As a coach I don’t have the privilege of coaching people on one topic. None of my clients would gain any benefit from a niche coach as their dream and ambitions are complex and require a more general approach fortunately the art of coaching was designed with that in mind. I just can’t imagine someone coaching on relationship and not also dealing with finance or even parenting.

Prompted by an article on Breakfast news this morning here is a little street level information on debt and money.

Having debt is not unlike being overweight, something I know a lot about. To get out of debt you must stop spending (eating) so much and begin paying (exercising) more towards that debt. Simple. Yet we complicate both and for very good reasons.
Debt is complicated because we lack financial savvy and we are victims of a massive corporate rapist called banks who employ some of the best brains in the world with just one purpose, to fool us.

Banks have a vested interest in ensuring we feel we can’t live without credit. Remember banks start the day with nothing. When John deposits 1 pound the banks give themselves permission to lend 9 pounds to Peter against that single pound. (I believe that remains the current ratio)

Now I hope you notice the con in the lending system. Going by the 1:9 figures the bank only ever has 1/9 of the money it is actually lending. The remainder of the rape is that they have used Johns pound to “create” 8 new pounds which peter must pay them back at a higher (much higher) rate than they pay John for the use of his pound. Oh if you are waiting for me to explain where the 8 pounds came from don’t. They just pressed a few buttons and made it up. Yep the great “Money is secured against gold” myth is a lie. Sure when money systems began this was true, but as man became more and more greedy we simply invented this magic money.
So what does any of this have to do with debt? Well you need to understand that banks need to keep you in debt. Once you understand that, you will begin to see the traps they lay for you and you may even be able to devise ways of avoiding and even getting out of debt .

As a coach I never give advice, but as a mentor I am free to and will. Here is my number one fail safe why of getting out of debt which is 100% guaranteed to work EVERTIME. Don’t get into debt in the first place.
Now for those of us incapable of that simple technique here are the other methods currently available, which I must warn you were designed by banks and bankers and as such as full of traps.

Debt restructuring/Consolidation

In this farce you are often encouraged to take out one large loan to pay off the smaller loans and spread your payments of a longer time period. The debt stays on your record on until debts are paid which can be decades. The other main issue with this method it that you credit rating remains low due to the on going debt and you eventually repay many times the original debt.

Debt relief Order (For amounts under £15,000)

This process is relatively new, but suffice to say if your debts are under £15,000 you are not struggling with the big boys. This one is like Bankruptcy for poor folks. This too will stay on your record for 6 years and for that little money you really got to ask yourself is it worth it and are there better ways to remove your debt.

Individual Voluntary Arrangement or IVA (For Amounts over £15,000)

This one is very dangerous unless you can guarantee your employment for the entire duration of the arrangement. One missed payment and you are right back where you started. Normally the arrangement removes as much as 75% of the debt and allows you to make payments on the remainder over 5 years. No more pesky debtors calling or letters. This too stays on your record for 6 years

Bankruptcy

This is the one that we are trained to fear the most, yet in a number of ways it can be the best.

This too stays on your record for six years, but there is no upper limit to the amount of money you can write off. Drawback? It is more expensive to implement than any of the others. You remain a ‘bankrupt’ for 12 months and therefore must live by the restrictions i.e you can’t be a company director etc.


Details

The net has much more in-depth information on all these so-called solutions. But here are a few practical tips and points on all of them.

All these interventions will be on your record for 6 years except the first which will be on your record until all the debt is cleared. So if you know you can’t clear you debt in six years maybe these are good options.

The IVA requires 60 payments and does not allow you to miss a single one. In this era of employment uncertainty you may want to think twice about this option.
Bankruptcy strips you bare, but it is a clinical strike which many ‘wealthy’ people use, ask yourself why.

The longer you are in debt the more you repay. Be careful of schemes that are designed merely to keep you in debit.

Avoid banks when seeking advice on debt, you getting out of debt is not in their interest.

Speak to your creditors, they would much rather get some money back rather than none. This you can do for yourself at no cost!

If there is one rule of thumb surrounding debt try this: never take loans in order to remove debt it’s not a good strategy.

Parents

Please teach you children how to handle money. If you don’t they will not know what to do when their first credit card application form mysteriously turns up the day after their 18th birthday. Teach kids to save. Don’t teach them instant gratification. The word NO never killed anyone. Explain to your kids about the monthly bills in your home and involve them as much as possible in the family finances.

Well that’s my rant for the day!