The arrival of the new year marks a symbolic time for fresh starts. Many of us take it as an opportunity to set goals, contemplate decisions, and renew commitments. It’s special because of the revitalized sense of hope it brings.

Before you make your New Year’s resolutions for 2007, I’d like to share some thoughts about how it’s never too late to start living a rich life.

The Live Rich Factor
Most people believe that if they just had more money, the things that make them unhappy would disappear and their lives would be better. The truth is that your life can be better without more money. It can be better today, but you need to make some decisions and take some actions.
You don’t need me to tell you what will make you happy — only you know that truth.

I believe each of us has the power to discover our purpose and become joyful in the process of journeying toward that purpose. It’s not easy, however. Nothing important and meaningful ever is.
What you need to do is create what I call the “Live Rich Factor” in your life. I call it this because those who find the purpose that leads them to joy are truly the luckiest people in the world, because they’re living richly.
There are five basic principles involved in creating your Live Rich Factor:
Principle 1: Give Yourself a Break
We all tell ourselves the story of the one that got away. You can’t move forward if you spend time focusing on what you shoulda-woulda-coulda done in 2006 or before. It’s over, and its time to move on. The fastest way I know to do this is to write all of your regrets down on paper.
Make a list of all your personal and financial if-onlys. For example, “If only I had saved more money. If only I hadn’t quit that job. If only I hadn’t taken the job I have.” You get the idea.
After reading the list aloud to yourself, get rid of it. Let it all go by literally burning the list (safely). Now you’re ready for a fresh start in 2008 — a new beginning.
Principle 2: Get Connected with Your Truth
The hardest thing to do is be honest with yourself. Asking yourself some key questions will lead you to some amazing discoveries, and possibly motivate you to do what it takes to create the life you envision for yourself.
I suggest writing your (honest) answers to the following questions in a new journal for the new year:

What makes you happy at work?

What makes you happy at home?

What makes you happy with your friends and family?

What makes you happy when you’re by yourself?

What do you love to do?

What would you do with your life today if you weren’t afraid of failure?

What’s not working in your life?

What are you currently doing that prevents you from experiencing joy?

What’s working in your life?

Who’s not working in your life?

Who in your life is subtracting value from and adding misery to it?

Can you fix any of these relationships, or should you let them go from your life?

What relationships are working in your life?

If we were getting together one year from today, what would have to happen for you to be able to tell me that you now have more joy in your life?

What’s the single most important thing you’ve learned about yourself as a result of answering these questions?
You’ll find that by putting your answers down on paper, they’ll become clear more quickly and the actions you need to take more obvious and easier to initiate.
Principle 3: Stop Judging Yourself
Be nicer to yourself in 2007. Many people talk to themselves in a way they would never accept from a stranger, friend, or loved one. If this describes you, try stopping the negative conversations you have with yourself immediately.
For one week, simply commit to saying “stop it” when you think a negative thought about yourself. If you’re in the habit of saying negative things to yourself, you’ll find this is one of the most difficult exercises you’ll ever do. Carry a notepad with you and make a mark each time you catch yourself thinking negatively. You’ll find that as the days go by, your negative thinking can quickly be reduced.
Principle 4: Stop Judging Others
It’s hard to be joyful when you’re always judging others. In fact, it’s close to impossible. Judging others creates a huge amount of stress in our lives. It affects our marriages and our relationships with our kids as well as the way we relate to friends, co-workers, and society in general.
We’re not here to judge one another.
The next time you find yourself upset at someone or some situation, catch yourself and ask, “Are you judging?” Judging others is often an unconscious habit. But it’s a habit that can be changed the moment you decide to stop doing it.
Principle 5 : Pursue Fun with a Vengeance
It’s OK to pursue fun. It’s what children do. My greatest joy these days is the simple pleasure of playing with my three-year-old son, Jack.
This holiday season with Jack taught me the simple power of pursuing fun — again and again. What was fun for Jack this Christmas? It turns out it wasn’t the Big Wheel that my wife, Michelle, and I stayed up so late building on Christmas Eve. And it wasn’t the Star Wars Lego toy (although he was pretty excited about that).
Instead, what Jack found the most fun was a new game I made up to keep him entertained. The game was called Geronimo — and it involved Jack jumping from the bed onto a stack of pillows yelling “Geronimo!” This silly little game ended up bringing us both hours of fun. The price of the game: nothing. The fun: priceless. And the laughs? Endless.
Why do we stop pursing fun as we get older? Fun shouldn’t be squeezed into a few weeks of vacation each year. And it shouldn’t be squeezed into the last chapter of your life when you “get to” retire. Fun deserves to be a part of your life now — in 2008.
But fun doesn’t just happen. You have to make it a priority in your life or it’ll go missing. Life’s too short to not have it.
So here’s to a fun, happy, and healthy New Year. Cheers!

