February 2005

Credit Card Chaos
By Gerry Schmich

“Where do I begin?”, Tom asked. “Well, what is the problem?”, I responded.

Tom started by telling me he was at the end of his rope. He was deep in debt and sinking lower every day. His small specialty shop business was still struggling to break even after six years of sweat, blood and tears.

He and his wife, Jean, came to Colorado to build the business of their dreams in a small resort community along the Front Range. With some savings and years of experience working for others they went to a local bank to seek a small business loan. They found out that the bank would only loan them 25% of what they needed to fund their start up. Undaunted, they made a risky decision many entrepreneurs have made. Some have even gotten away with it.

“Let’s just put our expenses on credit card(s)”, they decided.

“It will only be for a little while, until the business picks up”, they reasoned. Tom explained that they had credit cards at 0% and 9% rates of interest. The strategy sounded reasonable, pay at least the minimum on each card every month until the business was self-supporting. Then pay off the cards and your business is free and clear.

Wonderful!

Except that it didn’t work. Too much expense and not enough revenue created the ”perfect storm”, which caused Tom to apply for more credit cards and run up more debt. Only the spiral he was caught in got deeper because his credit rating began to slip. This causes financial institutions to raise interest rates. One late payment generates a gut churning notice from the front office that one more incident will raise the rate on your credit card to 27.99%!!!! Of course this creates a feeding frenzy of other hungry sharks who also automatically raise the rates on their cards. This practice was once (30 years ago) known as loan sharking. It is perfectly legal today. As many uninformed souls have found out.

Let’s net this out. Tom and Jean now have 20+ open accounts. Totaling $90,000 of debt at minimum interest of 9% or $8100 per year. And on the precipice of going to 27.99%. That is $25,000+ per year! Current monthly cash flow barely covers the leased space of their shop. And what about their other business? ----Their personal needs of food, shelter, clothing, transportation, medical, etc. What a mess. A dilemma. A bankruptcy waiting to happen.


I am frustrated. It is difficult to sit and listen to someone who pours out their heart to you in telling you the trouble they have created for themselves. They are broke, depressed, and angry. Their dreams are dashed. The future is uncertain and appears darker with every hour. The marriage, of course, is suffering. Financial problems are one of the prime reasons for divorce according to numerous counselors. Will it happen to Tom and Jean? I hope not, but they are under severe stress right now. It is gut wrenching to tell them there is no magic bullet. That now their options are limited to 1) slim or 2) none.

And....it could have been prevented.

How? First, for a business, start with clarity of purpose. Know what you want and why you want it. Be united in that inspiring purpose and vision. Sharing both business and marriage requires truthfulness and knowledge of each other’s needs, wants, desires and fears.

The next thing is to put together a business plan. What are the start up and ongoing expenses of your business? List everything you can think of such as rent, utilities, furnishings, equipment, phone/fax, computers, copier, inventory, manpower, insurance, association memberships, marketing and advertising.

You must have an idea of what this will cost.

Tom and Jean would have benefited from a separate marketing and advertising plan and budget. It is important to assess the competition and their degree of success. This gives insight to the probability of success. It also helps you assess how to compete. Planning for advertising should include the method and the frequency of delivery and all associated costs. This is an area of neglect for most small businesses.

A trip to the Small Business Administration (www.sba.gov) is well worth the time. You can learn about business plans, loans and how to apply for them as well as countless other small business topics. This site contains a ton of valuable information.

Tom and Jean slipped into trouble because their business was under funded and there was no financial reserve to help them through the lean times. When the bank would only fund 25% of what they applied for they could have looked for other options to gain funding or enlarge their nest egg. Revenue dropped after 9/11 and most expenses have continued at levels prior to 9/11. Using the credit card was a trap because it was easy. It is seductive and addictive for many people. Endless credit card “teaser” checks promising to provide instant cash suck you in. They let their guard down by denying the truth of what the economic environment had become and kept charging, opening one account after another. “Until the good times returned”, Tom said. The “good” times never returned but the credit card bill was continuous and increasing. As the credit balance grew, the options, to remain solvent have all but disappeared.

Credit cards are neither good nor bad. Like driving a car you need to control them, use them to your advantage. You should also know that credit cards are a high stakes cash cow for financial institutions and their primary objective is to hook you for life by relying on the benefit of convenience and some perceived perks like airline miles. An article by Julie Sturgeon, at Bankrate.com states that the banking system targets young people precisely for their financial illiteracy. What does that say about the banking system? It tells me to look out for number one----no one else will.

Fight back with some tips to control credit cards:

• Limit yourself to one personal and one business card.

• Stay within the card limit.

• Pay off the balance every month. If this isn’t possible, pay the minimum at least. Pay a few dollars more than minimum (Pay It Down by Jean Chatzky) and your balance will be paid off earlier with substantial savings. Stay away from “loan shark” interest rates!

• Pay the bill before the date it is due. Make no late payments and avoid outrageous penalty fees.

• Close out extra accounts. Remove the temptation from your wallet or purse.

• Fight the financial institution that attempts to rob you by raising interest rates. Go to www.bankrate.com for more information on how to talk to these people.

• Rollover your cards with high interest balances to a lower rate card.

• Refrain from playing the “airline miles” game by charging everything on the card. Yes, you can build up air miles but the price you pay is loss of control over what you are spending. You never know until the bill arrives. I recommend charging only large ticket items on the card. The rest is cash.

• Read the fine print! Know what the contract requires between you and the institution.

This is a partial list of tips which I consider the most important. Applying these will improve your awareness, and your behavior in using cards to your best possible advantage.

