You may be working on various ways to tackle your financial obligations and shore up your credit worthiness. Though you have several choices to make in order to become debt free, yet you need to smarten up your plan of attack to take on those troublesome debts effortlessly. For that reason, it is important that your approach to debt repayment is practical and an effective one.

Are you aware of your credit?

Prior to creating a debt repayment plan, it is important that you get a stronghold of your credit reports and credit scores. These are what will make or break your efforts to become debt free. Here some of the justifications for you that establish the importance of tracking your credit:

• A good head-start – According to the debt experts, most of the debtors like you have misconceptions regarding the total amount of outstanding balance owed by them. However, if you want to become debt free, then it is best to list all the details of your loans as well as respective creditors in an organized manner.

  In this case, your credit report will come in handy since they’ll contain all such financial information that you may require to create a smart debt repayment plan. For instance, you can locate any collection account that you’ve forgotten or find out the recently added outstanding balances that you owe through your credit reports (it can be from Experian, TransUnion or Equifax).

• Better credit awareness – Though you may believe to have a good credit rating after making regular monthly payments, yet the reality might be something very different. On the flipside, the amount of outstanding balance you owe may be the cause of a slumped credit score. However, it is difficult for any of you to decipher and analyze the actual financial condition through a credit report.

  Simply put, your credit report will only provide you with information related to all the credit accounts that you have, their balances and your payment history. Additionally, you can easily make out the impact of your debts on your credit rating through your credit scores. So, the moment your outstanding credit card balances approaches the set credit limit, from then on your credit score will start to suffer.

• Improved credit report – Usually, it takes a considerable amount of your time and commitment to repay all that you’ve amassed over the past few months or years. Just remember you aren’t going for a sprint, rather debt repayment is a marathon and so, you’ll have to be strong in your resolution to become debt free and agile with your budget to cut down bad expenses as well as build up an emergency fund.

  You must find your own sources of inspiration and stick with the repayment plan till you have no debts to repay. Another important thing that you shouldn’t forget is to monitor your credit report and this applies even if there is no financial obligation for you to take care of. This is one of the best ways to keep yourself motivated and manage your debts with ease.

Once you have become disciplined and have been paying off your dues on time, all these activities will be reported to the credit bureaus and that’ll show on your credit reports. As a result of a widening gap between credit limits and your outstanding balances, there is are high chances that your credit score will also improve. However, if you had opted to settle your loans or file for bankruptcy, then keeping a tab on your score can at least assist you in monitoring your development as you put in all the efforts to rebuild your credit and ultimately your life.

In its most basic term, a debt matures only when it becomes due. However, depending upon the financial condition of a company, loan terms can be modified or structured in such a way so that they have a different maturity period. This process of debt management is known as debt maturity structure.

Modes of structuring debt maturity

Here are few ways that a company can structure their debt obligations in order to stay current with their loan repayments:

• Trade-Offs – According to some financial experts, long-term maturing debts do not enjoy much importance as compared to debts with shorter maturity period. In other words, shorter-maturing debts are superior to long-term ones. Due to this fact, a lot of lenders prefer to work with those companies that have shorter maturity structure of debt. This happens, even if longer-term maturity debts cost higher in terms of interest to the borrowers.
• Ladder – Multiple notes of varying maturity period listed in the form of a structure is called a ladder. These loans can be arranged in accordance to their increasing maturity deadline. As a result of this mode of debt maturity, companies can lessen their burden of making the loan repayments all at the same time. Actually what happens in this regard is that, the total loan balance doesn’t become due straight away.

Major factors of debt maturity structure

It is the responsibility of the financial managers to keep their company’s credit account current. For this reason, they continuously pursue the process of debt maturity structure to help themselves meet their company’s financial liabilities with ease. However, no financial manager of a company can afford to work independently on this subject. Instead, these professionals manage their company’s finances with the help of accountants and corporate treasurers.

Here are some of the factors that financial managers have to consider while creating the maturity structure of their company’s debts:

• Regulatory compliance – One amongst all the important factors that are crucial in case of debt maturity structure is rules and regulations related to them. In this case, financial managers will have to comply with the law of the land governing such deals. This is all the more an imperative issue for industries that command stringent government control. Suppose, a financial institution must follow all the rules that speaks of the necessary amounts of regulatory capital while contemplating long-term debts over shorter-term loans.

  So, it’s the duty of the institution to borrow loans without hampering its capital ratio needs. Alternatively, an insurance provider should opt for such a debt maturity structure that has been done in accordance to the solvency constraints set forth by the National Association of Insurance Commissioners (NAIC).

