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10 Things You Can Give Up To Increase Your Debt Payment Fund

frustrated looking woman looking at a laptopDespite the rising confidence of consumers towards our economy, it remains to be a fact that we need to continue working hard to finance our debt payment fund. The recent data from the Federal Bank of New York revealed a continuing rise in consumer debt. The number itself is already alarming. If you take into consideration the long term effects of debt, you will realize just how important it is for us to lower our current debt level.

An article published early this March on USAToday.com revealed how student loans are expected to have a long term impact on our economy. The article mentioned how more 40 million Americans owe $1.2 trillion worth of student loans. It has now surpassed all types of consumer credit – save for housing loans.

It is a devastating picture for young adults to be so buried in debt even before they have been given a chance to prove themselves in the corporate world. While this may drive when to work hard to finance their debt payment fund, it puts them in a compromising position when it comes to investments. At an age when they should have been driving their own vehicles, they could not afford it. Home ownership is also something that is delayed because of this debt. Instead of buying their own home, they are forced to live with their parents just so they can save up and pay down their student loan debts.

If you scrutinize the statistics about debt, you will realize that we need to look for extreme measures to increase debt payment fund. But in some cases you will realize that the changes does not have to be too drastic. You can spot a little sacrifice here and there and it can add up as a huge amount in your monthly credit payments.

10 things you can cut off to have more money for debt payments

Whether you are in the midst or still trying to survive a looming financial crisis, you should know that no small feat is too little for you to try. Do not think that the small savings you get from simple changes will not matter. When it comes to your money, even a penny will matter.

Given that thought, here are 10 things that you may want to consider cutting off to help you grow your debt payment fund.

  1. Less dining out. Compared to the frequency that we spend eating in our homes or in restaurants and the amount that we spend on each, you need to realize that the latter costs us so much more. If you are used to grabbing that take out every night – you need to change that habit. Just do your grocery every weekend and cook your meals at home.

  2. Brown bag your lunch. Another simple change that can accumulate to be a huge addition to your debt payment fund is when you brown bag your lunch to work. If you do not like cooking in the morning, you can prepare your lunch at night. Just heat your food in the microwave when you get to the office. That will really cut back on your daily expenses by $5-$10. If you compute that at 25 days a month, it will add up to $125 to $250. In a year, that can add $1,500 to $3,000 towards your credit contributions.

  3. Cancel gym memberships. Inquire with your local community center if they have their own gym equipment. You can utilize that to save on gym membership fees. This can save you around $100 a month and you do not have to sacrifice your exercise routine. You can also access training videos via Youtube. Jogging and making use of your trusty bike can also help you with your cardio exercises.

  4. Bundle your Internet. You do not really have to cut your Internet subscription but you may want to bundle it together with your phone or cable subscriptions. The savings will not be as great as your other options but it can add up.

  5. Cut the cable. Some people think that they cannot live without a cable subscription when it fact, they can. If you find yourself wanting to catch the latest sports event, why not organize a get together a friend’s house (who has cable) and watch as a group? Not only will it cost you less, it will also give you a chance to bond with your peers.

  6. Eat healthy. If you are wondering how you will cut down on food costs, prioritizing the healthy food choices will do the trick. Believe it or not, the unhealthy food are sometimes the ones that cost you unnecessary money. Why not cut back on potato chips, soda, chocolate and other junk food? Concentrate on rice, beans, vegetables and oatmeal. These will fill you up without having to eat a lot. Not only as your saving, you are taking in healthier food choices.

  7. Avoid new clothes. Unless it is really necessary, do not buy new clothes. Who cares if you wear the same thing over and over again? With all the tips you can see online or in magazines, you can accessorize the same outfit and make it appear like you are not repeating your wardrobe.

  8. Buy used everything. From furniture to clothing and electronic, you may want to consider buying only used things from now on. At least, until you have paid off your debts. If you really have to buy clothes, just buy used and whatever you save should be placed in your debt payment fund.

  9. Use coupons. For some people, coupons have become their way of living. We even have reality shows dedicated to this purchasing tool. The dollar or two that you save for every purchase can really boost your credit payments.

  10. Lower car expenses. You do not have to go to the extreme by getting rid of your vehicle but you may want to stick with just one. Not only will you benefit from the sale of the second car (if you have one), you will also cut back on costs when it comes to insurance, gas, car repairs, etc. You can check how much your car will really cost you if you go to Edmunds.com. They have a true cost to own calculator that can really help you out.

You can opt to choose only a few from these or you can come up with your own set of saving strategies. Do not worry about the amount at first. No matter how small, remember that it will all add up in the end.

