As we look at today's economy, we see what I think are some pretty serious issues that confront the U.S. and Canada. The stock market is extremely volatile. It's up 150 one day, down 280 the next day. There's real uncertainty. Bad economic news is coming out daily, and corporate scandals are rampant. No one knows whose numbers to trust. Our legislators are looking for solutions! I think it is a great idea to ask Chief Financial and Chief Executive Officers to sign their company's financial statements certifying they are accurate. I'm in favor of stiff penalties that say, "If you're lying to us, you're going to go to jail." I think that's what it's going to take.

But I see some other problems the media isn't even talking about. You know, the press seldom picks up on anything until after it happens. In fact, our whole political makeup is that way: legislators only change laws after something bad happens. They ignore danger signs until it is too late. For instance, no one was forecasting terrorism until September 11th. Now we'll listen, but it seems like it takes a catastrophe to occur before we take anything seriously.

No one was reporting on the dot.com bubble burst until after it happened, and yet there were all kinds of signs that the dot.coms were bogus. In my President's Message of August 2000, about 6 months before the dot.com crash, you'll find that we predicted what was going to happen. Those companies were ridiculously bogus, yet people foolishly kept buying their stock and the press sat idly by saying nothing. Everyone was buying technology stock because everyone else was buying technology stock. And the economists, analysts and the press who knew the facts foolishly thought that since no one was forecasting a crash, it was not going to happen. When I forecasted the crash, I did not have any inside information. I just looked at the facts.

I want to talk to you about something else that I think is pretty serious: the rate of personal debt in the United States. I don't know what the Canadian numbers are but I'll bet they are quite similar. The amount of personal debt is soaring. The idea of putting purchases on a credit card before we can afford them is rampant. We are being bombarded with the idea that we've got to have more stuff in order to be happy. We've got to have lots of stuff, especially if somebody else has got something that we don't have, then we've got to have it or we can't be happy. Worse than that, we can't be somebody if we don't have stuff. That's the message. If they have one and we don't have one, there must be something wrong with us. That's part of our society. It's part of our culture, and it's getting us into some trouble. Right now 14.3% of this country's family take home wages goes to paying off debt, mostly on credit cards. Okay, so what's the big deal? Well, when you're buying with credit cards, you're paying for it twice. At 15-21% interest you're really paying for it three or more times, depending on how fast you totally pay off your credit card.

Debt is even crippling those who can least afford it-the elderly. For people over 65, debt is skyrocketing-up 164% in just the last eight years! And now those who promote the scourge of easy credit are after our kids. College students are being barraged with credit card offers to the point where 72% of all college kids now have a credit card. Can you believe that? What in the world are college kids doing with a credit card? Well, I'll tell you what they're doing… they're buying stuff. The average undergraduate has $2,800 in credit card debt. These are teenagers with $2,800 in credit card debt! Twenty-five percent of them have over $3,000 in credit card debt and 10% have over $7,000.

It gets worse, I'm afraid. Personal bankruptcies are up dramatically. They doubled from 1980 to 1990 and are now doubling every 5 years. There were 1.5 million U.S. bankruptcies in the last 12 months alone-the highest in history by a long shot-and up from 1.2 million bankruptcies last year, itself a new record high. If this rate just stays steady it means statistically that, in the next 10 years, one out of every seven American families could go bankrupt.

Now, I'll make another forecast. I don't know if it will be in a year or two, or even three years from now, but it is evident that unless the economy improves and spending habits change, the debt explosion and the rate of personal bankruptcies will eventually create major havoc with our financial institutions and, therefore, throughout our nation. Think about this: For the first time in seven decades, the savings rate has been negative for the last two years. That means, as a whole nation, American households are spending more than they make! The last time that happened, and the only time that happened, was in 1933. That is interesting to note!

Here are some sobering facts: In 2001, American families carried $1.668 trillion in debt. The amount that people buy with credit cards is now greater than what they spend using cash and checks together. The average cardholder has nine cards and the average family has $7,500 in credit card debt, but what I think is most alarming is that only 40% pay off their total credit card each month! Late fees are rising and what you have to realize is that credit cards are costing American families $300 million per day in interest! What does an average family get for that $300 million? Nothing. Absolutely nothing! What if millions of families had actually bought something with that $300 million? I think our economy would be a lot better off. So, I repeat… make a note on your calendar, check back two to three years from now, and see what will be going on with our financial institutions in the face of a blizzard of bankruptcies. Do not think, if there is a catastrophe coming, the press will be telling us. The press only picks things up after they happen (i.e., the dot.com crash, the stock market crash, and 9-11). Just study the facts and review the evidence for yourself.

What can we do about it? Let's teach ourselves and our children to leave debt alone. Let's teach ourselves to get rid of those cards. Have a ceremony. Burn them, cut them up and then commit to pay off the balance totally. Except for the home we live in, establish the motto: If we can not pay cash, we cannot afford it! In the end, we will have a lot more because of the interest we will save.

Now I want to bring something else to your attention. We can hurt people with Melaleuca! I know you'll gasp when you hear me say that, but if we are not careful, people could get hurt by doing the wrong thing. Recently I heard a sad story about a young couple who saw Executive Directors flying around the country doing Melaleuca and thought, "That's the way to success." They started flying around the country and before they knew it, they had stacked up more than $20,000 in credit card debt-Melaleuca credit card debt. I would advocate you to tell your people, "If you can't afford it, don't buy it." I'm an advocate of customers buying a Career or Value Pack, but if they've got to use a credit card to do it, and if they can't pay it off the first month, then I'm not in favor of it. Nor should they be spending money for travel, or Business Kits, or anything else unless they can afford to pay cash. People can build this business and work hard without spending any money other than what they can afford to spend, regardless of their status. We should teach this. The best opportunity to build is in our own backyard.

Let's create a culture in our families of becoming totally debt-free. It takes a lot more than just making more money. It takes controlling our spending and disciplining ourselves to never buy anything unless we can afford to pay cash. Just because our neighbor is knee-deep in debt does not mean we need to join him. Let's outsmart the system, pay cash, and save the interest!

Sincerely,

Frank