How To Control Your Debt

If you’ve ever opened up your credit card statement and been shocked at the balance staring back at you, you’re not alone. More and more, Americans are stretching their credit to the max. The trend toward using credit cards to pay for regular expenses such as utility bills, grocery bills, gas, and fast food illustrates the increased dependency on credit. And credit cards are far from the only type of debt. Student loans, mortgages, IRS debts, and other indebtedness can leave you wondering how you can stay in control.

Know what you spend. When using a credit card, it’s quite easy to spend much more than you realize. Even small transactions add up rapidly into large balances with high interest rates. For this reason, it can be useful to keep a transaction register for your credit card similar to the one you keep for your checking account. Write down each transaction and add up your spending. If you want to make sure to spend no more than a certain amount per month or in total, write that amount in as a balance just as you would note the balance in your checking account. Subtract the transactions you make from that “balance” up to the full amount and then stop using the card until you’ve paid the amount back down. To make this work, you may need to take the card out of your wallet and put it away somewhere.

Know what you are really paying. How much debt are you comfortable with carrying? If you are unsure, ask yourself how much interest you are wiling to pay each month. Then calculate how much debt you can have at that level of interest by taking the number you’ve come up with and dividing it by the decimal form of the interest rate you’re paying. For example, if you would like to pay no more than £25 in interest each month and your interest rate is 12.9%, divide £25 by .129. (For 9.9%, the decimal form would be .099. Don’t forget to put in the extra zero for single digit interest rates.) You’ll find you should carry no more than about £195 as a balance on your card each month to stay at this interest level.

This rule also applies when shopping for a home. The price tag on the house itself is only the beginning. Consider the total amount you will actually have paid by the time you own the home free and clear. The way interest is calculated for a mortgage is somewhat complex, so ask your loan officer to add it up for you before making a purchase decision. As a general rule, you should never take on a mortgage payment that is more than 30% of your income, and certainly no more than you get after taxes from a bi-weekly paycheck.

Remove the option to use your credit card if you need to. If you’ve tried several methods of controlling your credit card spending and find that you lack the discipline to stick with the plan, you may need to hide or destroy your card. Hiding the card from yourself may work if you can put it somewhere that keeps you from using it. If you find yourself frequently retrieving it and using it despite the fact that you had put it away, then it may be time to destroy your card to curb your spending. One solution is to put your cards in a bowl and fill it with water. Freeze the bowl and the cards, that way you have to chip away to get to your cards… and hopefully any passing urges will be gone by the time your cards are thawed out.

Controlling your debt begins with being aware of it. Everyone finds it easy to pass the credit card across the counter, but when you know what that swipe will actually cost you, you’re more likely to think twice about reaching for a card.

How To Avoid Bankruptcy & Get Out Of Debt Faster Using Debt Negotiation!

Has credit card debt got you thinking about bankruptcy?

You’re not the only one these days. Even with the new bankruptcy laws, credit card debt continues to climb. Unfortunately for most of us, our paychecks don’t climb as quickly.

If you’re on the verge of bankruptcy, you may have another alternative.

Debt negotiation is a process where you negotiate with your creditors to pay off your debts at a reduced amount – for example, if you owe $12,000, you can negotiation a payoff of $5,000. The benefit for the creditor is that they get more money than they may have through bankruptcy, and they get the money sooner. The benefit for you is obvious – you get out of debt faster, and save lots of money in interest.

Where do you get the money to pay off the debt?

Take the money you would have normally used to pay your credit card bills, put it aside, and when you accumulate enough to pay off the debt, send in the reduced amount you agreed to.

If this sounds confusing, that’s ok. It’s really not.

There are many professional companies that will do all the work for you, and charge you a percentage of the savings.

I can speak from experience (I built up a lot of debt trying to start a sporting goods business, which didn’t quite work out) that even with the fees, this is a good deal – plus you save a lot money by not having to pay the high interest rates on your credit card bills.

Sure, it is a more aggressive approach to getting out of debt than making minimum payments, using credit counseling, getting a debt consolidation loan, or borrowing from a friend or relative. But in the end, you’ll get out of debt faster…

And avoid bankruptcy!

If you’ve never heard of debt negotiation (also called debt settlement), that’s ok too, not many people have. I didn’t until I began to seriously consider bankruptcy.