Pay off debt fast to avoid the negative side effects

The Bank for International Settlements published a study on BIS.org that discussed the effect of debt in general. The study revealed that when you borrow in moderation, debt can improve your personal wealth and aid in the growth of your finances. But if it is already too high, it can be destructive already. The study mentioned that for household debt, 85% of the GDP is the limit. Anything more than that can drive the consumer down.

In truth, debt can dictate how you live your life. If it eats up a huge portion of your income, you cannot do anything but comply. Even if you want to move to a new job, you need to make sure that the income is enough to pay for your debt payment fund.

But beyond all of this is the alarming effect of debt in your emotional well being. Here are some of the negative effects that you can expect from being in debt.

  • Debt stress. This is a serious problem that borrowers are facing. It can affect not just your everyday disposition, it can also affect your health.

  • Relationships. Money is a powerful influence in a marriage, or any relationship for that matter. If you are not careful, you could end up putting a serious strain in the relationship if you do not deal with your debt trouble.

  • Delay financial investments. Another effect of debt is it can delay your personal wealth. It can keep you from investing in a car, a business or a home. That will seriously set you back.

These are more are some of the reasons why you have to work hard to grow your debt payment fund. Deal with your credit situation before things get out of hand.

How To Pay Off Debt If You Are Not Paid Enough For A Job You Love

telemarketerHow’s this for a difficult scenario. You spent months after graduation stressed out about getting a job despite a tough job market. When you finally found a job opening, you are ecstatic to learn that it is a job that you know you will love to do for decades. But here’s the catch – it will not pay you enough for the type of lifestyle that you want to lead. How will you decide between your dream job and having the finances to support your dream lifestyle?

Most people will actually choose the latter. They will sacrifice their sense of personal fulfillment and happiness with work just so they can earn more money. And guess what the main reason is: to pay off debt. They will lean towards the practicality of being able to pay for their debts instead of pursuing the career that they know they love to do.

But there is some logic to pursuing the job that you love despite not giving you enough money to pay off debt. It may seem impractical but we have some sound reasoning that could help you decide. The work that you will do will take up at least 40 hours of your time every week. Imagine feeling miserable for 40 hours each week. If you think that the lifestyle you can afford will make you happy, think again. In most cases, people who come home from a bad day at work will bring that negativity with them. It will be felt by the people they live with.

But if you pursue a job that you love to do, your sense of personal fulfillment and happiness will be greater compared to the other scenario. And even if you start out with a low paying job that you are passionate about, you will most likely be more productive because of the happiness level that you have towards it.

Do not be too quick to shut out the jobs that you love to do just because it will not pay you well. There are two options for you to make ends meet so you can afford to pay off debt accounts that you owe. You can either earn more or spend less during a debt crisis.

Lower your expenses if you want to increase debt payments

The first option is for you to cut back on your expenses. If you are a new graduate, this may be easier for you. People who are older and have families will usually have a harder time changing their lifestyle to fit their low income. The longer you have grown accustomed to an affluent life, the more difficult it will be for you to make the change. But if you concentrate on the priceless benefit of doing a job that you love, it should be a sacrifice worth making.

The reason why it is difficult to make this transition is because Americans are spenders. That is according to an article published on CNBC.com. The article even cited a statement by former President George W. Bush back in 2006. Apparently, he said that the best help that Americans can give their country is if they went shopping.

In this country, everything around us encourages us to spend. But that is a lifestyle that we can no longer follow. You need to pay off debt by lowering your expenses. That will free up more money from your limited income.

To start, you need to simply concentrate on your priority expenses. According to the latest consumer expenditure data published on the Bureau of Labor Statistics website (BLS.gov), the average expense per consumer in 2012 is $51,442. It is noted to have increased by 3.5% from the previous year, 2011. Here are the top expenses that people usually spend on.

  • Housing: $16,887 (32%)

  • Transportation: $8,998 (17%)

  • Food: $6,599 (13%) (at home $3,921; away from home $2,678)

  • Personal insurance/pension: $5,591 (11%)

  • Healthcare: $3,556 (7%)

  • Entertainment: $2,605 (5%)

  • Cash Contributions: $1,913 (4%)

  • Apparel and services: $1,736 (3%)

  • Other expenses: $3,557 (7%)

If you notice, the food expense is high and that is alright. But we are wasting a lot of money on eating out. You can cut back on expenses if you only opt to cook and eat more at home. Not only that, transportation costs can find more room for savings. You can carpool with colleagues or opt to bike to work – if the distance can make it possible. There are so many ways that you can cut back on your expenses at home. And if you cannot afford, it simply opt not to spend on it. Prioritize what is important like the funds you will use to pay off debt.

Increase income to grow your credit contributions

The second option to make your low income job work for you is to set up side jobs that will earn you more income. In fact, this is common for Americans.

