by Alan Olsen
The Average American spends a great deal more than they make every year. This results in a financial pitfall to them later in life. If you find yourself digging deeper into the empty wallet there are ten steps that you can use as a crutch to help free you of the overwhelming financial burden of debt.
Create and follow a budget - Creating a monthly budget will help you to track where your monthly income is going. In order to do this, you should add up how much your expenses will be for the month and then add up your monthly income. Once you have calculated how the money should be spent you should have some money left over for emergencies.
Stop spending what you don’t have - When you spend what you don’t have your debt is only climbing higher. If your monthly budget disables you from making a purchase, then the purchase should wait until the money is within your reach.
Learn to distinguish between wants and needs - In a world filled with televisions, computer games, luxury cars and other costly trinkets, our perspective on wants and needs at times becomes distorted. A need is something that is essential to your survival. Although sometimes we think that we will not be able to function without that big screen TV, waiting until the money is in the bank and paying cash for large purchases is a better option.
Spend less than you earn - After you have covered all of your monthly expenses there should be a little money left over. If not, adjust your monthly budget. You never know when an emergency may arise.
Track your spending - Many people who are in debt are unaware of where their money goes during the month. If you carry a notebook around and write down every penny that you spend when you make a purchase, you will be able to see where your money is going.
Pay yourself - Building up your savings monthly will only ensure that you do not fall into debt again. It is always good to have a little extra money stashed away.
Use a credit card responsibly - Credit cards are convenient for record keeping and budgeting, but can be dangerous if used improperly. You should not make purchases that you can not pay off at the end of the month.
Use a debit card - Debit cards will not allow you to spend more than you have in your account because it draws directly from your bank account. This way you cannot spend what you do not have.
Remember that the key to escaping debt is spending less than you earn.
About the Author
Alan Olsen is the managing partner at Greenstein Rogoff Olsen & Co., a top Bay Area CPA firm. He focuses on developing innovative strategies for business enterprises and individuals. A specialist in income tax planning, he frequently lectures and writes articles on tax issues for professional organizations and community groups. His website is ranked among the top in the nation for accounting firms, featuring tax tools and business leadership articles: http://www.groco.com
8 Steps for Getting Out of Debt
Should You Pay Off Your Mortgage?
A new look at the old fashioned concept of being debt free.
About five years ago we worked with some clients coming to Austin, Texas, from California. I was a little shocked by their choice of mortgage - a 100%, interest-only loan. At the risk of sounding a little backwater, I asked them, Why would you not want to pay off your loan? Their answer was, We both have MBA's. I assumed that meant that they were better informed than I. And, I am sure that was true. But, I still wonder (for non-MBA's), is it better to pay off your mortgage?
It is true that a home mortgage loan is still the best loan program available. It often referred to as good debt. But, does leveraging this loan to put cash into other investments make sense?
Certainly, the deflation in housing prices in many parts of the country makes clear that there is some risk in this strategy. As the real estate market heated up during the past few years, the expectation was that values would increase quickly, and buyers would be covered, if they needed to sell.
If people could put zero down to buy a real estate investment, and use their cash for other things, who would not want to play? If folks could expect 10% - 30% appreciation and get 6% interest rates, who would turn down the opportunity? A subtle change took place in how we bought homes. Home ownership became speculative. In many cases, buyers did not realize that speculation has a risk factor. No pain, no gain, as they say.
Regardless of the state of the real estate market, most of the expert advice that I have read suggests that, for most people, it is safer to pay off your mortgage as quickly as possible. The truth is, mortgage debt is a long term burden. There is really no good long term burden. Of course mortgage loans do not have the high rates of credit cards or payday loans. And, the federal government has favored mortgages by making the interest deductible. Nevertheless, a 15 year mortgage is worth considering. It has a lower interest rate, and pays off fast.
No matter how you look at it, debt free is a nice place to be. First of all, when you move into retirement, you will be in a much better position if you are debt free. You will be able to exercise more control over your savings. Second, when you have a fixed income, you will have less ability to make money to contribute toward paying down debts. And, third, most of us are not able to control the success of our other investments. The stock market has its ups and downs. But, paying down a mortgage offers a clear and predictable return.