One reason many people are hesitant to consider debt negotiation is that it goes on your credit report. Sorry to tell you, but having lots of debt (even if you pay on time), making payments late, even credit counseling – all go on your credit report and can negatively effect your credit. And (of course) bankruptcy is a big negative!

In my case, getting out of debt, removing all the financial stress, and being able to live a normal life were well worth it. With so much debt, having good credit was meaningless anyway.

Plus, I was able to get all but one of the negative items off my credit report (that’s a topic for another discussion), and my credit is now back to normal. In fact, I now get more credit card offers than I can handle – and fortunately, I can now throw them all in the trash!

When money is tight, and debt is high, there aren’t many simple answers.

But if you are already considering bankruptcy, then debt negotiation might be the right alternative to help you get out of debt faster!

Debt Consolidation Mortgage Loans: Easy Way to Save Money:

Swimming in heavy credit card debt sometimes means getting deeper in debt simply because of high interest rates.  The IRS no longer allows credit card interest as a deduction.  If you use a home equity loan to consolidate and pay-off your bills, you could actually save cash three ways: 1. No interest accrues on your credit card balances, 2. Your new loan could have a lower interest rate, lowering your monthly mortgage payment, and 3.  At the end of the year, three IRS allows you to deduct most if not all of the interest from your mortgage.

One possible glitch in the system is a variable rate loan.  If your home equity loan has a higher interest rate, the potential exists you could have more out of pocket expenses than you had before.

While equity loans usually offer a lower interest rate, the closing costs could be higher.  And, some lenders could charge a pre-payment penalty, almost forcing you to stay in your home rather than sell if a potential buyer makes an offer.

One way around these restrictions is a home equity line of credit.  Those usually don’t carry any closing costs, and there usually aren’t any pre-payment penalties.

If you have extremely good equity built up, you may want to consider cash-out refinancing.  No matter what your home is worth, borrow only enough to pay off the existing mortgage and a specified amount you need to spend.  For example, if your home is worth £300,000, but you only have £100,000 to pay-off.  Borrow more than the existing mortgage, but less than the homes market value.  You will then have lower payments, and probably less restrictions for an early pay-off.

A Debt Consolidation Program To Relieve Debt

Debt consolidation programs are good if you are paying on several different loans. They can make your life easier by giving you one monthly payment. Your monthly debt decreases if the program you use for debt consolidation stretches your payments over a long period of time.  Paying less every month will free up some extra cash.
A successful strategy sometimes is to use a debt consolidation program. With these programs you can manage various high-rate revolving debts with one payment. Let’s say you have several high credit card balances with high interest rates. With the debt consolidation program, you will be able to lower the interest rate you’re paying and manage the debt better.

Debt Consolidation Programs Reminders
A debt consolidation program doesn’t eliminate your debt. All these programs do is move your debt to make it easier to make the payments.  You will have to pay the money back sooner or later since you do owe it.

One problem with a debt consolidation program is you will feel like you owe less.  Your credit cards will again have large amounts of available credit for you to use. Beware of digging yourself into a deeper hole by continuing to add to these balances.

With a debt consolidation loan you may end up paying more in total interest. By stretching your payments over a longer period of time, your total interest cost could possibly be higher. Of course, it may help you more easily manage your current cash flow.

There are risks by using debt consolidation programs. If you’re using a home equity loan or line of credit to consolidate your debt, the consequences of falling behind on the payments can be disastrous. You could lose your home if it is pledged as collateral against your loan.
How to Choose the Best Debt Consolidation Programs
You should shop around to find a program that fits your needs. Local credit unions and banks you already deal with are a good place to start. They are a reliable source and will most likely give you a fair deal. You might also try a bank you aren’t currently working with. Be careful of scams though, when searching the Internet for debt consolidation.

When searching for a debt management company, look for experience, how professional the company is, their assistance and budgeting services. Try to find a local company you can communicate with without having to drive for hours to talk to your counselor.

The debt management industry is unregulated. Scam artist are out there waiting to charge your outrageous fees without informing you of the best solution for your situation. Try to find out some of their customers and talk to them. Get recommendations and research online if possible.
When you team up with a debt management company who is less than above board, you may be left feeling insecure. You should relate well with your counselor and understand what they suggest. That peace of mind should help you pursue your goals and your financial future more comfortably.