An article published on BostonGlobe.com revealed that Americans hold multiple jobs to help supplement their primary source of income. The article said that 4.9% of working adults hold more than one career. Half of them have one full time job and a part time job. They are called the moonlighters.

A lot of people have opted to increase their income through a second career but we encourage you to set up a passive income source to avoid burning yourself out. The article mentioned that people seek to get payment for the amount of time that they spend working on their hobbies and interest. They will spend some time doing handyman repairs, some will tutor or work on computers in their spare time. Any skill or interest that you have can be capitalized on so you can earn money on side to pay off debt without feeling too burnt out.

Here are some of your options to earn more money.

  • Freelancing. This is when you use your skill to earn money and get paid on an output basis or based on the time that you spend working on a job.

  • Passive income. There are so many options to earn a passive income. You can use a spare room in your home and rent it out. You can let other people rent out your extra vehicle. You can also convert your garage into a storage space for other people to rent out. These are options that will help you earn without necessarily having to work for it all the time. Writing a book and earning off it’s sales is also an option.

  • Earn from a hobby. If you love to garden, offer to plant and take care of the garden of your neighbors. Not only will you be going something that you are good at, you can help your neighbors cut costs on food. You can also offer to cook for colleagues and brown bag their lunch. That will help you earn extra through the lunch payment they will give you. Babysitting is also one way to earn more.

  • Teach a skill. If you are good at playing instruments, you can opt to take on student and teach them what you know. Cooking and baking classes will also work. If you love sports, this is also something that you can coach every summer.

Of course, you can always opt to simply ask for an increase from your boss. Given that it is something that you love to do, you will find the motivation to be as productive as you can be and improve your skill. That can be a leverage in negotiating for an increase.

Debt relief options for low income households

While you work on your options to increase the money that you can allocate to pay off debt, you need to choose a debt relief program to further improve your chances of achieving a debt free life. You have three options to help you out.

  • Income based repayment for student loans. This option will help you set a monthly payment on your student loans depending on the amount that you earn every month.

  • Loan forgiveness for those working in public service. This is mostly for student loans too. You may be qualified for a loan forgiveness if you work in the military or another career in public service.

  • Debt consolidation. For all the other debts that you owe, you can opt to use debt consolidation. This type of debt solution will help you restructure your payment plan so you can make lower monthly contributions towards your debts without being penalized for it. Here is a video that discusses your different options to consolidate debt.

Sacrificing a high paying job to do something that you love is rewarding. Do not worry about how you will pay off debt because you have so many options to help make it a less of a burden.

Tips For Resolving Debt

man chained to a debt ballYou’ve undoubtedly seen those TV commercials where a guy is sitting around a table of children asking questions like, “is it better to get something now or something later.” Well, our question for today is, “is it better to be in debt or debt free?” If you’re typical, your answer was it’s better to be debt-free. The good news is that you could accomplish this in the year 2014 just by resolving to do some fairly simple things.

Get your finances organized

If you haven’t already done this, it’s important tp make a list of your bills, your interest rates and how much you’re accumulating in interest charges. You should create a filing system and a budget. The reason why most people get into trouble is because they didn’t realize what was happening until it was too late. If you get organized and pay attention to your bills you can keep this from happening.

Set up automatic transfers

Why write checks every month, buy stamps and mail your bills when you could set up electronic bill pay? Your bank probably offers online banking tools such as sample budgets, calculators and the ability to pay your bills electronically. If not, you could get an app for your computer or smart phone that would do the job for you. You should also arrange for automatic transfers from your checking to your savings account every payday. If you don’t see the money, it’s less likely you’ll miss it.

Get a financial buddy

Find a friend or relative that would be willing to help you create a budget and stick to it. It’s a fact of life that you’re more likely to stay with your goals when you don’t want to disappoint the person who knows what they are.

Shop fast

The best time to go shopping is when you’re in a hurry. This is because the less time you spend in a store the fewer items you’ll probably put in your shopping cart. Also make a list of the things you need before you go shopping. Then stick to that list and buy nothing that’s not on it.

Make smart and reasonable resolutions

If you’re making resolutions for 2014, be smart about them. Be careful about resolutions such as “go on a nice vacation” or “lose 30 pounds. These can result in travel expenditures or the cost of a gym membership. When you’re writing down those new resolutions, choose ones that don’t put a dent in your wallet. Also make sure that they’re realistic. Your 2014 resolutions don’t have to be big ones. Think instead about those that would help you save money and that are reasonable, such as “bring lunch to work three times a week” or “put $25 extra a month into my credit card payment.”

