Small businesses that have money management and debt problems are anxiously waiting for the new credit card rules to go into effect in July 2010. But the majority of business owners need immediate debt relief. While the new rules will help, for some it will be too little, too late.

The main problem with using credit to finance your business is that it is a big risk. That risk, of course, is you are promising your future production to pay back that financial obligation in full and in a timely manner. There is really nothing wrong with using credit as long as there is virtually no risk involved in paying the money back. There is a lot wrong with being over your head in debt and being handcuffed to the credit cards. This is risky in the extreme, because with just one or two bad months, the house built on using credit lines can fall very quickly.

I am glad to see the new credit rules passed. What I am not happy about, however, is the length of time until credit issuers must comply. The current credit system has driven some individuals and businesses into bankruptcy and the rest of the nation to the very edge of financial disaster. The credit rules could have been mandated to be effective in 2 or 3 months rather than 18 months and it would help the economy now when it desperately needs it.

Living in a condition based on credit and debt is very, very risky. Done on a national scale, and helped along by exorbitant interest rates, over-limit fees, late charges, and a 22-day billing cycle, the nation’s consumers are $850 plus billion in credit debt and it is evident they are sinking fast. The new rules are a long overdue step in the right direction.

What are some of these new rules that everyone is talking about? Simply stated, the new rules prohibit:

- Placing unfair time constraints on payments. A payment could not be deemed late unless the borrower is given a reasonable period of time to pay. This would eliminate many of those exorbitant “late payment fees.”

- Placing too-high fees for exceeding the credit limit solely because of a hold placed on the account.

- Unfairly computing balances in a computing tactic known as double-cycle billing. This two-cycle method enables billing offices to charge interest on balances that were part of the previous month’s balance, even if the balance was paid in full.

- Unfairly adding security deposits and fees for issuing credit or making it available.

- Making deceptive offers of credit.

Two excellent provisions of the new rules are: 1) that customers will be given 45 days of notice before any changes are made to the terms of any account, including jacking their rate for missing a payment or paying a bill late, and 2) banks must apply payments (beyond the minimum) either to the balance with the highest rate or proportionally across all balances. The second one eliminates beyond the minimum payments to be applied to only to the lowest (or 0%) interest rate principals first.

When someone balance transfers to a zero interest rate card and then uses the card for purchases, the purchases are typically billed at a very high interest rate. What consumers fail to realize is that the bank will apply payments only to the zero interest balance while the higher rate purchase racks up interest charges until the entire zero balance principal is paid off. That sabotages the whole debt reduction strategy of the zero balance transfer.

While the Associated Press is calling the new rules the most sweeping clamp-down on the credit card industry in decades, I’m wondering why the clamp-down on the abuse took so long to be addressed, and why the banks are being given 18 months before the new laws go into effect. With modern technology we can move and make changes almost at the speed of light, so 18 months is like moving at the speed of a glacier.

As I have been doing for the past decade, I still advise business owners and consumers to use the 5 old-school money management tips on reducing debt that they can employ right now to start digging themselves out of debt and get their own personal economics healthy.

Money Management Strategy #1 – Stop Using Credit

The place to start is by locking away the credit cards and figuring out how to cut expenses back to function within your income. Unsurprisingly, this first step can take quite a bit of discipline. Paying operating expenses with credit cards can easily become a habit, and as a result, can rapidly build up debt for the small business.

Figure out ways to increase your income and instead use only cash. This is the single most effective action you can take to begin the process of debt reduction.

Money Management Strategy #2 – Never Spend More Money Than Your Company Makes

Paying for items with credit because you don’t have the cash is the recipe for economic slavery. Using credit in that manner commits your business’ future income to pay the credit company.

Business owners must get creative and find ways to increase the company’s income, and then use it to pay both current expenses and to pay off past credit debt. Additionally, a business owner must take a ruthless look at what expenses are absolutely necessary. Business expenditures should be expected to bring in more money, business, and income. If they don’t do this—don’t directly lead to the creation of more income in some way—then determine if the company can do without certain items in the short term.

