Can Bad Credit Be A Good Thing?

Excerpt from Go Broke, Die Rich 

From the day you are born you are indoctrinated on how important credit is to everyone. You're told over and over again that good credit is the secret to financial success and happiness in life. You're barraged with advertisements for all the expensive luxury items you can buy right now on credit and nearly everyone takes the bait.

You get a house you can't afford, a luxury car you don't need, and run up a half-dozen credit cards to the hilt. Before you know it you're a slave to the system. You’ve stepped into the credit trap. Most of your hard-earned money is going to banks and mortgage companies in interest payments. You pay and pay and pay, yet the balance you owe never goes down. For many the joy is soon gone—happiness is replaced with constant worry and depression.

Yes, from the day we are born, each and every one of us have been carefully manipulated into becoming slaves. That’s right, carefully programmed robots who go to work everyday and then religiously send seventy to eighty percent of our wealth to our masters, the big corporate giants of Wall Street and the government bureaucrats in Washington.

Think about it. From the day you are born you're told that good credit is your ticket to the American dream. You can have all the luxuries and modern conveniences of life on credit. Why wait, they say, when you can have it right now.

Millions of Americans, including myself, have been victimized by this credit conspiracy. The lure of easy money is so tantalizing that few can resist it. I started my own law practice with a two-thousand dollar cash advance on my American Express card. I tried to get conventional financing but had no collateral, so I was summarily turned down. Over the years I continued to finance my small business with high-interest credit card debt that the average entrepreneur would have no prayer of ever paying off.

A lot of small business are started and financed with credit cards each year this same way. A few will be successful and pay off this high-cost debt, but most will eventually perish because of it. Eventually the burden of the minimum monthly payments will get so heavy that the business will collapse.

Credit cards are very handy and useful for travel and to make it easy to keep track of business expenses. But they shouldn’t be used for financing your business or covering your negative cash flow at home. If you are using credit cards for this purpose you need to stop immediately and take a close look at the business. Find out what is wrong and correct it, but don’t keep digging a hole that will eventually swallow you and your small business.

So, now you’ve been warned, but will you do anything about it? Probably not. Credit cards are addictive just like cigarettes and booze. They provide immediate pleasure and allow you to fulfill your dreams. In your mind you’ve got everything under control. You tell yourself that you can stop using your credit cards whenever you want. So, why don’t you?

What makes credit cards so dangerous is that, unlike booze, there is no immediate hangover to make you regret you your actions. The consequences of your indiscretions with your credit card are deferred for months or years. For awhile you can manage to make the minimum payments without too much struggle, but eventually all the minimum payments add up and you find yourself overwhelmed.

The use of credit cards defies logic. Why would anyone pay 29% interest, late fees, over the limit penalties, and an annual membership fee, when the bank won’t pay you 2% if you buy a CD. It’s ludicrous. But when I point it out to clients they just shrug. It’s like their minds don’t compute when it comes to credit cards. Armed with a pocket full of plastic gods they become mindless zombies who have no idea what they are doing.

I could understand it if they were desperate. Many of my bankruptcy clients over the years have turned to pawn loans, payday loans, title loans, or other legalized loan shark operations. Without giving it a second thought sign a note that provides or sometimes over 900% interest. What’s ridiculous is that the Truth-In-Lending disclosure is right there staring them in the face and they still sign on the dotted line. When you absolutely have to have money people will do whatever it takes no matter what the consequences are to get it.

But people with credit cards half the time don’t need what they are buying. They are not desperate people who are buying food, clothing or gasoline to get to work. They are buying gifts they can’t afford to give, luxury items they could do without or booze and cigarettes that will eventually kill them. Nor are these people stupid. They are just as often college graduates as high school dropouts. The common threat among them is materialism and a lack of common sense. They like fancy cars, good food, designer clothing, the latest in technology and large well furnished homes. If they can’t have all these things they are unhappy.

So, what is the answer to the credit card addict? Fortunately, it’s an addiction that can be easily ended. All you have to do is quit paying the credit cards. When you do this they soon will lose their magic and you will never buy something you don’t need ever again. Even better your credit score will crater so you won’t be able to get new credit cards to replace the ones you have lost.

Of course, the downside of this solution is having to deal with all the angry collection agents who will start hounding you for payments on the now dead cards. They will threaten you will all kinds of horrible things like lawsuits, liens, garnishments, attachments, and even criminal prosecution. Of course, they can’t legally do any of this, but they will do their best to make you believe it will happen very soon if you don’t send them money. It may become so bad you will have to file bankruptcy just to get some peace, but bankruptcy is the worst thing for the credit addict.

That’s right because as long as your credit is bad you will have no choice but to go straight. But once you file bankruptcy your credit will rebound quicker than you’d ever thought possible and then you’ll be right back where you started with a pocket full of plastic gods.