Pay cash

If you find you are unable to pay off your credit card balances every month, you should definitely resolve to pay cash more often. There’s just something psychological that makes paying cash more difficult than using a credit card. For that matter, you probably shouldn’t take a credit card with you when you go shopping so that you won’t fall prey to temptation.

Tour your house

Take a tour of your home and look for ways that would save you money such as deciding to lower the temperature during the winter months or adding insulation. Did you know that every degree you lower the temperature in your home will save you as much as 5% on your monthly heating bill? It’s true and is an easy way to save money.

Hunt for couponsdiscount and promo

There are people who say you shouldn’t ever pay full price for anything and I definitely agree. There are coupons available that would save you money on everything from your groceries to a night on the town. Here are nine of the most popular coupon websites you should check out.

  • Coupons.com (http://www.coupons.com/)
  • Retail Me Not (http://www.retailmenot.com/)
  • Groupon (http://www.groupon.com/app/subscriptions/new_zip?)
  • Shop at home (http://www.shopathome.com/)
  • Brad’s Deals (http://www.bradsdeals.com/)
  • Slick Deals (http://slickdeals.net/)
  • Coupon Cabin (http://www.couponcabin.com/)
  • eBates (http://www.ebates.com/)
  • Fat Wallet (http://www.fatwallet.com/)

Make small changes daily

You don’t have to make huge changes in order to pay down your debt. Sometimes just making small changes will get you where you want to be. You should write down a list of changes that you could make in your day-to-day routine that would save you money, then create incentives that would help you stick to them. Here are 12 changes you could make that would save you money you could then use to pay down your debts.

1. Shop and re-shop your auto and home policies – If you haven’t gotten competitive bids on your auto and homeowner’s insurance for the past couple of years, now would be an excellent time to do this. Insurance companies are as competitive as the auto companies. Shop around a bit and you’re likely to cut your premium substantially.
2. Have a massive garage sale – Get rid of all that stuff lying around the house that you either don’t need or aren’t using and turn it into cash. You might be surprised at how much money you could raise in just one single weekend.
3. Use a grocery store awards program to save on gas – Our supermarket has won our undying loyalty with its program that awards points we use to cut the cost of gas. We had enough points recently that we were able to fill up one of our vehicles for just $20. It was amazing!
4. Go to matinee movies – Many theaters price their afternoon movies cheaper than the same ones that run in the evening. You could see that new movie on a Saturday afternoon rather than Saturday night. It would be the same movie but the tickets should cost much less.
5. Get books and movies from the library – Our library offers books, CDs and movie DVDs you can check out for a week. The movies won’t be first run or maybe not even second run but you should be able to find classics and great family films. For example, next Christmas why not check out “A Christmas Story” or “National Lampoon’s Christmas Vacation” rather than buying the DVDs.
6. Plan your errands to save gas – Don’t do three errands in the morning and then another two in the afternoon. Group your errands to save gas. Start with the one that’s furthest away and then work your way back towards your house.
7. Call you utility companies and ask about a budget plan – Many utilities offer budget plans. The way these work is that they take your total billing for the past year, divide it by 12 and then bill you 1/12th of that amount every month. Yes, you probably will have a higher natural gas bill in the summer than you’re used to but your winter bills should be much smaller.
8. Use exercise videos and walk or hike instead of using a health club membership – A health club or gym membership can cost anywhere from $50 to several hundred dollars a month. If you belong to one of these clubs, you could cancel your membership, save the money and resolve to either use exercise videos or to just hike or walk to get your exercise. Most experts say that if your goal is to lose weight all you have to do is walk 30 minutes a day every day of the week.
9. Make extra dinner servings then eat them for lunch the next day – Instead of making dinner for two or four, double your servings and use the leftovers for either lunch or dinner the next day.
10. Buy your most expensive groceries – meat, cheese, paper products, etc. – in bulk
at Costco or Sam’s Club. You’ll get the same quality but at much lower prices. Paper products are especially good items to stock up on because they never go bad.

Pick just three or four

It could be a mistake to try to implement all 10 of these tips beginning in early January. Instead, pick three or four and start working on them. Once you feel that you have them mastered you could start working on another three or four, etc.

Do You Have What It Takes For DIY Debt Settlement?

woman drowning in debtIf you feel as if you were drowning in a sea of debt and saw a sign advertising “bankruptcies for as little as $500″ you might be very tempted to call that attorney and say “sign me up.” However, this could be a very serious mistake. A bankruptcy will stay in your credit report for up to 10 years and in your personal file for the rest of your life. Once you file for bankruptcy it will be at least two to three years before you will be able to get new credit. And when you are able to get credit it will have a very high interest rate. You may even have to pay more for your auto insurance, your utilities and your rent.