Of course, if you have an investment that you are sure will offer a better rate than you are saving by paying off your mortgage, then that might be the best choice for you. Or, if you have high rate credit card loans, then these should take precedence over paying off your mortgage. Homeowners should look at their whole situation before making a decision to work on paying down their mortgage.
But for most of us non-MBA's, the security and peace of mind that comes from being debt free is well worth the effort.
About the Author
Roselind Hejl is a Realtor with Coldwell Banker United in Austin, Texas. Her website - Austin Texas Real Estate - http://www.weloveaustin.com - offers homes for sale, market trends, buyer and seller guides. Let Roselind help you make your move to Austin, Texas.
Paying Off Your Credit Cards
Credit card debt is a huge problem for many if not most Americans. We know that we need to get the cards paid down but it can be difficult. You might never seem to be able to make a dent in them. Read this article and get a few tips to help you pay your credit cards off for good.
The first tip and the one you have probably heard the most is that you must pay more than your monthly minimum to get your cards paid off. This is absolutely true. If you just pay the minimum payment on your card it will take decades to pay them off. Try to at least double the payment so that you are actually paying principal off instead of just interest.
Next, transfer balances to 0% interest cards. Many credit card companies will give you promotional rates of 0% interest when you transfer card balances over to them. This will save you a huge amount in interest payments. Be careful not to charge up the new card or the card you transferred the balance from. Cancel your old credit card or at least cut it up to keep from being tempted.
If you have a home and have equity, get a home equity loan to pay off debt. If you have equity in your home cash it out and pay off that debt. The interest you will pay on the home equity loan is much less than you will pay on your credit cards. This can save you hundreds of dollars a month, depending on your debt.
My last tip and the most important one is to not make nay new charges. Take all of your cards out of your wallet and leave them at home. If necessary, cut them up. This will keep you from making those impulse credit card purchases that will keep you from paying them off.
Overall the most important thing to have when trying to pay down credit cards is discipline and patience. make yourself a plan, follow these simple tips and have patience. Eventually you will get yourself out of debt.
How To Get A Car Loan Even With Bad Credit
by JON ARNOLD
So you have had some problems with your credit in the past, maybe even with a car loan, and maybe the circumstances were not your fault. Even if they were, learning to manage your credit and make timely payments to your creditors is something that you learn along the way. But in the meantime, you have gotten your act together and now you are looking at a way to finance a new car and your current credit problems are behind you.
The problem is that the credit bureaus have a memory like an elephant, or at least that is the way it seems when you go to apply for an auto loan. It seems like they remember every little thing, even though you are in a much better financial position today and have learned your lessons.
The truth is that it is not at all impossible to get a great deal on a car loan even if you have bad credit. Of course it is easier if your credit is good, but if that were the case, you would not be reading this. In fact, an auto loan when you have bad credit is an excellent way to firm up your credit score and affirm the fact that you have gotten your financial act together.
There are many sources that will give you credit for an auto loan even if you have bad credit. If the dealership that you want to purchase the car from is not real innovative, you may want to bypass your neighborhood banks and look elsewhere. If you live in New York and the company offering you the loan is in California, does it really matter, since even if they are in your same city, you will more than likely be mailing your monthly payments anyway. In other words, do not limit your searching to your local city, but take the time to search for who is willing to offer the best deal for your needs.
You may also want to consider car leasing options, but be careful here. Usually the credit requirements are a bit higher, and you need to be aware of how many miles per year you anticipate putting on the car. If you exceed that number of miles, say 12000 per year at the end of the lease, you may end up paying a whopping 30 cents per mile over what it should be. Also be aware that with a car lease, you are not building any equity in the car, even though you still have all the responsibilities for gas, oil, maintenance, tires, tune-ups, insurance, etc. On the bright side, your payments will probably be lower, depending on the estimated resale value of the particular make and model you are looking at.
Yes, you can get a great car loan even with bad credit. Be aware that you will likely pay a bit higher of an interest rate on the loan, but this makes sense in the eyes of the lender since he feels like he is taking a chance on you. Your goal is to prove him wrong after you get your loan and your car, by making each and every payment on time, which will go a long ways towards reversing the negative items in your credit report.