Also the debt management company your choose should be a be advise you on how to deal with angry creditors, whether bankruptcy is an option or how to consolidate debt or simply reorganize your bill payment schedule.

Remember, your main goal is to work towards a better understanding of your financial debts. You will want to learn how to take care of your own debts, assets, and financial goals through your counselor’s advice. The debt management and debt consolidation is only stepping stone towards your own financial self-reliance.

5 Simple Tips For Getting Out Of Debt In 2006!

Is credit card debt driving you crazy? Spent too much this holiday season?

Well, you’re definitely not alone. Credit card debt is a way of life these days. Especially now, right after the holidays!

For many people, money gets REAL tight this time of year – we need to pay for all the holiday gifts, get ready for tax season…

Ahhhh!

What can you do if debt has taken over your life?

Make getting out of debt your New Year’s Resolution for 2006!

Here are 5 simple tips for getting out of debt. Keeping a New Year’s Resolution is difficult. But if you follow these tips, you’ll be prepared for a prosperous 2006!

1) Write down your goal and make a plan for achieving it!
The first step to getting out of debt is by far the most important – you need to:

• make a commitment to get out of debt
• write it down
• and come up with a plan for reaching it!

Hey, you didn’t get into debt overnight, and you won’t get out overnight, either. But if you want to get out of debt – if you REALLY want to get out of debt, you need to have a plan. And you need to stick with it.

2) Seriously consider using a debt reduction program
If you have the discipline to get out of debt on your own, without any help, then good for you! But if you’re like most people, a little help will go a long way. Here are a few debt reduction programs to consider:

• Credit counseling: If you have high interest rates on your credit cards, working with a non-profit company will help you lower those high rates, and combine your credit card bills into one lower monthly payment – which means more of your money will go towards reducing your debt!

• Debt consolidation loan: If you own a home, you can consider taking out a home equity loan to pay off all your credit card bills, lower you interest rates, and possibly deduct the interest on your taxes (but check with your tax professional on this one).

• Debt settlement: If nothing else is working, and your debt is still overwhelming, then you should consider debt settlement. This is a more aggressive approach, and is not right for everyone, but if you’re considering bankruptcy, this is a good option. You can pay off all your credit card bills at a savings of 40-60%, and get out of debt much quicker.

3) Start fixing your credit problems
Many people think that anything that goes on your credit report stays there for 7 years. Well, that’s not always true. I got a bunch of negative credit items off my credit report – all I did was get a copy of my credit report, and ask the credit bureaus to remove the “bad stuff”. In just a few months, my credit was almost back to normal. There’s nothing that says we must pay for our mistakes forever (or even for 7 years)!

4) Cut down your monthly expenses
If you overdid the spending in 2005, then it’s time to cut out all the expenses you don’t need, and use the money you save to pay off your credit card bills. Take a look at your checking and savings account statements, your credit card statements, and your monthly bills. Then start looking for things to cut. I know, I know, it’s hard to live without cable TV, cell phones, internet access, the morning paper, weekend dinners and entertainment. BUT DO IT ANYWAY – at least until you get your debt back under control!

5) Make some extra spending money
Sometimes making more money is the best answer! There are lots of ways to make money – selling some of your valuables, getting a part-time job, starting your own business. Despite some of the ads you read, there’s no really secret to making money – you just need to find something you like to do, and work hard at it!

6) Think positive!
OK, there were only supposed to be 5 tips, but this one is the best one – no matter how hard life can get, no matter how much debt you have, the one thing in life you can control the most is how you think. So rather than focusing on what you don’t have, be thankful for all that you do have. Nobody dies wishing they had made more money or worked longer. But many people do regret all the fun and meaningful things THEY DID NOT DO! So make some time to have fun, think positive, and find little ways to enjoy life EVERY SINGLE DAY you are here on plant Earth!

Wondering what makes me an expert on debt? Well, I lived through it. I know what it feels like to struggle. And I know what it feels like to overcome financial problems. There’s nothing special about me. I work at a college, so I don’t make a heck of a lot of money. I didn’t win the lottery. And no rich relatives left me a pile of money.

I just learned a few simple strategies – actually, I learned the 5 tips you just read about – and stuck with them until my life changed for the better.

And you can, too – just follow the tips above, believe in yourself, and DON’T LET ANYONE OR ANYTHING STOP YOU FROM REACHING YOUR GOALS in life!