A better option

If you’re five months or more behind in your credit card and loan payments a better option might be to settle those debts yourself. This will cost you less than hiring a professional to do it for you and puts you in control of the settlement process. However, many people won’t try DIY debt settlement because they just don’t want to have to interact with banks, collection agencies and other creditors. DIY debt settlement can seem like it would be a very scary experience and you may have heard that it can be a brutal process. And it definitely isn’t for the faint of heart. DIY debt settlement requires hard work, persistence and the willingness to deal with debt collectors for months or even years.

The goal

Of course, the goal of debt settlement is to settle your debts for less than you actually owe. In fact, if you have the guts, time and negotiating skills you should be able to settle your debts for 50% or even 40% of what you owe.

What you need to know

Debt collector hollering into micBefore you decide to try to settle your debts yourself, there are some things you need to know. First, it will probably be a time-consuming and frustrating process. You will have to be ready to field calls from angry lenders and possibly even debt collection agencies. Debt settlement will damage your credit though not as badly as a bankruptcy. Many financial experts believe that a bankruptcy will drop your credit score by as many as 200 points, while debt settlement might reduce it by only 140 points.

How to determine if debt settlement is for you

The first important question you need to ask yourself is whether debt settlement would be your best option. To answer this question you will need to look at your whole financial picture and alternatives such as a family loan or consumer credit counseling.

How to do debt settlement

As noted above, you will probably have to wait anywhere from three to five months before you initiate negotiations with your lenders. The reason for this is because they are usually unwilling to negotiate until they believe that if they refuse to settle you will file for bankruptcy and they will then get nothing.. Many experts say that the best way to begin is by writing a simple letter stating that you had run into financial problems, that your situation had improved somewhat and that you wanted to settle your debts. You should offer a partial payment of each debt if the lender agrees to remove the delinquent payments and collections from your credit report. Be sure to ask each lender to sign and send back the letter. This way you would have a paper trail in the event you needed to prove that the lender had agreed to settle for the amount you offered.

A small silver lining

While debt settlement will have a negative affect on your credit, there is a small silver lining. If you can take your outstanding balances down to zero, this might help mitigate the damage to your credit because 30% of your FICO score is determined by how much you owe. Also, many lenders will not provide credit to people who have outstanding delinquencies. So if you can settle your debts, this can put you in a position to start rebuilding your credit.

Settling debts like a pro

If you feel you have what it takes to settle your debts yourself, here are some tips that could help.

1. Talk first to an expert.

Get some expert advice from a tax accountant before you plunge into DIY debt settlement. This is because there it could have tax implications.

2. Write out a timeline

You want to settle your debts as fast as possible as this increases your chances of success and cuts the risk that you would end up being sued. The ideal is 12 months or less and you should never go beyond 24 months. Take a hard, realistic look at your finances and assets to determine how quickly you could come up with the money you will need to make the lump sum payments that will be required to settle your debts.

3. Find the money

Your chances of successfully settling your debts will increase if you can find assets or other ways to come up with the money you will need. For example if you have a motorcycle sitting in the garage or a second car that’s not absolutely necessary, think about selling it. You might also have collectibles such as coins, antiques and baseball cards you could sell. Or you might consider refinancing your mortgage, getting a loan from a family member or taking on a second job.

4. Ditch the emotions

If you’re you’re typical, you may feel shame, guilt and fear about debt you can’t manage and collection agencies and banks will try to take advantage of those emotions. Forget all this and treat the settlement as if it were a business transaction. Also, try not to get angry if you are turned down or if a lender makes a ridiculous counteroffer. Remember, it’s not about the emotions. It’s about your money.

5. Create a system

If you’re average, you will have about six accounts that you will need to settle. Multiply this by several calls a day – especially if there is one or more collection agencies involved – and you can see that you will be receiving a lot of calls. You might want to assign those people a silent ring tone on your cell phone to help manage the calls. You might also get collection calls routed to another phone – a second cell phone, a Skype account or a magicJack. Then you can listen to those messages and return the calls on your own schedule.

6. Explain the problem

There’s no way you’re going to be able to settle your debts unless you have a real hardship. This needs to be something such as you lost your job or your spouse or got hit by a tornado. It’s best if you can detail your situation so that your lenders and debt collectors will understand just how underwater you are. For example, if you’re trying to settle a credit card debt you may not need a lot of evidence. But if you’re trying to negotiate on a second mortgage, you may have to provide copies of bills and even tax documents.

7. Get it all in writing

Always get everything in writing before you pay a cent. This is especially important if you reach an agreement with the original creditor or a collection agency over the phone. If you fail to do this, the amount of money you thought would take care of your debt might end up being counted as just a partial payment. Understand that when talking to a debt collector, he will say anything to get you to pay. It’s up to you to not pay anything until you have the entire settlement in writing.