Jon is a computer engineer who maintains web sites on a variety of topics based on his knowledge and experience. You can read more about getting a great car loan or car lease even with bad credit at his web site Great Car Loans Even With Bad Credit.
Credit Repair: Tricks of the Trade
Great Credit is Within Reach
The benefits of great credit are significant. The effort that you put into improving your credit score will be well rewarded. Here are the some powerful credit repair strategies that can produce dramatic results in a short period of time.
Check Your High Credit Limits
The relationship between your current balance and the available credit limit on each of your revolving accounts has a major impact on your credit score. Consumers often overlook this important issue. Each and every revolving account on your report should be examined. If the high credit limit is understated send a dispute letter to each of the three credit bureaus asking them to update the information. Don’t bother calling the credit card companies directly. The credit bureaus are responsible. Let them do the work. The results will be better and faster.
Increase Your High Credit Limits
There is one additional course of action that you should consider that can also reduce the ratio of your current balance to your high credit limit. Call each and every credit card company and ask them to increase your available limit. They may or may not agree, but you might be surprised. By the way, please keep in mind that you are doing this to improve your credit. Having a higher credit limit does not mean that you should use it.
Check the Age of Your Accounts
New accounts count against your credit score. Conversely, the credit bureaus will reward you for the accounts that you have maintained over time. When reviewing your three credit reports be sure to look carefully at the initial reporting date for each revolving and installment account. If the age of the account is incorrect on your credit reports send dispute letters to the bureaus. Here also don’t bother contacting the creditor directly. You will find that this is well worth the time involved.
Resurrect an Old Account
It is not unusual to discover an account on your credit report that you forgot about years ago. If you don’t have much credit please don’t cancel the account. If you no longer have the card in your possession I suggest that you call the company and obtain a replacement card. When you get it you should make a small purchase. The exact algorithm used in the FICO score is a secret, but based on our observations it is best to have some occasional activity on a credit card. Old accounts are good accounts!
Secured Cards
If you have limited credit and want to improve your credit score it is essential that you get a few credit cards. Secured credit cards are an excellent option that is available to everyone regardless of credit history. In the credit repair business we recommend this course of action. It is true that opening a new account will have an adverse impact on your score, but it is worse to have a lack of credit. In this situation secured cards will have an important and positive impact. Typically there are some fees involved with these cards as well as relatively high interest rates.
Authorized User Cards
In addition to getting a couple of secured credit cards you should also ask a trusted friend or relative if they will make you an authorized card member on one of their accounts. Currently the FICO scoring model seems to give new authorized card members the full score benefit of the principle card members credit history. Please be aware that authorized user status is not the same as additional card member status. Authorized user status does not require that you qualify, and either your friend or you can cancel your status at any time. I suspect that both you and the principle card member will favor the authorized card member status.
Post Bankruptcy Cleanup
If you have had a bankruptcy you should take action to clean up your credit with all three bureaus immediately upon receiving your discharge. If you don’t feel up to the task of dealing with the paperwork I suggest that you hire a reputable credit repair company. A reputable credit repair company will be inexpensive and be able to do this for you very quickly. The credit bureaus are required to remove all of the derogatory information from each account that was discharged. If you don’t take action to clean up your credit report it will not happen by itself. A comprehensive post bankruptcy clean up can have a dramatic impact on your credit scores within as little a sixty days after your discharge.
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
Jim Kemish is the president and founder of Power Mortgage, a Florida mortgage company based in Delray Beach, Florida. Power Mortgage Corp was established in 1989 and serves the states of Florida, Georgia, Massachusetts, and Virginia. Jim is also the President of Sky Blue Credit, a national credit repair business.
Release Yourself From The Burden Of Debt
by: Christopher D. Beard
Do you feel like you are in debt prison? Are you in financial turmoil wondering how you can continue to keep everything from imploding on you? Did you know that there were actually debtor prisons in America before the Revolutionary War? Robert Morris, a signer of the Declaration of Independence, was imprisoned in the 1700's for failure to pay debts. The bible also warns against borrowing more than we can afford to pay. Proverbs 22:26-27 says do not be a man who strikes hands in pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you.
