These are people who, prior to some unfortunate situation such as an accident, illness, job loss, divorce or other unforeseen event, were in good standing with their creditors. They want to get back to that position. They are people who are unable, not unwilling, to meet their financial obligations. Unfortunately, debt settlement is a largely unregulated industry that has attracted some unscrupulous players who prey on vulnerable individuals. It does little good to sign on with a debt settlement company if undisclosed fees and charges end up costing you more than they save.

With consumer debt approaching $3 trillion, coupled with a sagging economy, the number of people in trouble is growing exponentially. The failure of our educational system to teach basic financial literacy leaves millions of people facing financial hardship with little or no knowledge of how to overcome the problem. Unfortunately, these are frequently people who fall into the lower to middle income bracket and have few assets to draw against when faced with unexpected financial adversity. It is this combination of circumstances that make them vulnerable to unscrupulous practices.

For those experiencing severe financial hardship, debt settlement can provide a better alternative than debt consolidation loans, bankruptcy, or trying to hide from creditors. For people willing to make the needed sacrifices, legitimate debt settlement companies provide the financial advice and advocacy needed to negotiate plans to reconcile debt, improve income to debt ratios and help you gain control over the process of getting out of debt.

If you are facing mounting debts and are considering calling a debt settlement company, here are some things to consider:

1. You must be committed to reducing your spending so you can save money to fund a settlement agreement.

2. You must understand that the results of a debt settlement can’t be guaranteed.
3. You should never allow a debt settlement company to escrow your money on the pretense that they will pay your bills.
4. You should know that the IRS classifies any amount of settled debt in excess of $600 as taxable income.
5. Your creditors, especially if they are lending institutions, may exercise their right of offset and seize any deposits you have with them to apply to your debt.
6. Creditors may continue to call you even after you have entered into a debt settlement agreement.
7. A debt settlement agreement will probably have a negative impact on your credit score and credit bureaus may still report “Settled for less than full amount” even after paying settlements in full.
8. You should always make sure the debt settlement company is working solely for you and not any third parties, and is fully disclosing all fees and charges up front.
9. Before even considering a debt settlement company, you should review your finances and determine if you can afford to fund a program based on your expected income and expenses.

10. Finally, if you feel you are a candidate for debt settlement, be sure the company you chose has written policies and procedures about their debt settlement program, are members of the Better Business Bureau, have a customer dispute resolution and review policy and in-house legal counsel that has experience with credit industry compliance.

When I was just 8 years old, my best friend’s parents bought him a new bicycle and he was the envy of the neighborhood. Naturally, I wanted one too. When I approached my mother about getting me a new bicycle, she explained that my friend’s parents had more money than we did. She said she couldn’t afford to buy me a bicycle. It was what she said after that that taught me a lesson that I’ve carried with me my entire life. She said, “If you really want a bicycle, you’ll find a way to get one.” She didn’t tell me to go ask anyone else for money; she challenged me to use my own resourcefulness to find a way to earn one.

At that young age, my mother’s empowering words encouraged me to seek out numerous ways to earn money. I really wanted a new bicycle. Instead of sitting around and feeling sorry for myself and being jealous of my friend, I started looking for ways to earn money. It took months, but I kept at it until I figured out a way to get that new bike. In the process, I learned what my mother meant when she said if I wanted one badly enough I would find a way to get it. Today, she is approaching 90 years old, but her wisdom is still with me. I’ve often wondered what I would have learned if she had been financially able to go out and buy me a new bike so I could have one like my friend.

When I reminisce about that story, I can’t help but wonder why more parents don’t teach their children these kinds of lessons today. Just look around. How many spend thousands of dollars to make sure their children have the latest gadgets, designer clothes and other trappings so they can “fit in.” They are often the same ones who save nothing to help with a college education. Their children learn that things which come easy don’t have much value. What they don’t learn is the value of ingenuity and hard work.