Tips For Tackling Debt As A Couple

couple looking at a laptopWhether you’re married or in a committed relationship, the time always comes when you must discuss the ‘D’ word or the debts that one of you has brought to the relationship. These are never fun discussions and easy ones for you to put off – especially if you’re the one who came to the marriage carrying a lot of debt. In fact, money and debt are two of the most common things that stress relationships. There are statistics showing that couples that have regular fights about their finances are 30% more likely to end up divorced. However, if you’re honest with one another and plan ahead you can alleviate the stress of having to share a budget. And here are some tips that can start the conversation, help you create a plan and work towards becoming a debt-free couple.

1. Be upfront right from the beginning

Sitting down to talk about money can be very stressful but it’s crucial that you have a realistic expectation of each other’s finances. Talk about all those things you’d rather not discuss– your outstanding loans, your income and whether you’re in a position to make progress towards paying off your debt. Of course, talk is the easy part. You’ll then have to make a budget. If you’re planning on sharing a balance sheet you’ll have to factor in things such as your debt payments, where you want to go on vacation and how often you’ll go out to dinner. In other words, get everything in order today before you begin planning for the future.

2. Understand the law in your state

In general, the two of you won’t be responsible for debts incurred before your marriage but there are instances where you may be liable for your partner’s debts. The simplest explanation of this is that if your name is on the form, you are liable for the debt. As an example of this, you’re fully on the hook, whether or not you’re married, if you cosigned any loans with your partner. If you did cosign a loan, you might try to split the payments down the middle. However, if you find your partner can repay only 25%, you’ll have to be responsible for the other 75%.

You should also understand that there is a difference between communal property states and equitable division states. If you live in a communal property state, you will jointly be liable for all debts that were incurred after you married. On the other hand, if you live in an equitable division state and get a divorce, either you and your spouse will have to decide how to handle your joint debts or a judge will do it for you.

3. Have both joint and separate bank accounts

No couple wants to think about this but it never hurts to prepare for the fact that you may eventually need to separate your finances. This makes it a good idea to have both separate bank accounts as well as joint ones – just in case.

4. Make sure your plans include your debts

When the two of you are planning for your future together, don’t forget to include paying off any debts. If you have a heavy debt load, this can actually affect your ability to get a mortgage as well as where you can afford to live and even how you’ll pay for your children’s college.

5. Reduce the amount you pay on your debts.

This may sound very simplistic but it’s important that you do what you can to reduce the amount you actually pay on your debts. You might be able to do this via a balance transfer on your credit card debt, by looking into a student loan consolidation (if appropriate) or refinancing your mortgage. However, be careful because some of these options can end up costing you more than they save. As an example of this, a lower mortgage rate may come with fees and higher property taxes. And debt consolidation can be a good option for some people but it’s not a one-size-fits-all kind of solution.

6. Remember that you’re in it together

Never forget that you are in this together. Don’t let money issues come between you and your partner. You are still together regardless of how much debt you have and how you plan to pay it off. Be supportive and kind even if your partner’s finances are in worse shape. In the event that you’re the one that’s bringing debt to the relationship or marriage, remember that you still have much you can contribute. With some focus and good planning, the two of you should be able to weather any debt storm.

Seven more helpful financial tips for couples

1. Have common financial goals

You should have shared goals when it comes to building a life together. This needs to include everything from buying a home to having children and from their college education to how you will handle each other’s healthcare and retirement. Sitting down to discuss finances may not be very romantic but it’s important to have the same goals. Also, understand that a financial plan is just a beginning point. Life happens, things change and you will need to make adjustments. But a good financial plan will help you remember what your big goals are and how you intend to reach them.

Young couple in financial trouble

2. Share the costs

Whether it’s buying a home or shopping for food you should be able to earn efficiencies by combining the costs. If you combine your savings, you will probably qualify for lower fees on bank transactions and retirement accounts. Personal loan fees and checking account fees can also be combined and should provide significant savings.

3. Take advantage of tax benefits

If you go from filing single to filing married, you may pay a bit more in income tax but you should enjoy some overall tax savings. For example, in the case of the estate tax, the two of you should be able to transfer up to $5 million to each other tax-free. It’s really important to have the ability to transfer assets to each other.

4. Respect your partner’s money skills.

The two of you probably don’t have the same financial expertise and it’s not always the man who has more. The important thing is to let the spouse who has the best money skills lead. For example, one of you might focus on bill paying while the other focuses on investing. Of course, the both of you need to be involved in all major decisions or one of you could end up feeling bitter.