by David Bach – The Automatic Millionaire

Of all the games the credit card companies play that end up costing you thousands of dollars (late fees, over-limit fees, transfer fees, and so on), it’s always been the interest rate game that hurt the most — until now.

There’s a new, completely legal game they’re playing, and it can literally wipe you out financially if you’re not careful.

The Universal Default Clause
If you own a credit card, you know by now that if you’re late with a payment the credit card company will charge you a late fee in addition to raising your interest rate. But did you know that they can raise your interest rate if you’ve made a late payment on any of your other cards, including those issued by other companies?
Not only that, but your interest rates can skyrocket to 30 percent or more if you make a late payment on your car loan, mortgage, or even your phone bill!
“How can that be legal?” you may ask. The answer is found in the fine print of your credit card agreement, and it’s called a universal default clause. According to the Institute of Consumer Financial Education, currently almost 40 percent of credit card issuers apply this policy to their customers.

A Late Payment ‘Trigger’
Generally, a universal default clause states that a creditor reserves the right to penalize you with an increased interest rate if you’re late — that is, in default — of a payment to any other creditor. They justify this practice because, in theory, if you pay any of your creditors late, you pose a greater credit risk and are less likely to pay your debt.

Your creditors also have the right to routinely monitor your credit file. So a creditor with a universal default clause will be watching — and waiting.
Let’s say your Visa card has a universal default clause. Any late payment — whether it’s on your utility bill, home equity loan, or Macy’s credit card — acts as a “default trigger” allowing the bank that issued the Visa card to double or even triple your interest rate overnight. Your all-important credit score will be hurt as well.
According to a study by the nonprofit advocacy and education group Consumer Action, the top three default triggers that cause your interest rates to spike are a decline in credit score, paying your mortgage late, and paying your car loan late.

Other Triggers to Worry About
Under the universal default clause, your interest rates can be increased for several other reasons, including exceeding your credit limit, bouncing a check, having too much debt, having too much credit, getting a new credit card, applying for a car loan, and applying for a mortgage loan.

How does this affect your financial future? Take a look at the numbers. Let’s say you’re an average American household, with $8,000 of credit card debt. Assuming you make no additional purchases on your card, you have a 9 percent interest rate, and you make the minimum monthly payment, it’ll take you 218 months (18 years) to pay off your debt and you’ll end up paying $3,334 in interest.

Now let’s assume that for whatever reason you were late one month with your car payment. This late payment triggers the universal default clause with your credit card issuer, and now your penalty rate gets increased to 24 percent (the average default rate in 2005). It’ll now take you 679 months (56 years) to pay off your credit card debt, and get this — you’ll pay $30,813 in interest.

Staying Ahead of the Clause
Here are six ways to protect yourself from interest rate hike triggers:

1. Stay away from credit cards with a universal default clause.
If you’re looking to open a new credit card account, be sure to choose one without a universal default clause. This means you have to truly read the fine print. If you’re confused by the fine print (as many are), call the credit card company and ask what specific circumstances will affect your interest rate.
I read recently that Capital One cards don’t have a universal default clause (although you should double-check before applying), and Citi has dropped its universal default policy as well. In addition, sites like CardWeb.com, Bankrate.com, and LowerMyBills.com let you compare credit card offers, so visit them before you apply.

2. Know your current obligations.
Check your current statements and credit card agreements to find out your current interest rates, and to identify which cards have a universal default clause that you weren’t aware of until now. Again, if you’re uncertain after reading the fine print, call your credit card company.
Consider transferring your balance from a card that has the universal default clause to one of your cards that doesn’t. But don’t rush to cancel the card altogether, because it could have a negative effect on your credit score.