Money Management Strategy #3 – Always Pay More Than the Minimum Payment

Set a goal to pay at least 3 to 5 times the minimum required payment on each credit card and line of credit. Paying the minimum amount due on credit payments is a financial trap that keeps you perpetually in debt.

An effective way to reduce the debt is to take 10% to 15% every week off the top of the company’s income and use it to pay down the debt. Don’t wait until the statement says the payment is due. Pay some on-line every week as soon as you earmark it for paying the debt. The added bonus is that you stop the daily interest compounding on the payment amount you made. That alone can save you thousands in interest over the long haul.

Money Management Strategy #4 – Never Spend Over Your Limit or Pay Late

Use old fashioned money management discipline and never sabotage your debt reduction program by getting hit with $25 to $39 over-the-limit or late fees. Banks, credit card companies, and other financial institutions make millions through financial penalties for being late or going over your credit limit. Worst of all, the money paid in penalties creates more debt.

Money Management Strategy #5 – Find Ways to Cut Expenses

While a fundamental requirement of any debt reduction program is more cash as fast as possible to pay the debt off, there is one important area that should not be considered an unnecessary expense. That area is marketing and promotion. Correct money management includes the continuous promotion of your company’s products and services. Marketing and advertising are areas you don’t want to stop spending on. Marketing is going to make you money and is a correct financial investment when properly done.

There is an old advertising saying that still holds true today: “When the economy is good you need to promote, and when the economy is bad you need to promote MORE!”

Whether an economy is in an economic depression, a recession, or is thriving, the above money management principals still apply. Money management for small business takes financial planning and discipline. Reducing debt is just one step in an overall program to ensure that a business will survive and make the maximum amount of money for the business owner. There are other steps in a successful money management program that can be taken to achieve your financial goals, and this will be addressed in future articles. For now, reduce that debt and improve the financial health of your own economy.

For more information about steps you can take to reduce your debt, sign up to receive the FREE Debt Reduction Solutions Guide. If you need further help with a debt management program, send an email to Sandra Simmons, President of Money Management Solutions, Inc. at info@MoneyMgmtSolutions.com  or call (727)448-1011

Will Obama-nomics and the Obama economic plan work? That remains to be seen. However, with the new Obama administration and the financial “experts” telling us it may be years before we see an economic recovery, most of us don’t have time to wait for the politicians to get their act together. We, as a nation, need to take the economy into our own hands and speed up the recovery as quickly as possible.

But how do we do that, exactly? With figures in the trillions of dollars, it would seem impossible for any individual to have much of an effect on our current economic crisis.

“The answer is correct money management and the correct handling of our finances,” says money management expert Sandra Simmons. “We got ourselves into this situation because we, as a nation, have violated many of the basic principles of sound financial management. No matter what the government does, in the end, all of us need to change the way we handle money and credit in order to truly get the economy back on track.”

In particular, Simmons takes aim at America’s over-indulgent love affair with credit. Credit, she says, is an all-too-seductive trap that has lured an entire nation to shipwreck upon hidden fiscal shoals. Almost everyone, from the largest of companies to the individual consumer fell into the credit trap and began living a false lifestyle that was way above its means. This false economic condition was a ticking time bomb just waiting for the right set of circumstances to explode.

“At any given point-in-time, we are all in a certain financial condition,” explains Simmons. “And it is easy to fool yourself into thinking that you are in a better condition than you are actually in. The basis for this false financial condition is usually an over-reliance on credit to supplement your income. Too much credit and too much debt inevitably leads to a financial crash.”

Although Simmons has been writing and lecturing on the dangers of credit and debt for years, the recent U.S. Economic crisis has brought the point home with historical force. Financial pundits and politicians may complain that this “Economic Tsunami” was unforeseen, but Simmons disagrees.

