Educating Yourself About Money Makes You Richer

If you don't educate yourself about money and how it works, you will never be financially independent or debt free.

Recently I have been contacted by a client who was in a great deal of debt and was struggling to pay her bills.

She had already gone into an IVA (Individual Voluntary Arrangement) by the time she found out about the DebtFree & Happy programme. She was facing bankruptcy because she was struggling to keep up the repayments on the IVA.

She explained to me that she'd started on this slippery slope by agreeing to a debt management plan with a debt management company at the beginning of 2006.

A month after she had signed up for the debt management plan she had received a call from the debt management company representative.
He had said to her "How would you like to reduce your monthly payments further? By say... another £100 or so less per month? And it's all for free."

Obviously she was keen to reduce the payments as much as possible even though she was managing quite well with the new arrangement. So of course, when offered a "free £100 per month" she said "yes (please)". Afterall, she thought that she would have nothing to lose and a lot to gain.

A few months later she had received the paperwork and was told it would result in her saving £100 per month. In her excitement, she simply signed "by the X's" marked on the paperwork, and obediently returned it, without reading the agreement or really understanding the implications.

She then heard about my programme in September, bought the DebtFree & Happy programme and took up some coaching. Just before subscribing to my coaching programme she had been contacted again, but this time by the Insolvency Practitioner and he had asked her how things were going. She wanted to move house, but said that if she did she would find it difficult to repay the IVA. At this point the Insolvency Practitioner said that her only option would be bankruptcy.

When clients join my debt elimination coaching programme they can send me documentation for review (as part of the service), so she sent me her agreement. Upon reading the agreement, it was obvious the arrangement was costing her more than she had realised:

In round figures, her debts were £47,000.
When she signed up for the IVA she thought she had agreed to pay £20,000 back over 5 years, then the rest would be written off.

However, I pointed out that although she would be paying out £20,000 over 5 years, only 7,000 would be going to her creditors. A whooping £13,000 would be paid to her Insolvency Practitioner. Whilst I don't object to Insolvency Practitioners receiving payment for their service, this certainly seems like a lot of money - and far more than my Debt Free & Happy Educational Programme or caoching! :-)

This would mean that for the next 5 years she wouldn't be able to utilise the power of OPM (Other People's Money - well, the official sources that is!). OPM is important to create wealth. She had now put her ability to achieve any financial goals for at least 5 years into jeopardy.

It also means that she was not getting it for "FREE" as she was told. She has to pay for it through her arrangement.

When I explained to my client what the agreement included and what the implications of her actions would be, she was shocked. She could not believe what she had done.

ALWAYS carefully read any documents you are asked to sign - otherwise you might make this costly mistake. Before signing anything, always find out the implications and ask a few different people, not just the advisor who is trying to sell you the plan. Then you can make a sound judgement based on the information you have available. If you believe you have been misled then there are organisations such as the Financial Services Authority that will investigate the matter for you. But make sure you have as much information and facts as possible. Always make notes of any contact you have with advisors, and the dates along with what has been said.

With a little education and know-how you can easily effectively utilise a lot more money, just like this client could have done. You could make agreements with your debtors yourself and as long as you stick to the agreement you'll pay more to your creditors and build up a good credit history too. (By the way, with the DebtFree & Happy pack, you get access to "hidden" pages on my website that includes template letters you can use!)

People believe that when they get into financial difficulty, that they are financially ruined. You are not. In fact, if you have been in debt and managed to make agreements with and pay back money to your creditors then you are considered to be a better risk than someone who has never owned a credit card! :-) So they will be more willing to lend you money in the future for good investments (more on that in part two of the DfH course)

If you pay off your debts quickly you'll then be able to use the money you have available to invest in financially sound opportunities. So you see, educating yourself about money really does makes you richer.