3. Run your credit report.
Not only do you need to know exactly what your current interest rates are, you also need to know exactly what’s on your credit report. Visit Freecreditreport.com or myFICO to order your credit report and credit score today.

4. Pay your bills on time.
According to the American Bankers Association, late payments for most types of consumer loans were on the rise during the third quarter of 2006. If you’re having trouble with your credit card payments, at the very least strive to make your minimum payment on time.

5. Be proactive — call your lender for relief.
If you’re struggling to make monthly payments on your other bills, like utilities, car payments, or mortgage payments, call your lender to see what options they might be able to offer you. They might be able to adjust your monthly payments so that they’re more manageable.
Your goal is to protect your credit report and credit score with a consistent record of on-time payments.

6. Fight back for your money — write your local legislator.
Right now, there are amendments to the Truth in Lending Act that, if passed, would prohibit many unfair practices within the credit card industry — including the universal default clause.

As a consumer, you can take action by letting Congress know that you want laws to protect your rights. For more information on how you can be heard, visit Consumer Action’s web site.

As I write this, Congress is holding hearings to discuss the abusive and deceptive practices of the credit card industry.

A Good Night’s Sleep
Obviously, what you don’t know really can hurt you. Check today and see if you have the universal default clause on your credit cards.

If you do, be careful to stay on top of your debt. Better yet, find a credit card that doesn’t have the clause — you’ll sleep better at night.

by David Bach – The Automatic Millionaire

I’ve spent a lot of time teaching Americans how to get out debt. From television appearances to books to speeches, I’ve tried to proactively address how to fight the credit card companies at their own game.

CardTrak.com reports that the median amount of credit card debt carried by a typical American is about $6,600. But 13 percent of participants in a recent online poll reported balances higher than a staggering $25,000.
Many of these families now have over nine credit cards per household. That’s not hard to believe considering that the average college student now graduates with three credit cards.

Kill Off Your Credit Card Debt
The question for many of these people is, “How do I know which of these cards to pay off first?”

To that end, I developed a system that helps consumers prioritize their debt payment plans for my book “The Finish Rich Workbook.” It’s called DOLP, which stands for Dead On Last Payment, and DOLPing your way out of debt is all about building momentum as you systematically pay off each card, one by one.

Back in a February column, I introduced you to Dan and Sally Eggleston, with whom I’ve been working over the past two years. We met on “Oprah” while taping the Debt Diet series, and the Egglestons have made amazing progress toward wiping out their debt.

Using the DOLP method, they’ve gone from 13 credit cards down to 4; in 90 days they’ll be down to 3. They’ve reduced their $72,000 in credit card debt by over $25,000 so far, and by doing so they’ve also increased their credit score by over 100 points.

Do the DOLP
This same system can help you, too. Like Dan and Sally, you can get a true handle on how much you owe and how to put a payment plan into action in a matter of minutes. Here’s what you need to do get DOLPing:

1. Make a list of the current outstanding balances on each of your credit card accounts.

2. Divide each balance by the minimum payment that particular card company wants you to make. The result is that account’s DOLP number.
For example, say your outstanding Visa balance is $500 and the minimum payment due is $50. Dividing the total debt ($500) by the minimum payment ($50) gives you a DOLP number of 10.

3. Once you’ve figured out the DOLP number for each account, rank them in reverse order, putting the account with the lowest number first, the one with the second-lowest number second, and so on.
You now know the most efficient order in which you should pay off your various credit card balances.

4. Pay as much as you can each month toward the card with the lowest DOLP number. For each of your other cards, make only the minimum payment.

5. Once a card is paid off, cut it up — but don’t close the account! Leave the account open so you have credit you aren’t using, which will help improve your credit score.

Now move the next card up on your list and repeat the process until all your cards are paid off.
Track Your Progress

I had Dan and Sally create a DOLP chart that was big enough to hang in their kitchen. This is a great way for the whole family to keep track of where they are in the process of wiping out their debt, and it serves as a reminder of their ultimate goal and helps them stay focused.

Tracking which cards have been paid off is a huge emotional boost, and propels you toward future progress.