Credit card use has continued to grow in leaps and bounds. From 1996 to 2005, the total number of bank credit cards almost doubled. In 2004 alone, credit card companies generated $43 billion in fee income from late payment, over-limit, and balance transfer fees. The Federal Reserve reports that the total US consumer revolving debt reached 2.46 trillion in 2007. This large increase in card usage has created a "fee feeding frenzy," among credit card issuers. The whole credit card industry has really evolved for the benefit of creditors in recent years, with the industry imposing fees and increasing interest rates if a single payment is late. Penalty interest rates usually are as much as 30-39%, while late fees now often are $39 a month and over-limit fees are as much as $35. If you consider how that can add up over just one year, it could be very expensive. Consider this: late and over-limit fees alone can easily rack up $900, and a 30 percent interest rate on a $3,000 balance can add another $1,000.
The bottom line is, credit card companies want to issue as much credit as possible to as many people as possible and hope you barely make the minimum payment. It’s the exact same way these cash advance companies all over town work. They couldn't care less if you ever pay it off. In fact, they do not want you to pay it off. While most card issuers claim this is the cost of doing business, consumers should not be charged excessively for small errors. Ultimately we are responsible for our own financial choices and credit purchase decisions. However its clear to see that credit card companies will continue to entice and market low teaser rate introductory offers (the bate) and make it easy for us to use the cards. This is attractive to the consumer because they can avoid waiting and have the items or purchases they want now. But what price will we actually pay for these items?
That said, roughly $355 billion in mortgage loans are set to adjust during 2008, to significantly higher interest rates. This means many borrowers may face additional difficulties. Hopefully the Bush administrations plan for a rate freeze for adjusting arms and foreclosure prevention will help many consumers avoid catastrophe. The combination of mortgage woes and credit card debt pileup has made many people feel as though they just walked out on a pirate ship plank with nowhere to turn.
So, what is the best way to find the road to financial prosperity?
First and most importantly, if you are in an adjustable rate arm loan, check the date that it is set to adjust in your paperwork from your title closing. If you closed two or three years ago and took one of these teaser loans it will adjust 24-36 months from the original closing date. This is very important because when it adjusts it can increase by two or three interest points. Your lender should notify you 30 days prior to your reset date and you may get reminders from lenders vying for your business. Don’t get yourself caught in this self destruction.
Mortgage interest rates are anticipated to remain steady or dip slightly in 2008; this may be a good opportunity to refinance into a 30-year fixed-rate. The FHA modernization act will make refinancing a good option for damaged credit borrowers to qualify for up to 95% of their homes value at competitive single digit interest rates and avoid incurring prepay penalties. The teaser arms sold over the past 2-3 years are under extreme scrutiny due to the explosive foreclosure epidemic and its effect on the overall economy. The FHA Secure is also a great option for those who need help to avoid foreclosure, allowing them to roll in the arrearage. The future of sub-prime lending appears to be bleak at best. Many borrowers had little options other than 2 or 3 year fixed rate sub prime arms over the last few years because of credit issues, and aggressive lenders pushing these loans on poor credit borrowers. Unfortunately, these same borrowers are now in trouble and imploding due to a cocktail of housing value depreciation, adjusting rates and maxed out credit cards. The bottom line to most of these issues is proper guidance and good decision making. Additionally, it is prudent that you choose an advisor that will educate you about any loans that are different than the norm, like arm loans, negative amortization loans and loans that do not collect escrows. Now, if that is not upsetting enough, federal regulators pressured credit card issuers to double the minimum payment requirements on credit card balances. This can be both good news and bad news for many Americans burdened by debt. While it may force you to pay the balance down, it can mean disaster for many who cannot afford the extra out-of-pocket expense each month.
Should you use a mortgage refinance as an Option to Debt Consolidation? If you are a homeowner with verifiable income, who pays their bills on time for the most part, but who would sincerely like to be debt-free and financially secure while still young enough to enjoy it, maybe even become wealthy. Whether you've had some credit problems and have a blemished credit report, whether you're struggling now and need immediate help to avoid foreclosure, or are doing okay but wish there was a strategy to get out of debt and build some net worth. Then this could be a possible option.