5. Share your goals and diversify assets

If you have money you can invest, the more you can invest together, the more creative you can be in your asset mix. For example, if you combine assets you could diversify more to protect against risk. In fact, to get the most out of your investments, you should pool both spouses’ holdings together into one account. When you have a bigger pool of money, you will have more freedom to add a few growth stocks with upside that you might not be able to put in a smaller account.

6. Support one another through the bitter and the sweet

There are a number of things you can do to take the pressure off one another. In terms of income, women have gotten closer to equality with men. One Wells Fargo survey revealed that 25% of women earned more than their male spouses. If one of you loses your job or becomes underemployed, it’s important that the other be supportive. After all, in a few years the shoe may be on the other foot.

7. Do regular financial checkups

Couples rarely just want to go off and each do their own thing financially. Most couples are more interested in finding a financial path and then staying on it. But this requires ongoing communication between the spouses, creating a sound financial plan and updating it when things change. Although this may sound basic, it’s important that the two of you sit down regularly and perform financial checkups.

Save More Money Or Pay Down Debt? Ay, There’s The Rub

stressed old manIn his play “Hamlet, William Shakespeare wrote, “To die, to sleep;
To sleep: perchance” to dream: ay, there’s the rub…” But a better question today might be “which comes first to save more or to pay down debt, ay there’s the rub.

10% to 20% – seriously?

Financial advisers say that we should be saving 10% to as much as 20% of our income. But the latest data from the Federal Reserve Bank of St. Louis is that the United States’ savings rate is just 4.2%. Why do so many of us have a tough time saving money? In most cases it’s because we’re deeply in debt. If you’re facing the double curse of high cost debt and little in the way of savings, what’s better? Should you put your money into savings or pay down your high interest debts as quickly as possible?

Put first things first

The simple fact is that if you have high interest debt and are trying to save money it’s like trying to swim when you have a cement block tied to your feet. Paying down high-cost debt should always come first before trying to save money. Here’s why. Let’s suppose that you are carrying $10,000 in credit card debt at a 15% interest rate. If you make just the minimum payments each month, it will take you nearly 30 years to pay off that debt and it would cost you about $12,000 in interest. As you can see from this example, your number one priority should be paying down debt before you do anything else, including putting money into savings. That’s because this will have a much bigger impact down the line – especially if you’re dealing with credit card debt.

However, most experts also say that before you start using money to pay down your debt you need to put a little bit aside as an emergency fund. Ideally this should be three to six months worth of living expenses. Unfortunately, that’s not easy to do if you’re carrying thousands of dollars in credit card debt. So instead of this, you might try to start with $2000 so you would have some money to cover unexpected bills.

Get a guaranteed return

The biggest benefit of paying down credit card debt is that it gives you a guaranteed return on your money. You can precisely determine and quantify a guaranteed rate of return by using your interest rate, balance and payment plan. While you would be lucky to earn 2% these days on a certificate of deposit, you could get a guaranteed 15% or more by paying down your credit card debt – making this a very good deal.

Save a fortune

When you pay more on your debt you will not only get out of debt faster, you will save a fortune in interest. Plus, once you pay down that debt you will be able to put a lot more money in your savings.

Back to the previous example

If you go back to the example given above of the $10,000 in credit card debt let’s assume that you increase your payments to $400 per month – instead of making just the minimum payments. In this case, you’d pay off your debt in three years and your interest costs would be only $2000. That would be a savings of $10,000 that you could then add to your savings account in subsequent years instead of your bank getting the money.

$9600 in just five years

In this example if you did increase your payments to $400 then continued to save that $400 per month once you paid off the debt, you’d not only be debt-free you’d have $9600 in the bank in just five years.

get out of debtPaying off that debt

One way to get out from under credit card debt is to get a home equity loan or home equity line of credit and pay it off. This would dramatically reduce your interest rate, which will reduce the amount of interest you will end up paying. However, there is a danger to this and you should tread very carefully with the equity in your home. The problem is that you would have a new loan and if not careful, could very well rack up new credit card debt. This would leave you in a worse situation because you would now have a home equity debt as well as credit card debt. For this to work, you need to have a tremendous amount of discipline and personal commitment because if you don’t, you could easily end up in even worse shape than before you took out the loan.

Another option

Another way to get credit card debt under control would be to do a balance transfer from your high interest cards to one with a lower interest rate. There are still cards available that give new cardholders anywhere from six to 18 months with 0% interest. However, before you rush off to get one of these cards make sure that you read the fine print as some have balance transfer fees of 2% to 3%. Plus, you must pay off the credit card before your promotional period expires or you’ll be hit with more interest that could be as high as 18% or even 20%.