“If you analyze the histories of economic bubbles, you will find at their root violations of sound money management principles. Whether it’s herd mentality or some other phenomena, group-think drives people to take actions they intuitively know to be unsound and overly risky,” she says. “But the terrible truth is that people know when they’ve extended themselves too far and national confidence begins to wane.”

Confidence, says Simmons, is the single most important hallmark of any strong economy. The question becomes how confident can anyone be when they know that they owe their lifestyle and economic standing to a economic foundation based on credit. Like any structure built on an unstable base, it’s only a matter of time till it comes tumbling down.

“Conversely, an economy with little debt, operating on very little credit and strong reserves is an economy in very good shape and one that is very stable and hard to disrupt,” states Simmons. “The kind of money management system that I am talking about is actually the kind of system that is very old-school and traditional. That is a tried and true system. It works and it’s the road to financial freedom and wealth.”

According to Simmons, this is the real way to build the economy from the ground up. The goal should be to get every American applying the tried and true money management policies to their own lives and this would serve to create an extremely strong economic base on which to build an unshakable economy.

Simmons’s plan to grow the economy from the ground up would include:

1.Start using cash instead of credit.

“We have to break the cycle of using our credit cards for every financial transaction,” says Simmons. “Instead, use cash or your ATM card. If you can’t afford it, don’t buy it. Instead, save up for it if it is something you really want.”

Getting away from the instant gratification mindset that we have all become used to may go contrary to popular culture but it is the way to dig ourselves out of this economic mess.

“As a nation, it is not difficult to see the immediate effect it would have if we all stopped using credit cards and started using cash,” she says. “Many would argue against this, especially with the holiday season approaching. But we have to get off our credit addiction at some time, and now is as god a time as any to get into the right spending habits.”

2.Pay down your debts

Another unacceptable money management habit is carrying a large debt load.

“Somewhere along the line, it became acceptable to carry a large amount of debt,” notes Simmons. “Maybe this comes from Madison Avenue advertising campaigns, but this is completely wrong-headed. The goal should be to be completely debt-free. It doesn’t do to pay the minimum amount owed on debt. Additional money should be applied to debts to pay them off quickly.”

Debt, it could be stated, is at the root of all financial evil. Debt, by its very definition, carries with it, risk. That risk of course, is financial failure.

“I think the lessons of the Great Depression faded so far into the past that most of us forgot what could happen when you allow debt to accumulate,” Simmons observes. “The risk-taking by some of the largest financial institutions and our own government would have been unimaginable a generation ago. We can all get out of debt, but it does take a certain amount of planning and discipline. “

3.Build Reserves.

The road to wealth begins with putting money aside little by little into reserve accounts that are not touched except for emergencies.

“Unfortunately, the very concept of saving has gone completely out the window,” Simmons says. “Saving money is just not a popular concept anymore and is possibly viewed as old fashioned by some. As a result, the U.S. Ranks far down the list of countries whose workers and business owners regularly put money aside in savings, and this makes us very vulnerable when we can no longer work or when a crisis occurs in our lives.”

In fact, if anything, the messages in typical advertising and commercials is spend, spend, spend. If there are any suggestions in society about putting money aside, it certainly gets lost.

“In truth I think we’ve lost touch as a society with what it takes to build wealth and gain financial freedom,” says Simmons.”The fact of the matter is that anyone can become wealthy if they apply the right money management principles. It’s really not how much you make. It’s what you do with your money that counts.”

And Simmons has the client list to prove it. Despite the devastating economic storm, Simmons’ clients have weathered it rather well because they have applied her principles and were prepared.

Simmons is anxious to spread the word and is currently touring the U.S. giving seminars on the secrets of wealth building and financial freedom. Her next seminar is scheduled for the weekend of December 13th in the Tampa, Florida area.

If anyone thinks that we cannot change our collective financial habits for the better, Simmons cites one very prominent example.