We don’t know the impact yet on Tom and Jean. What will become of their business? Their marriage? Their dreams? Their way of life? It may be too late to help them but I sincerely hope that anyone who reads this article will be moved to take action or seek counsel before creating your own chaos.

Gerry Schmich

Gerry is an experienced leadership coach. Feel free to contact him thorough his website at www.gscoaching.com.

Taming Your Gremlin (and other Coaching Jargon)
By Lisa Eaton


When people come to their complimentary sample coaching session I find that more often than not they are in “Process”. Process is that stuck, limbo, transitional place in life that feels uncomfortable compared with our desire to live fulfilling, balanced lives. In Process, we “try to figure out” and “struggle”, which mires us down deeper in Process instead of getting us back in to Flow. Process is where the Gremlin lives. The Gremlin is like a little devil sitting on your shoulder whispering in your ear: “you have to”, “you need to” and “you should”. The goal is to simply notice your Gremlin. Awareness is a powerful tool and raising consciousness so we are making choices that are in line with our intrinsic values is the basis of my coaching work.

Once you are aware A) you have a Gremlin(s) and B) when it is your Gremlin leading your life instead of you then you can put it back in its place. This does not mean arguing or fighting with it or even hugging it. This means simply noticing it and sending it away. I often use metaphors in coaching and one example is a client whose Gremlin was a yippy little dog nipping at her heels. When she became aware of him, she would put him in a kennel and close the door. Now, Gremlins are escape artists and will make a comeback but for the time being you are free of Gremlins and can operate consciously from your core.

In coaching I make Requests of my clients in order to move them forward in the direction they want to go and create accountability through self management. I also give my clients Inquiries, which are questions that are meant to be pondered to see what comes up around them. They are not meant to be worked at but just put on a little note and kept in front of you for a week or month. Your Inquiry is: Where is my Gremlin right now?

I share many tools and resources with my clients and the only one I require is that they read Taming Your Gremlin by Rick Carson. It’s a relatively thin book - not to be confused with “easy read”. Your Gremlin may not want to you to read it because it puts him in the spotlight. Just be aware of that possibility if it comes up.

I’ve been speaking and coaching since 1997 and was trained through The Coaches Training Institute (CTI – www.thecoaches.com). The CTI model is one of Fulfillment, Balance and Process where the client is the star and creates an alliance with the coach to create a safe, confidential space where the chaos of the outside world is set aside long enough for the client focus on their internal agenda, working from the inside out. The client must be coachable, whole (vs. in crisis or in need of therapy) and ready to move forward with their life and do their own work. The client learns self management and is actually accountable to themselves while the coach provides that structure and focus in order for the client to achieve the results they set out for.

I coach individuals as well as do Group Coaching For Women and invite you to check out my website at www.shootforthemooncoaching.com and call me for a complimentary sample session to meet your Gremlin!

Live Large,

Coach Lisa

Our Morning Mindset
By Gerry Schmich

So how is your day going? Did you jump out of bed with sunny expectations for a
great day filled with promise? Were you expecting people that you meet to greet
you warmly and with interest? Are your work projects progressing smoothly and
on time?

What affects how we start each day? How can we help ourselves to enjoy and
achieve more each day?

The hotel lobby was empty as I sat down on the cold leather sofa to tie my
running shoes. I looked around for Pat who was my partner for this morning's
workout of walking and running. It was 6am and still dark with a cold wind
blowing through the pines outside the lobby. I knew we would be cold for the first
10 minutes, and then warming up, we would be lost in a world of talk about work,
people, projects, money, problems and life itself. Pat was a participant in an
intensive leadership program given by a local university in Denver and I was his
coach.

Stepping from the elevator Pat yelled, "OK, coach; help me to see why this form
of self-abuse is good for me. Its freezing outside, the wind is blowing, I'm getting
divorced, my kids aren't talking to me, management problems are piling up as we
speak, this program is draining my time to say nothing of my energy and here we
are taking a morning stroll."

Every problem he touched on was true.

I laughed and said, "Pat let's talk about what is working well for you this
morning." Walking from the lobby Pat began to tell me about some new ideas he
had gleaned from yesterday's session. Several new opportunities came to light
for him. His excitement was obvious and seemed to grow as we discussed his
ideas. By the time we returned to the hotel his frame of mind was very
positive...even gung-ho. He was ready for the day.

Our Morning Mindset, from the very instant of getting out of bed, sets our
compass for the day.

Wake up and begin thinking about your needs and wants which aren't being met
and very soon you will find yourself wallowing in self-pity and anger. This can ruin
your morning coffee. And it may last until bedtime. First its just your thoughts that
bother you and then things like road rage, mistakes, inability to talk to a real
person on the phone, computer glitches, breakdowns, missed deadlines, yadda,
yadda. Now we're talking about serious stuff!


Our brains are very much like computers where putting garbage in will equal
garbage out. A focus in the morning of our shortcomings, failures or frustrations
will carry over throughout the day. Take positive action to increase your daily
chances of success and enjoyment. Here are some ideas that will get your day
off to a good start:
Stand in front of a mirror and speak out loud:

- This the first day of the rest of my life, I will make it count.
- I handle problems and opportunities with ease.

Then write down 3 things that you are grateful for today.

That's it. That's all. As my friend Pat found, that by acknowledging and
appreciating his strengths, skills and good fortune he creates a powerful Morning
Mindset to start every day. Pat made all of his goals for the leadership program,
including being promoted to Sr. VP six months later, and he told me that
changing over to a positive focus in the morning was key to his success.

Gerry Schmich

Gerry is an experienced leadership coach. Feel free to contact him thorough his website at www.gscoaching.com.