Negotiate Interest Rates
Other experts will suggest that you pay off your cards in an order based on the interest rate each card charges. I disagree with this method simply because you should be negotiating a lower interest rate with each credit card company from the very beginning. (See my column “Credit Card Hazards and How to Avoid Them” for details.)

Once you’ve asked for a lower rate, you may end up with pretty much the same interest rate on all your accounts. In Dan and Sally’s case, they were able to lower most of their cards below a 5 percent interest rate — and many of them had been as high as 29 percent.

Breaking a Vicious Circle
Being in debt can be depressing and overwhelming. The more credit cards you have the more bills you have to worry about paying on time, and just trying to stay on top of all those bills inevitably leads to mistakes like late payments.

Late payments can cost you upward of $30 a month, higher interest rates of up to 30 percent, over-limit fees of up to $35 a month — and more stress. DOLPing your debt helps you break this cycle.

For instance, Dan and Sally went from 13 cards to 6 in less than 6 months. It was a huge relief for them, and also a huge motivator because they could see the progress they made so fast.

Patience, Persistence, and Progress
Although the DOLP method is simple, getting out of debt isn’t. It may take months or even years to pay off all your credit card debt. My experience is that it can take twice as long to get out of debt as it took to get in it. But you can do it, and it’s worth the effort.

Today, Dan and Sally’s DOLP chart still hangs in their kitchen, serving as a constant reminder of their progress as well as the work they still have left to do. I’m really proud of what they’ve accomplished to date, and they serve as a great example of how patience and persistence can pay off.

by David Bach – The Automatic Millionaire

Previously, I wrote how to “Get Rid of Credit Card Debt“ that introduced my DOLP method for paying down debt. (DOLP stands for Dead On Last Payment.)

I receive success stories on a regular basis from readers who have turned their lives around by using the DOLP method. The road to success isn’t an easy one. It takes discipline and sacrifice, but with the right tools, coaching, mindset, and commitment to changing your behavior, it can be done.

Buried in Debt

But what if your mountain of debt is so high that it’s literally unmanageable? Last week, the New York Times reported that with our slowing economy, a growing number of consumers are finding that they can’t even pay the minimum on their credit card bills.

According to the article, the Federal Reserve reported that revolving debt — an estimated 95 percent from credit cards — reached a record high of almost $944 billion in December 2007. The amount of debt that’s delinquent (where minimum payments are late but the accounts are still open) also appears to be on the rise.

The Federal Reserve also found that 4.34 percent of the credit card portfolios of the 100 largest banks that issue credit cards were delinquent in the third quarter of last year. Charge-offs (accounts closed for non-payment) also grew in that period, and banks expect charge-offs to keep rising in 2008.

Getting Professional Help

If you have massive amounts of debt, you may need professional help. Consider this: Serious debt problems that are out of control will cripple your spirit, break your courage, threaten your marriage, and even ruin your health. For those overwhelmed by credit card debt, there are credit counseling agencies you can turn to for help. Of course, there are scams out there, too, so “buyer beware” applies at all times.

Legitimate credit counseling agencies basically do two things. First, they help you sort out your current problems by negotiating with your creditors to get you lower interest rates and more bearable payment plans. Second, they try to prevent future problems by teaching you financial management skills.

Depending on your situation, a good credit counseling agency should be able to offer you everything from simple advice about handling your money to (worst-case scenario) helping you decide if it’s in your best interest to talk to a bankruptcy lawyer. One service virtually all of them offer is something called a “debt management plan,” or DMP.

How DMPs Work

DMPs can be lifesavers when your situation is dire — for instance, if you’re completely unable to make your minimum payments or are unable to renegotiate your interest rates. Under a DMP, the agency works out a payment plan with all creditors, often getting late fees waived and interest rates lowered in the process. Once the DMP has been set up, you make one consolidated monthly payment to the agency, which then parcels out the money to all your creditors.

DMPs can be great for the debt-strapped, but they must be used appropriately and run properly. Unfortunately, the new breed of rip-off artist that’s infiltrated the credit counseling industry over the last decade rarely does either. To the scammers, DMPs are just another way to separate unwary consumers from their hard-earned money.