“Just look at what we did with the gas prices,” she says. “The so-called experts said it couldn’t be done, but America, through our combined efforts, changed our habits and dramatically lowered the prices. It can be the same with the economy if we change our money management habits from the ground up. “

So you want to be broke and stay in the economic trap? Here are the top 7 Money Management Mistakes you can make to insure you have NO MONEY and are living in poverty.

Money Management Mistake #1. Spend every dime you make and deny yourself nothing; buy stuff whether you need it or not.

Money Management Mistake #2. If you have any money in the bank or room on your credit cards, go out and spend it. Don’t worry about emergencies that may come up. When they do, borrow more money to handle it.

Money Management Mistake #3. Work to make just enough money to barely pay your bills and be sure to spend your free time out spending money. Don’t stress over the yearly increase in the cost of living.

Money Management Mistake #4. Use your credit cards to pay for essential items like gas and groceries, and to do impulse shopping for things you want but don’t need. Max out those credit cards.

Money Management Mistake #5. Pay only the minimum payment required on your credit cards each month, and don’t worry about the extra charges for paying late or spending over your credit limit.

Money Management Mistake #6. Never put any money in savings, and if you do, feel free to tap into those funds when you can’t pay your bills.

Money Management Mistake #7. Rely on the Government and Social Security to take care of you when you can no longer work.

These actions will guarantee that you are being controlled by the money and are broke and living in poverty.

If you don’t care that you’ll constantly be worried about money and plagued with money problems, then you’ll be able to spend those sleepless nights out spending more money on credit cards or shopping on-line on the computer for entertainment. Heaven forbid that you should be working on ways to take responsibility for your own financial survival instead of relying on someone else to take care of you financially. Isn’t that what friends, family and the Social Security system are for?

Now that I’ve given you all this advice about how to live broke and die penniless, I should also tell you that there is a money management system that you can use to control your income and debts to get on the road to financial freedom. Just in case you change your mind and decide you want to take responsibility for improving your own financial condition, visit www.moneymgmtsolutions.com.

Why do the media and Congress seem surprised about the current credit crisis? I’ve been warning my clients about it for years. The effects of greed, poor money management practices and betrayal of consumers’ trust have been building and are now being exposed in every dark corner of the credit market. The days when practically any business still open could get a bank loan are long gone. The good news is that there are alternatives.

Despite the sub-prime meltdown negatively affecting the credit markets and the dramatic change in the rules of lending, it is still possible to qualify for business equipment leases. Yes, it’s tougher to get the capital you need to grow, but there are things you can do to increase your chances of qualifying for a loan or lease. Here are some suggestions that will help:

Check your credit regularly and take steps to improve your score. Underwriters have always placed a lot of importance on credit scores because it reflects the debtor’s ability to take care of obligations in a timely manner. Lenders are obviously nervous today, so a credit score of 675 or higher is even more critical. It is a smart money management practice to check your score on a regular basis and carefully review the information. In a 2004 study, it was found that 4 out of 5 credit reports contain errors that can be detrimental to your credit standing. These errors include, but are not limited to:

1. Inaccurate personal information and out-of-date addresses.

2. “Closed” accounts listed as “open”, like a student loan paid off but showing delinquent.
   .
3. The same mortgage or loan listed twice.
   
4. Major loans or mortgages that have been paid off or timely serviced not listed at all.

If you find an error on your report, write a letter or e-mail to the credit bureau. The bureau is obligated to contact the creditor who supplied them with the disputed information and then respond to you within 30 days. If you are unhappy with how the claim is settled, you can ask to have a brief written explanation added to the bottom of your credit report.

To improve your score, you need to take steps to resolve any items that are showing up as delinquent and those in which a judgment or lien has been filed. Make it a priority to pay credit cards and loans on time each month.

Pledge additional collateral. Some lenders who might otherwise turn down your application for a business loan or equipment lease may change their minds if you increase the collateral base. This might add a comfort level in the event things to south. Additional collateral might include specific assets from another business that is free and clear, rental property, or equity in a personal residence.