When you really analyze your financial situation, are you using too much of your income just servicing debt making the minimum payments? You absolutely can not build wealth overusing your credit cards you have to make a conscious decision not to make purchases with credit cards unless you can payoff the balance. While home equity has been reduced dramatically in some declining markets, many people may still be able to benefit from restructuring the way they pay their bills and by using their home's equity as the means of accomplishing this.
Do you have two loans with one of them adjustable? Consider consolidating your 1st and 2nd mortgage loans. Do you have high balance credit card in which you are being charged late fees, over limit fees and excessive interest? Consider paying off obligations such as auto or high rate credit cards, overdue property taxes or insurance premiums.
This will wrap up your existing obligations into one tax-deductible payment and puts you back in control of your debt with one manageable payment. Consult your accountant or tax advisor on this as it could equate to a 20-30% savings in interest and your overall Net Effective Rate. If you can eliminate your credit card payments, late fees and penalties and start enjoying increased monthly disposable cash flow, you may actually be able to make financial choices that will help you build a positive net worth. Another way you can reduce mortgage interest further is by signing up for a biweekly repayment plan that splits your mortgage into two monthly payments, this forces you to pay down your mortgage interest much faster. I know, I know your friend said just make one additional payment per year to accomplish this, seriously! Who does this? I say forced biweekly, kind of like forced property taxes through escrows, you get the idea! Then take the savings, say for example $200 a month, and purchase an equity indexed life insurance policy that will protect your family if you die to cover the mortgage balance. More importantly, if you live, the account your premiums go into is tied to an investment account so that it will accumulate a cash value that could be drawn on at retirement, and essentially you could pay off your mortgage tax free. Imagine the benefits of having fewer bills to deal with every month and simplifying your financial life!
Here are a few things to consider to decide if you could benefit from a refinance consolidation:
Do you have equity based on a current appraised value?
Do you have a home equity line of credit that’s increasing out of control?
Do you have a loan that does not collect escrows for taxes and insurance and have difficulty paying them at the time they are due?
Do you have too many credit cards that are near or above the credit limit?
Do you have an Adjustable Rate Mortgage on the brink of spiking Up?
Do you make minimum payments on credit cards and are unable to make a dent in the balance?
Are you saving and investing less than 15% of your income?
Would you like to take advantage of the FHA Modernization and qualify for a great rate?
Would you like to get out of that high interest rate sub-prime loan and qualify for a single digit 30 year fixed rate loan without a prepay penalty?
Are there tax-deductible savings opportunities like pension plans, IRA, Keogh, Medical Savings Accounts, etc. that you are missing out on because you don't have enough money after paying bills to participate in them?
Would you like to take a really nice vacation or make some improvements to your home this year without going into debt to do it?
Would you like to eliminate years off of your mortgage balance?
Do you have a mortgage protection insurance plan to protect your home and family should you die or become disabled?
If any of these questions apply to you, consider the following:
The average personal savings of a retiree amounts to about $6,500. The average benefit check is about $968.00 according to the Social Security Administration. Baby boomers are expected to enter retirement starting in 2010 and considering people are living longer, it is expected that these funds will be exhausted by the year 2040 and will create a deficit in the trust, only providing 72% of what is needed.
The key thing to consider with proper debt management is to make a conscious effort to avoid using credit cards for unnecessary purchases. If you cannot afford it, do not buy it! More simply said than done, I know. Look for ways to curtail extra activities such as eating out everyday, soft drinks, anything you can do without. Use the extra savings to pay off your high interest cards first. Contact a credible mortgage advisor to see if you qualify for a debt consolidation loan at a competitive interest rate. Transfer non tax deductible interest from other debts to a tax deductible loan. If the loan will not create a tangible benefit to your financial picture do not do it.