Legitimate credit counseling agencies cover their expenses by charging clients small fees to set up and administer DMPs. These fees shouldn’t run much more than $50 up front and $25 a month thereafter. Agencies also receive what are called “fair share” payments from your creditors, who pay them a percentage of the money the agency collects from you and passes along to them — the idea being that if the agency hadn’t set up the DMP for you, your creditor might not be getting anything.

Vetting Credit Counseling Agencies

Unfortunately, because DMPs generate revenue, unscrupulous credit counseling agencies try to pressure everyone who comes through their doors into enrolling in one whether it makes sense or not. They also charge unconscionably high fees, pressure clients into making “voluntary” donations, and even deduct money from consumers’ payments without letting them know.

Be suspicious of “experts” who claim they can solve all your credit problems with some magical quick fix. Your problems won’t be solved overnight. In addition, the National Consumer Law Center and the Consumer Federation of America (CFA) suggest that you look for the following red flags when you’re considering signing on with a credit counseling agency:

• High fees: If an agency charges more than $50 up front and $25 a month to set up and maintain a DMP, they’re probably ripping you off. An equally bad sign is if they’re vague or reluctant to talk about specific fees.

• The hard sell: A counselor who answers your phone call shouldn’t be reading from a script. If he or she aggressively pushes the idea of debt “savings” or the possibility of a future consolidation loan, simply hang up.

• Commission-paid employees: The best credit counseling agencies are nonprofit organizations whose only motivation is what’s best for you. Employees who earn commissions for signing up clients are likely to care more about their own paychecks than your debt problems.

• The 20-minute test: Whether you do it in person or over the phone, effective credit counseling generally takes a fair amount of time — often as much as an hour and a half. An agency that offers you a DMP after a consultation of just 20 minutes or less can’t possibly know enough about you and your situation to be making an informed recommendation.

• Aggressive ads: Don’t be fooled by hard-sell pitches on TV or the Internet that promise to solve all your debt problems. Before signing up with a credit counseling agency, get referrals from friends or family. Also check with the Better Business Bureau to see if the agency has had any complaints lodged against it and, more important, how those complaints were handled.

Trustworthy Referrals

Consumers looking for a counselor to help them solve their debt problems face a real challenge. As the CFA points out, it’s virtually impossible to tell the honest, caring agencies from the rip-off artists simply by looking at an ad or making a phone call. So how do you find a good one?

By far the best way is through a referral. As I noted above, if you have any friends or relatives who’ve used a credit counseling agency, ask them how they fared. Nothing beats personal experience and a recommendation from a satisfied client. In addition, the Federal Trade Commission web site features some great information, including specific questions to ask when choosing a credit counseling organization.

Probably the most highly regarded referral service in the country is Consumer Credit Counseling Services. The CCCS is an offshoot of the National Foundation for Credit Counseling (NFCC), the nation’s oldest national nonprofit organization for consumer counseling and education on budgeting, credit, and debt resolution. The NFCC has 113 nonprofit, community-based member agencies and more than 900 local offices throughout the country.

According to Gail Cunningham, senior director of public relations for the NFCC, over 2.2 million consumers were helped last year by member agencies across the country. You can find an affiliate near you by calling (800) 388-2227 toll-free, or by visiting their web site.

Protect Yourself

Though the NFCC is extremely reliable, that doesn’t mean you shouldn’t do some research of your own. Ms. Cunningham emphasizes the importance of shopping around for the right credit counselor for you: “It’s up to the consumers to do their due diligence when choosing whom to work with.”

For a complete listing of questions you should ask prospective agencies, see the NFCC’s credit counseling page.

Finally, if you’ve been victimized by a fraudulent or unethical credit counseling agency, file a complaint with the Federal Trade Commission by calling (877) 382-4357 toll-free, or by going to the FTC’s web site. Then contact your local state Attorney General’s office.

by David Bach – The Automatic Millionaire

Four ways to make sure your best intentions aren’t thwarted by the temptation to spend money now.

When it comes to saving, the spirit is willing but the flesh is weak. A recent TD Ameritrade survey shows that 40% of people who make New Year’s resolutions cite saving more money as a goal. However, the same poll also found that nearly half of those who resolve to stash away more bucks abandon that plan within a month.

And that’s a problem because saving is the single most important thing you must do to have a shot at a comfortable retirement.

parts of our brains are geared for rational decision-making, others are hard-wired for immediate gratification,” says Harvard University behavioral economist Brigitte Madrian.

