All This Debt Can Get You Down…What To Do?

“For beautiful eyes, look for the good in others; for beautiful lips, speak only words of kindness; and for poise, walk with the knowledge that you are never alone.” – Audrey Hepburn

Well there’s potentially depressing news all over the place these days. The loss of an American Icon (two, if you include Farrah Fawcett), unrest around the world and all of the political developments can leave your head spinning, I bet!

Further, if you do follow the news, we continue to get barraged with stories like this:

http://www.istockanalyst.com/article/viewiStockNews/articleid/3317499

Essentially, not only are many Americans falling into debt…but so is the country! It would be even worse were it not for the fact that many other established countries are in even worse shape (UK, Germany, etc.).

But here’s my advice on this: Enlightened Ignorance. By “enlightened”, I mean that it’s not a bad thing to be aware of the fact that our national money situation ain’t great. But by “ignorance” (despite the negative implications of that word), I mean that you CANNOT waste your time worrying about things you can’t control (outside of the ballot box).

It doesn’t help you to spin your wheels in worry and frustration over our national debt. In many ways, it’s just like how it doesn’t serve your peace-of-mind (or even your wallet), to be endlessly spinning about your own personal situation. In fact, debt and financial unrest can be a cleansing process–it can help you remember what’s MOST important in your life (and it’s not money). Embrace the clarification which your situation is bringing.

Perhaps our country can have a similar, national epiphany. We’ll see.

But speaking of our nation, there’s a new law coming, and we’re starting to get questions around here about it: “Cash for Clunkers”.

In this week’s Personal Strategy Note, I break down what you need to know about this new bill, and what it could mean for your wallet.

Enjoy, and leave your feedback and questions!

“Real World” Personal Strategy

The Truth About “Cash for Clunkers”

The new law, which offers owners of older vehicles up to $4,500 to trade them for brand-new vehicles, came into law this week…but beware!

Official-looking sites have sprung up, offering information on the program and asking for personal data or preregistration. Here’s a quick way to know if it’s not official: If it uses the term: “cash for clunkers,” it’s not official at all. The program’s *official* name is the Car Allowance Rebate System.

All the details aren’t yet in stone–regulators have 30 days to set up the details and a system for distributing and collecting vouchers, making late July or early August the soonest the incentives could be available.

But the bill does provide $1 billion for the program through November, 2009. An estimated 250,000 vouchers will be issued on a first-come, first-served basis.

Here’s how it’s likely to go down: Dealers will let you know that your trade qualifies, credit the amount to your down payment, then apply on your behalf for the voucher. Only new vehicles qualify — domestic or imported, purchased or leased — and they must have sticker prices under $45,000.

IMPORTANT: Buyers do not have to register or apply for any part of the program. Dealers do.

Some other guidelines for you:

* Trade-ins must be 1984 models or newer, get no better than 18 miles per gallon, and have been registered and insured for the past year.

(An interesting note is that buyers’ trades will actually be completely scrapped and have no value to the dealership above the amount of the voucher. A 10-year-old Lexus might qualify for the biggest ($4,500) voucher, but it’s almost certainly worth more than that on the open market, so you should keep that in mind.)

* The mileage you get in your daily driving does not matter one bit. What matters is what’s on record with the government; its source of data is www.fueleconomy.gov . A muffler-dragging 23-year-old Honda may meet the popular definition of “clunker”, but if the government’s estimates show it should get more than 18 mpg combined new, it’s not a clunker. You’ll see two sets of fuel-economy numbers for most cars: one calculated under an older EPA system, the other recalculated to reflect a new formula. Use the new one.

* The numbers:

– New passenger vehicles must have a combined mpg of 22mpg; “Light duty” trucks must be 18 mpg; and trucks over 6,000 lbs. must get 15mpg

– To qualify for the program, the “old” vehicle must get…

>Passenger vehicles– 4 mpg LESS than the new for $3500 credit; 10 mpg LESS than the new for $4500 credit

>”Light duty” trucks– 2 mpg LESS than the new for $3500; 5 mpg LESS for $4500

>Trucks over 6K lbs– 1 mpg LESS than the new for $3500; 2 mpg LESS for $4500

Finally, don’t let the ring of “$4,500 in free money” hitting the table distract you. Negotiate on a new car the same way you always would. The only thing different is that all the parties involved know exactly what the trade is worth upfront.

Hope this helps!

To a contented summer!

R MendenAll This Debt Can Get You Down…What To Do?