The One, Essential Trait of Every Self-Made Millionaire
Wouldn’t it be nice if there was a specific formula for making millions of dollars? “If you want to become a millionaire, all you have to do is A, B and C.” You know . . . . “Go get a degree in small-business management, talk to Jim at the bank to set you up with a Subway franchise, and invest in Microsoft today because it will skyrocket tomorrow when they report earnings.” Unfortunately, life is just not that gravy. The good news is there are some defining characteristics, habits and belief systems that self-made millionaires share in common. Take this a step further, and I believe almost all self-made millionaires’ financial success boils down to one thing.
Now, I’m not talking about the 0.5% of “self-made” millionaires that hit the lotto or scored big on buying Microsoft at its lowest-low and selling at its highest-high. I mean the people that sacrifice, slave, and sweat their way to become financially free. I’m referring to the people that spent 20-30 years on a strict budget, giving up everything to build successful businesses – all the while living well below their means, and doing it happily at that.
What makes these people not want to spend the money they worked so hard for on a nice car or an extravagant dinner? Why would they choose to read Money magazine and study business over watching the NFL draft? This lifestyle just sounds boring and exhausting. After all, what’s the point then of being filthy rich?
The answer is Drive. But not only drive – the meaning behind the drive. If you peel back the onion, you will find that what makes millionaires become millionaires is an ultimate, singular factor that keeps them grinding away to accumulate so much wealth. How else can someone willingly sacrifice so much over such a long period of time? Because they have no choice.
The reason behind their motivation is so strong that there is no alternative. This is living life as they know it.
To become a self-made millionaire, without the big score or a grand inheritance, you will likely have to do it the hard way like most people in this class. If you are truly focused and determined to become a millionaire, you are far more likely not to succeed if you are unable to identify that element that pushes you through the pain. It is essential to dig down and find that “why” factor.
The reason behind your drive should be so strong that it makes you compulsive about becoming wealthy. Your “why” should establish your habits, attitudes and beliefs of money and wealth. It will invariably define who you are as a person.
Once you figure out the real reason you want to be rich, it is important to remind yourself frequently. The road to financial freedom has many ups and downs, good years and bad years, happy days and bad days. If you remember the why, the how does not matter. At least it doesn’t for those who have achieved their goals.This theory, by the way, holds true in business and life in general. It is what creates Olympic athletes, successful business leaders, great spouses and parents, etc. Those who have a relentless passion to succeed in order to fulfill their “why” are unstoppable. Discover your “why” and you have acquired the one, essential trait for becoming a self-made millionaire.
Do You Respect Yourself Financially?
There is always much talk about what the secrets for achieving financial dreams, whatever they be, are. It may seem like a mystery as to why some people seem to be able to make a lot of money, keep it and then go onto make more. The truth is these people follow some basic laws concerning money management. These laws are not difficult to understand, however they do require discipline. Money management and financial knowledge is important.
I am sure that there are some people who are reading this who feel ashamed about how they handle their money. The trouble with this is that shame or guilt about finances only creates a state of "poor" thinking and this type of thinking attracts more financial trouble. To turn this around you need to focus your energy and attention on new behaviors that will establish you to think wealthy thoughts. When you feel good about how you handle money, you can learn to trust yourself.
To improve your financial health you need to start out slowly and methodically in order to develop the good habits of fiscal management. Start by asking yourself this question: "What's the one thing you need to do in order to improve your financial well-being.?" Usually you will know immediately what it is because it is baggage that you carry around with you daily, baggage that weighs you down. Then again it may be that really have no idea. If this is the case it would be very useful to contact a financial planner. Experts with knowledge on specific tax laws and investment opportunities can assess your situation and advise or make suggestions about where you need to begin. Don’t underestimate the help they could provide you.
Once you have an answer, do something about it this week. The secret is in the doing. So, just how committed are you to paying careful attention to how you spend and invest, which is the key to making and supporting wealth? Do you want to develop high financial self-esteem when handling your money? Do you want to develop good money habits and maintain the discipline to live within your means? If so, you stand to benefit by increasing your level of financial self-respect and confidence. Last, but not least, your pockets could end up being a lot, lot fuller.