• Corporate solvency – Corporate solvency refers to the amount of money a commercial organization is allowed to stack up and whether or not the saved amount is substantial enough to fuel its growth or improve its value proposition. Though cash flow analysis is said to provide an overview of an organization’s financial solidarity, yet solvency evaluation is a much better way to understand the company’s financial health as well as its strategic growth in a given time-period.

  Take for instance, two types of solvency ratios – current ratio and working capital. These ratios help the financial managers to determine whether or not there is enough cash to repay short-term loans, get back receivables or put up inventories for sale.

In addition to that, financial managers keep a close watch on the credit market factors and evaluate them prior to their selection of a definite debt maturity structure. Actually, it’s a categorization of corporate financial liabilities either in terms of maturity or expiration deadline.

Visitors of this site may have wondered what occurred in February, since, up until this post, no new posts have occurred.  To make a long story short, the computer I use to save all my equity (stock) research and other commentary bit the dust.  Along with a busy work schedule, which included a decent amount of travel, I simply did not get around to making any updated on this site.

As you will see, I’m 2 months behind on the monthly newsletter now.  Since it’s a free service, I suppose you can’t complain too much, right?  Expect in the month of May for the newsletter to reappear with a new issue.

As far as general direction of where I am thinking of taking the content on this site, I would say that I’ll probably venture further into the realm of identifying buy/sell points.  I say this because between Thanksgiving and Christmas I dedicated a number of hours to crafting and back-testing an investment model, which conceptually I’d had in my head for a while (and used), though never tested against historical data or refined.  Since I now have that tool at my disposal, I will share some insights when I deem the information worthy.

I will continue to provide fiscal commentary in terms of specific companies all the way to personal finance practices.

I happened across an article the other day and was surprised to read that the average cable television bill in 2011 was $78 per month. This surprised me because my Comcast bill is significantly less than this figure. In fact, my Comcast cable, ATT internet, and Netflix bill total less than $78 per month – $62.28 to be exact.

This had me thinking…what is the real cost of those extra channels?

Out of curiosity, or pure boredom, I decided to find out.

Last month my Comcast bill was $20.21[1]. The difference between the average cable bill in 2011, $78, and my cable bill is $57.79.

When this difference is saved for a year it totals $693.48.

If someone saved this yearly amount for a 30 year period, without earning interest, they would have $20,804.40. Of course this isn’t accounting for inflation, but it’s not accounting for possible interest earned, either. Not a bad little nest egg.

But what if we did earn a bit of interest on our money?

$57.79 invested each month for 30 years, earning a modest 5% return, would total just over $48,000. Ah…our nest egg grew a bit.

When building a budget it is important to think about the small things. When committing yourself to a fixed monthly payment, take a moment to reflect on the real cost of that particular service or product and what value it brings to you. Do you receive that much joy from a few extra channels? You know…there’s really nothing on anyways.

• Where might the market be headed in the month of February?…And one dividend value stock that is currently bucking the market’s trend.
• How to reduce your investment research time with the use of ETFs.
• A guest post on the real cost of cable television.
• An updated portfolio performance table.

(Note – Regular visitors might notice a pattern.  The pattern is that I can get fired up about the topic of cars.  Why does this occur?  The primary reason is that they one of the biggest items people ‘splurge’ on.  By splurge I mean go further into debt for no practical reason.  They also are costly in that no one pays only 1 large lump sum of money for a car.  Insurance, registration, routine maintenance and fuel are all regular expenses…I didn’t mention debt payments, which is part of the list for most car buyers.)

A person that consciously thinks that a car (by car I mean automobile) is an extension of his/her personality must feel willfully inadequate.  A car is a chunk of metal, or maybe fiberglass, affixed to four wheels with a few seats, which is ultimately powered by an engine.  A car is a tool that is made to be purposeful and useful.

Now, I understand wanting to drive and be seen in a ‘nice’ car.  This is no different from wanting to be seen in nice clothes.  Yet, most people would probably agree that you can dress in a very fashionable way by going to Kohl’s or JC Penny’s.  You don’t have to depend on Nordstrom’s.  Why does this not apply to cars?  For example, why do people side with a BMW 3 series when it’s a much better financial decision to go with a mid-size American or Asia sedan?  Why do people buy quasi monster trucks rather than a regular truck or another more reasonable option?

Feelings of inadequacy can cause us to do some pretty interesting things.  Unfortunately, most of those ‘interesting things’ equate to detrimental acts.  Buying a car in an effort to demonstrate ones financial status, when the act actually strains ones finances, is irrational.  Buying a vehicle that makes you feel macho or sexy is ultimately a distraction from a personal issue that goes beyond the realm of transportation.