During my early adult years, there were many times when I could have qualified to receive welfare payments, but pride wouldn’t let me. I would rather have gone hungry than admit I couldn’t take care of myself. I’ve had many days when I left home knowing that I needed to earn some money that day or I wouldn’t be able to put food on the table that night. That wasn’t easy, but it brought out the resourcefulness we humans possess when faced with problems; especially ones that threaten our survival. Those are the type experiences that build character and self reliance. They are also the kind of experiences that our elected officials seem to want to “protect” everyone from having.

Each week, in this column, I try to give readers tips for financial success. Sometimes the tips are easy to follow, but other weeks they may be like unpleasant but needed medicine. This is one of the latter. As Newton’s third law is plainly stated, “To every action, there is an equal and opposite reaction.” I firmly believe that this law is also applicable to people’s ability to cope with life’s difficulties. Easy times produce soft people. Chinese philosopher Lau Tzo said, “Give a man a fish and you feed him for a day. Teach him how to fish and you feed him for a lifetime.”

I wonder if all the bailouts, handouts, and other promises will help us or hurt us; especially knowing that they will have to be funded with borrowed money? Will they empower people or will they make them more dependent? Will bailouts and handouts teach people to take care of themselves or will they just create economic weaklings? Will they encourage entrepreneurial thinking or destroy initiative?

If you believe all the negative advertising, you wouldn’t want to vote for any of the candidates. However, if you listen carefully to what they say, you will be able to determine which ones are for bigger government and which want citizens to assume more personal responsibility. For years I have been writing about saving and investing. Although it may be fun and exciting to temporarily live on borrowed money, it is impossible to borrow your way to wealth.

Here’s a tip! When you go to the polls this Election Day, before casting your vote, ask yourself how it will affect our future? Will it be a vote for instant gratification or one for long term economic prosperity?

What concerns me is the people who would liked to have helped their children get a college education, but couldn’t? These are the parents who kept putting off saving until “next year,” but “next year” never came. Kids grow up fast. College is expensive. If you plan to help your children with their education, the time to start saving is now. Now means as soon as they are born.

Most students enter college at age 18 or 19. They take 4 years or more to earn a degree. That means if you start as soon as they are born, you will have 22-23 years to save before having to make that final tuition payment. With that much time for your savings to earn and grow, the amount you would need to save each month is small.

Many years ago, I heard an insurance salesman use the best example of why starting early is so important. I’ve followed his advice in many areas of my life; saving for my children’s college education being just one of them. Here’s how he explained it. If you start saving when a child is first born, the amount you need to put aside is small enough it would be like carrying a marble around in your pocket. In a short time, you would hardly notice it was there. If you wait until the child starts school, then the amount you would need to save becomes more like carrying a baseball around in your pocket. You could do it, but you’d know it was there every day. However, if you wait until the child enters high school; the amount you would need to save would be like carrying a bowling ball around. It wouldn’t fit in your pocket and even if you could carry it around, it would be an extremely difficult task.

In today’s society, people want everything to be easy, but they aren’t willing to make the small sacrifices it takes to make them easy. Today, parents who want to help their children with college expenses have more options than ever in history. In addition to traditional options like savings accounts, annuities, and U. S. Savings Bonds, there are Section 529 college savings programs and Coverdell education savings accounts. There are plenty of ways to save for college, but none of them work unless people think long term instead of just what’s facing them today. Choices have to be made. Choices like, do I dine out an extra time this week or use that money to educate my children?

A college education is an investment. The question is, how do you finance that investment? As the greasy mechanic in the old Fram oil filter commercial used to say, “You can pay me now…or pay me later.” The implication was you’re going to pay, one way or another. That’s the dilemma facing many parents who wait until they are left with only three options; pay as you go, finance it and pay later, or find scholarships to help. If they had only realized how much more freedom and choices they would have if they had started saving early and not waited until their children were ready to enter college.