The result is a sort of ongoing war inside your mind, with the rational part nagging you to save and the gratification side spurring you to buy a new car. When you consider that you can drive the car today but don’t get to spend your retirement savings for decades, well, you can see what has the edge.

There are ways, however, to improve the rational side’s odds of winning. Adopting one or more of these strategies will help you boost your savings and enter retirement with a larger nest egg.

Put it on autopilot

The reason 401(k)s are so effective is that they make saving automatic and relatively painless; your contributions flow into your account before you even have a chance to spend the money. Ah, if only you could apply that concept to saving outside your 401(k).

You can. Sign up to have money automatically transferred from your checking account into a mutual fund each month. Most fund companies offer this option, with many allowing you to start with $250 a month or less.

I can testify to the effectiveness of this approach. A little more than 10 years ago, I began auto-investing $300 a month (later raised to $500) in a stock-index fund. I’ll admit that I felt a squeeze at first. But after a few months I no longer missed the money or, for that matter, felt that I was “saving” anything. But I was. To date I have more than $100,000 in that account.

Reward yourself

Maybe you need a more immediate incentive than the possibility of an extra six figures a decade down the road. If that’s the case, set an annual savings target and promise yourself a nice reward if you reach it.

You and your spouse might agree that if you tuck away $5,000, you’ll buy each other an iPod. If that works, you might up the ante the next year with a higher target, perhaps $10,000, and the prospect of a richer reward, like a big-screen TV.

Granted, bribing yourself with gifts may seem antithetical to encouraging thrift. But face it, you probably would have bought the iPods or the HDTV anyway, so you might as well get the goodies and stash some extra moola away for retirement too.

Wield a stick

You may be one of those people who respond more to the fear of punishment than the promise of a prize. Well, you can make a threat work for you too.

Outline a savings regimen – say, investing $500 a month – with the condition that you’ll incur a penalty each time you don’t follow it. Maybe you can’t watch your favorite TV shows for a month or you have to forgo eating out. Your spouse or a friend can be the enforcer.

Or up the ante even further and make the penalty cold hard cash. A new website called Stickk.com, created by a Yale economics professor and two colleagues, allows you to create “commitment contracts” for resolutions ranging from losing weight to saving more dough. If you don’t hold up your end of the deal (as verified by a designated “referee”), you pay an amount that you’ve agreed to in advance – $100, $1,000, whatever.

The idea is that you’ll be more likely to stay the course if you stand to lose real bucks (or suffer in other ways) for breaking your resolution. This money can go to a friend or a charity or, in a clever twist, you can stipulate that the payment go to a nonprofit whose goals aren’t simpatico with yours. So, for example, if you’re an advocate of gun control, the National Rifle Association Foundation might get a donation each time you lapse.

Invest in a Roth

If you contribute $10,000 to a regular 401(k), not only will you have socked away 10 grand, you’ll also lower your tax bill. If you’re like most people, you won’t invest those tax savings. But there’s a way to fool yourself into investing your tax break instead of frittering it away; fund a Roth 401(k) instead.

If you put $10,000 into a Roth and earn 8% for 10 years, you’ll end up with $21,589 tax-free. To get that amount after-tax from your 401(k), you’d have to put in every cent of your tax savings on top of that $10,000.

Don’t forget that you’re putting after-tax dollars into the Roth. So if you’re in the 28% tax bracket, you’ll need to earn $13,889 before taxes to invest $10,000 after-tax, which means your paycheck will be a bit smaller.

If you don’t have a Roth 401(k) option where you work, go ahead and fund your regular 401(k), and boost your tax savings by contributing to a Roth IRA instead of a regular IRA.

There is a potential downside to the Roth strategy. If you end up in a lower tax bracket when you withdraw the money, you’ll have paid taxes at a higher rate by doing the Roth. But I think that risk is worth taking.

If nothing else, putting some money in a Roth as well as a regular 401(k) allows you to hedge your bets on future tax rates.

Of course, you can always adopt the strategy most people resort to – promise yourself that you’ll start socking away more as soon as you’ve bought that fancy sports car you can’t live without. I just wouldn’t expect to retire on that money.