So, rather than going through all of that, the better move for the credit addict is to simply cut up all the credit cards and pay them off as quickly as possible. This will be painful and require a lot of sacrifice, but it will be well worth it as it will free you from the financial shackles that have bound you from the moment you stepped into the credit trap.

Lucky for me, attorneys often find themselves in a position to make the big score. For me it was a personal injury case that netted enough to pay off my credit card debt and the loan on my home, but it was only after struggling for twenty years that I finally escaped the credit trap and became debt free. For most entrepreneurs bankruptcy or death will be their only way out.

The above article is from my book, Go Broke, Die Rich, Turning Around the Troubled Small Business. For an entertaining perspective on credit cards read my novel Plastic Gods. And be sure and visit my website or follow me on Facebook.

Turning Around the Troubled Small Business

Over the years I have presided over the births and deaths of hundreds of small businesses. As an attorney, I have watched many of them grow, mature, and thrive, but I have seen many more stumble, fall, and die.

It is painful to see an entrepreneur, once so full of hope and excitement, suddenly desperate and defeated. I am saddened when I drive down the street and see an empty storefront, as I know someone has suffered an immeasurable loss, and endured extraordinary grief and pain trying to save their piece of the American dream.

There are few experiences in life as painful and brutal as the failure of a small business. For a small business conceived and nurtured by its owner is like a living, breathing child. Its loss is no less traumatic than losing a loved one. After all, a business owner spends most of his waking hours at work. He will invariably become very attached to it, particularly if it is the business he loves and the one he has always wanted to pursue.

Inevitably the business becomes an extension of the owner himself. When it is ailing, he is ailing as well from stress and worry over whatever problems the business is facing. When the business is thriving, he will be happy, confident, and enjoying life to the fullest. If the business fails, the owner will feel like a failure and suffer deep emotional scars that will greatly impact his personal life for years to come.

With business failure often comes marital strife and divorce. I don't claim to be a psychologist, but every day I see husbands and wives torn apart because one blames the other for a business failure. Or, if they don't blame each other, they are often so tired and battered from battling with creditors that they give up on the marriage. The sight of each other only brings back bad memories. So too often the unhappy couple opts for divorce. If the marriage does survive, it will never be the same.

Having watched my small business clients closely over the years and having operated my own law practice, I have come to some conclusions about why some businesses succeed while others fail. The sad fact is that many of the businesses I have seen fail could have been successful. The good news is that it's not too late for those still in business, if they will wake up and take control of their destiny.

In my new book, Go Broke, Die Rich, Turning Around the Troubled Small Business, ISBN 978-1-929976-9-59 http://tinyurl.com/7jv86fm, I explain these common causes of small business failure, how to identify them, and what can be done to defend the business while it is being turned around.

Don't get me wrong. This book doesn't contain any magical formula for success. Turning a business around requires hard work, discipline, and sacrifice. But what I hope this book will do is give the reader insight into why so many small businesses fail, and provide solutions and strategies that can help turn around an ailing business.

This book is intentionally written in a simple, informal style for the average business owner rather than for college graduates or MBAs. I've found that the cause of business failure isn't just a lack of education, experience, or business training, but just as often a lack of common sense. Often small business owners, or "entrepreneurs"s as I call them in the book, do things they know are stupid and reckless. Why? Because entrepreneurs by definition are risk-takers. They like to experiment and do brash things that may only have a slim chance of success. They are the eternal optimist and often have unrealistic expectations.

Although my major at UCLA back in the late 60s was political science, fortunately, I did minor in economics. The business courses I took were helpful to me when I started in law practice in 1976. More importantly, however, was the training I received at Metropolitan Life Insurance Company. While I was in law school I had to support my wife and four children, so I worked full time selling life insurance. This wasn't a glamorous job, but I did learn much about financial and business planning—something that had scarcely been mentioned in high school or college.

Go Broke, Die Rich is not intended to be a manual or reference book. It is my hope that it will be interesting, entertaining, and informative. I fear too many self-help books get stuck on a shelf and never read cover-to-cover because they are too much like a textbook. This book is about adversity and how to overcome it. Its full of practical advice and ideas on how to deal with just about every adversity an entrepreneur might face.

Go Broke, Die Rich is full of real life events that should be of interest to any small business owner. Obviously, the names and locations have been changed and the facts altered enough such that no confidences will be breached. Hopefully, the reader will be able to identify with the characters in these stories and understand the problems they face. The reader will, no doubt, be facing similar problems and can learn from the mistakes made by the business owners in these stories.

As needed, I will provide legal and business advice but it will not be technical or hard to understand. It is not my intention to burden the reader with the complexities of the law, but simply to give them ideas and alternatives that will provide direction and avenues to take toward solving the problems encountered.

I consider every business failure a tragedy and, when it is one of my clients who goes down, it is even more troubling. I often lie awake at night wondering if there was something else I could have done to save a client's business and spare him and his family the dire consequences of a business failure. My only hope is that this book will help other entrepreneurs save their small businesses.

Visit my websites at http://williammanchee.com and http://mancheelaw.com.