Everyone has experienced one form of financial problem or another. But if there’s one thing that stands out, it is debt. Whether for personal or professional reason, debt is usually inevitable. The problem comes with repaying the loan with interest within a reasonable amount of time. According to a 2009 AP/AOL study, Americans are deeply stressed because of the amount of debt burden they carry. Their stress level has significantly increased from four years ago.

As if financial troubles isn’t enough, stress levels that results from debt is also known to cause health problems such as anxiety, heart problems, ulcer, back pain, headaches, and muscle tension. The health costs due to stress are oven overlooked but it should be given further attention. For example, studies show that people with moderately high to high debt stress-related problems are prone to the following:

• 7 times likelier to experience severe anxiety
• 13 times likelier to lose sleep at night
• 4 times likelier to have digestive problems including ulcer
• 2 times likelier to have migraines and heart problems
• Around 7 times as likely to unload their burden to others
• Around 6 times as likely to have depression

It seems that debt is not something you can just erase from your mind, body, and life. What lessons can be learned here? Well, it seems that while money can increase standards of living, it can also significantly lower it in important areas. Your quality of life suffers especially if you don’t know how to manage your finances properly.

Many say that money doesn’t really lead to happiness. On the other end of it, debt burden can actually cause a lot of unhappiness. Unfortunately, people don’t even realize what its effect is on their health. Surveys conducted in 2009 showed that world affairs is their second biggest concern. Health is placed last in almost all countries surveyed.

If you have a lot of debt, don’t overlook its effect on you. Identify how you cope with debt stress. If it is in a negative way, look for a healthy alternative. For example, you can relieve your frustrations at the gym, make a thorough plan about repayment, or take a part-time job to do something about your situation. Whatever the case, don’t let it get out of hand. It is important to your overall well-being.

It is still possible to get credit today even if you’re in a terrible financial mess. However, be prepared to shoulder the cost of it. Despite sweeping reforms in the credit card law that are designed to stop banks from plunging borrowers deeper in debt, banks are still lending with devastating terms.

Consider the interest rate charged on some subprime credit cards: 59.9 percent. This is unfair and unrealistic whichever way you look at it. There are also an array of cards and loans available from prepaid cards to payday loans, which comes with a very high rate.

Bank’s Point of View

Financial institutions reason that the high interest rates and fees they charge are prerequisites of the business. This is because they are taking the risk that borrowers will default on the loan. They reason out that putting a cap on their interest rate will put them out of business. And even put consumers who need money most with no recourse than to rely on public services.

Nevertheless, President Obama and advocacy groups want better consumer protection. The President is pushing for a consumer protection agency that will oversee how financial products are handled. Right now though, its future is uncertain and negotiations are still underway for a more sweeping reform.

Worse Options?

Kathleen Day from the Center of Responsible Lending said that, “It’s in nobody’s interest to lend people money they can’t afford to repay.” That’s probably why about a quarter of households are not associated with any bank. Even if they are, many rely on alternative services such as payday loans, prepaid cards, or subprime credit cards.

As opposed to McDonald’s 14,000 branches, there are about 22,000 payday loan branches around the United States. This presence highlights the fact that many consumers are in a pinch. Around 19 million people took advantage of their services last year because it is a quick way to get cash. Basically, you just need to give the lender a postdated check of the loan amount plus the fee. Payday lenders usually ask for $15 or more for $100 borrowed.

On the surface, it is easy to understand the fee. But when you look closely, the average fee on the $100 loan translates to an interest of 391 percent in an annualized rate. While some states have banned payday lending, others worry that this may choke off an important source of money for cash-strapped individuals.

Previously, we talked about how America’s middle-class is becoming “extinct” due to debt, unemployment, and the financial crisis. Well, the Obama administration doesn’t want to go down without fighting. Several initiatives have been launched to bring peace of mind back to the middle and even lower-income segment.

These programs won’t actually do much for the unemployed and its contribution to the economy may be negligible. Whatever the case, it may be a beacon of hope for struggling American families who just about had it. Among the programs introduced during the State of the Union address include:

Cap on Student Debt

It is no secret that even professionals in a cushy job are struggling with student loan repayments. Student debt is a big problem because college graduates are burdened with thousands of dollars to be repaid as soon as they step out from school. Statistics suggest that two-thirds of American graduates carry an average student debt of $23,000. Obama’s plan seeks Congress’s approval to limit their monthly payment to 10% of their discretionary income.

Child Care Tax Credit

This type of tax credit is nothing new to the American public. But President Obama is encouraging Congress not only to expand the number of households covered but also to almost double the tax credit of individuals eligible for it. Under the proposal, households with an income of $85,000 or less annually can get 35% credit for their expenses (up from the current 20%). It may be the push that stay-at-home parents have been hoping for. The child care tax credit will encourage them to join the labor market again.

Automatic IRA Deposit

Employers who don’t have a retirement program in place can start individual retirement account for each of their workers. Small businesses and their employees will be the main beneficiary of this initiative. Making it easier to contribute will be a bonus for people who currently don’t have money for retirement.

A lot of realizations have been made over the past year. The recession has opened investors’ eyes to the previously hidden dangers of investing in big banks and betting big. This year, everyone is hoping to start on a clean slate on the right foot. But getting a good start takes more work than simply wishing on it. For starters, it might be a good idea to look back on 2009 to avoid the same pitfalls in the future.

Stop Being Gullible

Everyone looks to major financial analysts for predictions and guidance. Relying solely on them or basing important decisions based on their forecast can costs you a lot of money if you bet wrong though. Merrill Lynch, with no idea what is going on behind the scenes, reported that “The global economy will continue to grow with no sign of significant cyclical slowdown.” This statement was released on June 8^th, 2007. A few months later, Lehman Brothers went down.

Right now, analysts are predicting a 10-20 percent rally for 2010. The risk is for you to take if you still want to rely on them.

Look at the Hard Facts

Most investors rely on the S&P 500, Dow Jones, and Nasdaq to get a feel of the US market. Naturally, these indexes are critical but it may sometimes help to take some time to look at the DJ US Total Stock Market Index. From its low in March to October 15, 2009, this index gained 4415 points. After that, it inched up to a mere 183 points. This movement has a significant effect on investors’ psyche.

Bailouts – Its Implication in the Future

While the government bailout was seen as a necessity, its consequences will have a long lasting effect on almost every investor’s finances. Savvy investors can still make a lot of money by spotting opportunities. But for the most part, they will lose because of over pessimism or simply bad timing.

While the bankruptcy spells bad news for most, CIT announced that its lending activities will continue even as it proceeds with the bankruptcy. It hopes to shed around $10 billion in debt and implement the prepackaged reorganization plan. Chairman and CEO Jeffry Peek said that the reorganization “will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the US economy.”

No matter CIT’s good intentions though, analysts and retailers said that the case will most likely contribute to instability within the retail industry. CIT works with 2,000 vendors that provide merchandize to 300,000 stores. And a majority of players in the apparel industry rely on CIT for credit. Stores have already begun stocking up on holiday merchandize. However, they will require a reliable source of funding to restock their inventory, avoid shipping disruptions, and ensure continues supply.

Even a day without financing could create a bottleneck because shipments can be left in vendor’s warehouses or in the dock. CIT entered bankruptcy in a critical season but it dodged the worst of it for now because most merchandize for the holidays are already in distribution centers. More serious problems may emerge in the 2010 spring season as retailers gear up for a rebound in customer spending.