment on the account. This could result in the following situation:

Monthly Minimum Payments = $400
Monthly Interest Payments = $333.34

At a 20% interest rate, you’ll be charged around $4,000 in interest for the first year alone! Let’s look at this from another angle. What was that $20,000 spent on? Do you think it was used to buy items that will appreciate in value? Probably not. Even if the funds were used to make purchases on items that may appreciate in value, do you think those items will all appreciate at 20%? Once again, probably not.

Unless you are temporarily borrowing funds at these high interest rates, then it should be avoided all together. By “temporarily” I mean paying back the debt in a matter of a few months or so. Making the monthly minimums in this scenario just doesn’t cut it. If you should find yourself with excessive credit card debt, extremely high interest rates, and payments that you can no longer afford, debt settlement may be the right choice for you.