Do not fall into the delusional trap that your car is an extension of your personality.  Have more self-worth than to depend on a vehicle to prove to the world that you’re tough, sexy, or wealthy.

• What constitutes a reasonable pull-back in the market?  This is an essential question to be able to answer when identifying a good entry point into the market.
• How the current low rate environment will force more people into high-yielding securities, with or without tax increases.
• Why costs of maintenance and operations are so essential when determining whether or not that large ticket item is affordable.  The costs go beyond what you see upfront.
• An updated portfolio performance table.

• The overall market was carried away by bullishness in 2012.  Other than a light sell-off in May and June and an even lighter decline in November, the market didn’t experience much weakness throughout the year.  We experienced nothing close to what was seen in 2011.
  • When do we get a sell-off in 2013?  I see a replay of the sanguine market conditions of 2012 as being highly unlikely.  Somewhere volatility will strike, though how long and how server is anyone’s guess.
  • Conversely, are we in a period where the market is on a sort of ‘melt-up’ auto pilot?  Such was the case back in the earl-middle part of the last decade?  I don’t think this is true since so many unknowns politically and economically.  Yet, in 2012 they didn’t see to make all that big of a stir.

• Does the Federal Reserve increase its role in the market?  In the latter part of 2012, this was the case.  Does this pattern continue into 2013?
  • If the pattern does continue, at what point does intervention turn from a sign of bullishness in the market to a sign of bearishness?

• How big of an impact with the changes in tax rules impact dividend-centric stocks?
  • If a sell-off occurs, how big of an over correction occurs?
    • If this does come to pass, a buying opportunity exists in an already beaten down area of the market.

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Poverty is the state of being extremely poor and middle class is the socio-economic group between the upper and working classes.  We do known though that middle class people and families sometimes do lose their house to foreclosure, have items repossessed and declare bankruptcy.  Throughout all these calamities, they most often stay within the perceived middle class, though they exhibit characteristics of a person or family in poverty.  How could this happen?

The funny thing about the human condition is that we’re endowed with an interesting faculty known as free will. Some people like to deny they have free will and act as if fate has destined them to fall into a number of predicaments.  The reality is that you have a good amount of control over your actions, especially your financial actions.

Given the monthly income you earn, you have the ability to spend the money as you choose.  You can take your money and blow it at the casino, mall or any other outlet you can think of.  At the end of the month you end up with $0 in your wallet or a $0 in your checking account (probably both).  The next month starts and the cycle continues.

In the situation above, you have your middle class wage earner stuck in a cycle where lousy financial decisions are being made over and over.  It’s a bad situation, but the person is living within his/her means.  Barring any sudden disasters that put a financial strain on them, they are middle class and footloose and fancy free.

In today’s world we have more than just our regular income at our disposal.  Debt financing is everywhere.  Whether it is a credit card, lines of credit, pay-day check advances or other debt offerings, just about everyone can secure additional funds beyond what they currently earn. Obtaining financing through debt is a very powerful tool and can be very beneficial.  It also can be disastrous.

Though debt can be a wonderful resource, it does not come without risk for misuse.  If we revert back to the spending example described above and blend debt into the equation, it’s not hard to see how the financial path can easily lead to poverty.

When the need to consume goes beyond regular wages or savings on-hand, debt is used as a solution.  This solution comes with a cost.  The borrowing cost causes our average middle class person or family to begin servicing (paying) the debt they have incurred.  The more debt they use to fuel their consumption needs/wants, the more they must service the debt.  At a certain point, the liberation they have experienced through leveraging debt becomes an ever increasing burdensome weight.

Debt ultimately imposes financial restraint on the debtor, just as a dead-end street ultimately imposes a speed restraint on a driver.  Either can be ignored, but the restraint will be realized in the end.  As the debtor begins to see the end of his/her credit limit, actions are typically taken to reshape the impending financial future (disaster).  At this point, the concept of middle class poverty begins to take shape.  The free will that once was ‘free’ has now given itself over in large part to servicing debt.

A voluntary enslavement has occurred and the enslavement is impoverishing.  The wage that was once free to be spent wisely or frivolously is now controlled in part by the need to pay/service the debt that has been used.  The increased ability to consume that the debt once provided is gone and now the weight of debt is fully felt.  This is an impoverishing predicament.  As an increasing amount of income is relegated to servicing the debt, a decreasing amount of income is available for discretionary purposes (food, clothing, shelter…).

The decrease in the amount of the discretionary income, which results from the voluntary enslavement to debt, is the driving force in creating the situation where middle class poverty exists.

Middle class poverty is real because of misaligned and bad choices made by people and families. Don’t let it happen to you.