Finding Financial Breathing Room With Debt Consolidation
If you are in a situation of facing a mountain of debt, have you considered debt consolidation? Undoubtedly you have considered your options, none of which probably look very attractive at this point in your financial life. Let's look at some of the options you might be considering right now. Do nothing. Get a personal loan. Bankruptcy. Debt Consolidation What happens with debt consolidation is that all your bills and debts are laid out for the debt consolidation company and they work with you to determine how much you can afford to pay each month. They then take your bills and you pay them one lump sum each month, which they then distribute to your creditors. But the real beauty of debt consolidation is that they give you the financial breathing room that you probably need right now as you are getting your financial life put back together. They contact your creditors and work out payment arrangements to lower your minimum payment, to lower your interest rate, and sometimes even to waive past due fees and late fees. This is typically not something you can do yourself, but when the creditor becomes aware that this is a debt consolidation company, they are typically more than happy to work with them for your benefit, since in their eyes, this is certainly a better option than being required to write off your entire debt and follow through on legal proceedings. What this means for you is that if you total cash outlay at the end of the month was say $3000 for all your bills, your new cash outlay to the debt consolidation company is now say $1500 or even less, based on what they negotiated for you. You need to make sure that you make your payments to the company every month, since they will not make payments to your creditors if you don't, which will put you in an even worse position than you are now. Consider debt consolidation, whether your debt is from credit cards, student loans, college loans, or whatever source, and give yourself the financial breathing room you need to get yourself back on track.
This is probably the number one worst option you could choose. Most creditors are willing to work with you to the extent that they can if you communicate with them and at least try to make some payments or even partial payments. This indicates that at least you are trying based on your current circumstances, but maintaining silence is simply going to tell them that you really do not care, and they will take the action that they need to based on your silence.
While this might help in the short term, it probably only is a delay tactic for what is inevitably going to happen anyway and you will find yourself back in the exact same situation in another couple of months, except now it will be a bit worse since now you have one more debt to consider and work with.
This should be an option of last resort and should not even be considered at this point, at least not yet. Depending on how bad your financial situation is and how long you have let it go before taking some kind of proactive actions to get it squared away, bankruptcy may be an option to consider for the future, but based on the fact that this is typically viewed as a drastic measure with long term negative effects in various areas of your life, which are not limited to finances, put this thought on the back burner for now.
Unless your financial stagnation has gone too far to be rescued, debt consolidation can get you back on the right financial track without the long term negative impact that bankruptcy would cause, and should definitely be something you should be looking to implement.
Want to Live Debt Free? These Tips Will Help
Do you dream about being debt free some day? This can be a reality if you follow some basic rules and do what it takes. To start down the road to financial freedom you need to do a few things first. Are you ready? Let's go.
Tip #1. You need to admit there is a problem.
Is there not enough cash coming in or is it spent too quickly, or both? Is the money being spent on non-essentials? Is the income being spent unwisely on luxury items that you cannot really afford? Do you know how much you really have to spend? Do you know how much you owe and to whom?
You need to honestly answer these questions and be prepared to take some action.
Tip #2. You need a make a plan and stick to it.
First of all, you need to know your financial situation. Take out all your credit cards' statements and add up the outstanding balances. Make a plan to reduce the debt to a certain level within a fixed period of time. Once this is done there are tools you can use from the Internet to track your spending and your debt reduction.
Imagine what you will be able to do with the money you currently use to pay off debt.
Tip #3. Never add to your debt. Cut up the credit cards and live within your means.
Work out ways to cut down on your expenses so that you can live within your means. Start to put some funds aside for emergencies. You can cut down your expenses easily if you just think creatively. Here are a few suggestions to get you started.
a) Anything you need (not just want) can usually be bought at a sale. Commit to not buying at retail prices again. Look in newspapers, wait for sales and be patient.
b) Cook at home a lot more often. Freeze leftovers. Plan you food needs for the week. Make your lunch for work instead of buying it each day.
c) Read magazines, get DVDs and Videos for free from your local library.
d) Take up a hobby. Get busy - shop less. Maybe your hobby can create some income?
e) Give up the coffee bought while shopping or at work.
f) Maybe if you tried you could get away with only 1 car. Travel by bus or train if possible.
Tip #4. Don't compare yourself with others.
