Archive for October, 2009

You may think that everyday Americans like you are taking a beating in this economy. Home prices are down and unemployment is up, cheap credit is a fond memory, and the specter of inflation is lurking around the corner due to profligate government spending.

But in reality, things could be much, much, worse. You could be famous. Then you’d have real problems. For example…

Actor Nicolas Cage is suing his business manager for $20 million, alleging that his incompetence and mismanagement has led to “financial ruin.” Cage owes $6 million in back taxes, despite earning $40 million between June 2008 and June 2009.

“Actress” Pamela Anderson (whose most famous on-screen role was a certain home video that I’m not going to link to) thought it would be a good idea to tile her swimming pool in platinum, despite having a career that’s rapidly circling the drain.

The former “Baywatch” star can now just drive past her half-finished mansion in Malibu, California whose renovations have left her over $3 million in debt and facing lawsuits from five different construction firms.

Former NBA player Antoine Walker, who ten years ago signed a $70 million contract is now in debt to the tune of $4 million and is facing felony check fraud charges after his arrest this summer in Lake Tahoe.

And it’s too soon to forget about Michael Jackson and his woeful credit.

None of this is shocking anymore, since celebrities have been going bankrupt long before MC Hammer.

How is it possible that star athletes and entertainers whose paychecks have more zeros than Hirohito’s air force can end up in bankruptcy, with tax liens out the wazoo and even facing time in big boy jail? Simple, for the same reasons that everyone else.

They fall into the same pitfalls that we all do, like:

• Not taking personal ownership of your finances and relying on others to manage your bills. (Married people, I’m talking to you.)
• Lavish spending based on what you’ve made in the past, not accepting the fact that the future may (and probably will) bring a change in your employment status and income
• Bad habits. Gambling, smoking, drinking, speeding, overeating, the list goes on. Excess in any area can lead to a real drain on your finances, whether it’s due to legal, medical or career woes.

If the beautiful people, who have a license to print money in their basement, can go broke so easily then it’s not a stretch to imagine that you can too, no matter how good your circumstances seem today.

So remember to make more money whenever possible, don’t spend money you haven’t earned yet and take personal responsibility for your personal finances.

Senator Thomas Carper of Delaware recently admitted that he wouldn’t read the critical health care bill currently being debated before he voted on it, because the details were similar to the “gibberish” used in credit card disclosure forms. Putting dereliction of duty aside, he has a point that banks don’t make it easy to understand their terms and conditions. But just as he has a fiduciary obligation to understand what he’s voting on, you need to understand what you’re signing up for.

The General Accounting Office (GAO) found that these statements don’t lend themselves to easily comprehension.  A recent report stated that “Although credit card issuers are required to provide cardholders with information aimed at facilitating informed use of credit and enhancing consumers’ ability to compare the costs and terms of credit, we found that these disclosures have serious weaknesses that likely reduced consumers’ ability to understand the costs of using credit cards.”

Credit card issuers use the pages of legal mumbo-jumbo on their websites and monthly statement inserts as excuses to arbitrarily jack up rates and hike fees on unsuspecting consumers. This is exactly why Congress is looking to speed up enhanced regulation of the credit card industry. Even after these new rules go into effect, it will still be up to borrowers to know what their rights are and opt out of bad agreements.

How do you do that? Peruse the web for tips on how to read your credit card statement and how to choose a new credit card. It’s critical that you as a consumer understand rates, fees, legal rights and obligations and the terms under which the card issuer can change the existing payment structure. These should all be easy to decipher, and if there’s any confusion or ambiguity, it’s probably not in your favor.

Read and understand what you’re agreeing to! That’s plain English.

Candy  swims later anon farmhouse! The radio staggers against the backspace! New bombast home mentor snickering!

That’s gibberish. Your credit agreements shouldn’t be. Don’t know what a particular clause or statement is holding you to? Ask a financially-savvy friend to review it and explain it to you. If they can’t, think twice about how badly you want to do business with that company.

After writing yesterday’s post about Wall Street’s disregard for any sense of decency or restraint (and why you should follow their example) I saw this funny video from one of my favorite websites, Slate. A bit of fun for your morning.

Enjoy.