Statistics show that over the course of a lifetime, the additional earnings from a college education can easily exceed $1,000,000. That’s not a bad return on a $50,000 to $200,000 investment, depending on whether your child attends a public or private institution. One of the most popular ways to fund this investment is with a Qualified Tuition Program or 529 Plan. These plans allow earnings to grow tax free and the distributions are tax-free when used for qualified post-secondary education. The problem is, there are no guarantees that funds invested in stocks and bonds will go up in value and as we’ve seen recently, they can go down substantially in a short period of time.

Here’s a tip! If you want a safe and secure way to save for your children’s education, for most people Series EE and I bonds purchased after 1989 offer the same tax advantages as the 529 plans without placing the principal at risk. There are some income limitations for the tax exclusion, but you don’t have to worry about the principal being reduced by a stock market crash. No matter which savings plan you use, the important thing to remember is that the earlier you start and the longer you keep it up, the more ability you will have to assist your children with their education.

Just for fun, let’s go back to an ancient time when things were rosy and there was no such thing as consumer debt. John and Bill were neighbors who worked in the same industry and had identical salaries. Bill thought he must be doing better than John until he discovered that John was saving a substantial portion of his income. In fact, when he learned that John had several thousand dollars in cash, he approached him about borrowing some money to buy one of those newfangled contraptions called a television.

John, being a good neighbor, loaned Bill $1,000 and Bill agreed to pay him 10 percent interest on the money. Bill used the money to buy a television and became the envy of the neighborhood. Everyone who came to watch Bill’s television wanted to know how he could afford it. When Bill explained that John had loaned him the money to buy it, suddenly others started asking John for a loan so they could get one too. It wasn’t long before John had so many neighbors making payments to him that he was able to buy his own television with just the interest he had received.

As time passed, more people came to John for loans so they could buy the latest gadgets that everyone else was getting. Eventually John became the banker for his entire community and his original meager savings grew to become millions. The problem was, everything wasn’t rosy anymore. Now, people who had been his friends called him a fat cat and resented having to make payments to him each month. They said it wasn’t fair that he had so much money and they didn’t. Sound familiar?

I know that’s a simple scenario, but imagine situations like this playing out in communities all across the country. Gradually the few people who saved, invested and earned interest grew increasingly wealthy and those living on debt found it progressively more difficult to maintain their standard of living. Those who used debt to live above their means gradually grew poorer and the rich got richer. The reason is simple; money is borrowed from the rich, not the poor. Interest is a transfer of wealth. The borrowers pay interest. The rich receive interest. Interest paid buys nothing but time, but interest received can be used to purchase anything the lender wants.

This is an over simplification of what our nation has been experiencing for decades. Sub-prime loans, mortgage backed securities, and derivatives are just a few of the complicated ways lenders have found to raise and loan money to a society living above its means. The problem may have started with small loans to people with good credit, but gradually, as borrowers became addicted to the higher standard of living that debt brought, it evolved into a frenzy of lending without regard to the borrower’s ability to repay.

Individuals, companies, cities, states and the federal government have all been borrowing. Total debt is in the trillions. Almost everyone has been living above their means and it has created a house of cards that is on the verge of collapse. I fear that government’s attempt to solve the problem with more debt may be like throwing gasoline on a fire.

Warning bells have been sounding for years, but we keep borrowing. We are in a financial crisis today because credit has become more difficult to obtain. That may not be all bad since we have already spent our children’s inheritance and robbed them of the lifestyle we have enjoyed. When are we going to start repaying debt instead of piling on more?

If you’re wondering who is at fault for the current problems, answer this question. Are you using part of your paycheck to make payments, other than a reasonable mortgage payment? If the answer is yes, you’re part of the problem! It means you’ve been living above your means and taking part of today’s income to pay for yesterday’s spending.

Here’s a tip! We’re never going to get out of this mess if we continue to borrow. Years ago, if a child got sick, he and all his siblings got a good dose of Castor Oil. It tasted terrible, but it worked. What our country needs today is a good dose of economic Castor Oil. Forcing people to pay off debt and live within their means won’t be pleasant, but unless we do it, we’re never going to break the debt addiction.