If you spend to keep up with others, think whether they may be in a similar position to you. Work out and understand how much you can spend and how much needs to be put aside for saving or emergencies.
Tip #5. Pay off one small debt completely.
This will give you a boost and help you keep on track more easily and you'll be more motivated to pay off all the debts.
Tip #6. Keep some fun money.
This process needs to be fun, not a misery. If it becomes a chore you will be tempted not to meet your goals. Keep some money aside that allows you the freedom to spend on things you want, occasionally. You'll feel so much better about spending on items that you can afford.
To truly solve your debt problems you need to keep yourself under control. There's no one else who can do this for you. Ask for God's help also. You'll be so glad you did, once the debt burden has been lifted and you can become your own person.
6 Little Spending Mistakes That Can Cost You Your Financial Freedom
Can't seem to get ahead financially? Debts piling up? Maybe you're making some of these mistake unknowingly. These mistakes listed below will help you understand where you may be going wrong and how to get back on track quickly. You can be debt free.
Mistake 1. Living Beyond Your Means
This is the real cause of your worry and stress. If you are spending more than you are earning, whose money are you spending? It's the credit card provider's or the bank's. The cost of this money is interest.
The way out - Make a Commitment to yourself only to spend within your income limits. Maybe you could increase your income (or cash in) by applying for more skilled positions, selling some of your unused articles or assets. Is the second car really a necessity? What about working out ways to make your hobby pay for itself?
Why not find ways to reduce your spending? How much would you save each year if you decided not to have the daily coffee shop coffee? Why not make your work lunch each day rather than buying it? Commit to only buying the necessities.
Mistake 2. Paying Off Less Than the Full Credit Card Balance Each Month
Get this debt under control and your life will be much easier. If you are like many others and only pay the minimum balance each month, the interest on the interest makes those purchases oh so expensive.
The way out - Find ways to put aside more money to apply to the credit cards. It will take time to reach this goal. However, if you don't make a start now you may never pay them off. This situation did not occur overnight and neither will the solution. But, by diligence and commitment you'll get there.
Mistake 3. Not Really Knowing Your Financial Situation
Before you can set meaningful goals and develop savings strategies you need to know your financial situation now. The best, proven and tested method by far, is by developing your own personal budget. This is not hard to do. Please don't give up now. Just follow these simple steps:
The way out -
a)Find your latest credit card statements. Write down all the unpaid balances.
b)Are there any other unpaid debts (not home or car) then include these balances as well.
c)List out your (or family) monthly income. Only the amounts "brought home". Include all types of income.
d) Work out your monthly spending. List out where all the money goes. Don't leave anything out.
e) Minus the monthly spending total from the monthly income total and review the answer.
This will give you an initial idea as to whether you are living within your means or on borrowed money.
Mistake 4. Continually Adding to Your Debt
If debt has got you into this situation it is critically important not to add to the state of affairs and thus make it worse.
The way out - cut up the credit cards, keeping only 1 for emergencies. Don't buy on impulse. Ask yourself twice or three times before you buy anything "Do I really need this?" before you hand over your hard-earned money. Don't buy at the height of the fashion or fad. Commit to never paying full retail for anything. Get it on sale or negotiate a lower price.
Mistake 5. Spending All Your Income
It may sound OK to spend any money you earn but there are risks attached to this strategy. How are you going to pay for emergency items? What about major car repairs. What about major electrical appliance replacement? Are you going to pay for these on credit? Bad idea! How are you going to save for a substantial deposit on the next car?
The way out - Once you've prepared your budget you will clearly see what you need to do to put some income aside for other needs such are emergencies and repairs.
Mistake 6. Spending Without Caring About Your Future
Unless you are planning for your future and financial security, you cannot be really happy. There are always worries lurking in your mind about how you would survive in a financial emergency if you have no savings. It can be very rewarding to see how quickly your savings multiply over time with only a small investment each payday.
The way out - Take stock of your life and realize that tomorrow won't look after itself. It needs your attention. Keep some funds aside to put away for your retirement, children's college costs, emergencies, holidays and major purchases.
Avoid these 6 spending mistakes and you'll be well on your way to financial freedom. Guaranteed.