Snowballing your debt

Third, you could use the snowball strategy to pay off your debts. The way this works is that you start by paying off the card with the lowest balance because this will give you a psychological boost to continue paying off your debts. And when you get that first credit card paid off, you will have more money available to begin paying off the debt with the second lowest balance and so on. Where this strategy gets its name is because as you pay off that first debt you will begin to gather momentum just like a snowball rolling downhill. Many people have paid off as much as $25,000 or $30,000 in debt in just two to three years by using this strategy. It was invented by the financial guru, Dave Ramsey who explains more about it in this brief video.

The worst option

There is yet another option for getting out of debt that is sometimes called the “nuclear” option. It’s to file for a chapter 7 bankruptcy. If you can qualify for one of these bankruptcies you will get all of your credit card debts discharged (eliminated). If you have medical debts, a personal loan or personal line of credit, they should also be discharged. But there’s a good reason why this is often called the nuclear option. A bankruptcy will stay in your credit file for at least seven years. It’s likely that you would not be able to get any new credit for the first two or three years after the bankruptcy and when you can get credit it would come with a very high interest rate. Plus, there are some debts a chapter 7 bankruptcy can’t discharge, including student loan debt, alimony, child support, a mortgage or auto loan and any debts incurred through fraud.

Marked for life

The worst consequence of a chapter 7 bankruptcy may be the fact that it will stay in your personal file for the rest your life. Fifteen years from now you could get turned down for a really great job when your prospective employer saw that you had a bankruptcy. Many employers now routinely check credit reports as part of their hiring process. And like it or not, some people will always hold a bankruptcy against you because they believe it shows that you’re irresponsible when it comes to handling your personal finances. Your chances of getting that dream job may also be reduced if that prospective employer sees other negative items in your credit report such as late payments, defaults, accounts that have gone to collection and charge offs.

The best policy

What this all means is that the best policy is to get your debts paid off as quickly as possible. This should always come first before putting money into savings. It will pay off big in the long-term and when it comes down to it, what’s better – to be in debt or debt free? If you were to pose this question to that group of kids sitting around a table in those commercials that are currently running, we’re sure they’d all yell “debt-free.”

13 Ways To Cut Your Spending This Year

Pair of scrissors cutting the word SpendingIf you made some financial mistakes last year, think about 2014 as a “do over.” Now, while the year is still young would be an excellent time to make some changes that will boost your financial bottom line. Of course, before you can begin to slash your spending, you need to know where your money’s going. If you don’t already have a budgeting tool, you need to get one such as Mint. It’s free and is available for use on your computer, iPhone or Android-powered device. The best thing about Mint – other than the fact it’s – free – is that all you’re required to do is type in all your account numbers – those of your checking and savings accounts, credit cards, etc., and Mint does the rest, bringing all your financial information together so you can see exactly where you stand at a glance. Mint will even organize your spending into budget categories and then send you an email alert if you overspend in any of them.

Once you get a budgeting tool, you will need to make a note of all your spending for at least a month, right down to that soda you purchased at work.

It doesn’t work for everyone

You may have hard that old cliché that all you have to do to get your finances under control is just skip that morning latte. However, this doesn’t work for everybody, especially people who never have a morning latte. But here are 13 things that most people could do to save money and avoid overspending.

1. Cook at home more

Most of us tend to eat out too frequently. Suppose you’re a couple and eat out three times a week and spend $30 each time. That’s $90 a week, $360 a month and $4320 a year. Stop and think what you could so with that $4320 – like a nice two-week vacation. Anyone can cook and the Internet is replete with recipes for good-tasting meals that aren’t that expensive to make.

2. Use couponsCoupon Savings

We read recently that you really don’t have to pay full price for anything anymore and this is certainly true of groceries. You could go online to sites like www.coupons.com or www.couponmom.com and find coupons that would save you money on just about everything you buy at the supermarket, especially cleaning and personal care products. You should also get a loyalty card from your favorite supermarket. We get money-saving offers from our store every week and all we have to do is click on a few links and the “coupons” are loaded right on to our loyalty card. Also, make sure you watch for sales on items you can buy in bulk like paper towers, bathroom tissue, shampoo, rice and the like.

3. Drop your landline

We mean this seriously. If you have a cell phone, why do you still need a landline? This can cost $50 or more a month and why? Cancel that service and you could save as much as $600 this year.

4. Review your insurance costs

Auto and homeowner’s insurance is a competitive business. Take a hard look at your insurance bill(s) then go online to www.esurance.com or a comparable site and do some comparison shopping. You might be surprised at what you find. Also, check to make sure your insurance fits your needs. Think about your coverage and your deductibles. If you could increase the deductible on your collision insurance from, say, $250 to $500 or even $1,000, you would definitely slash that bill.

Woman talking on the cell phone5. Negotiate with your credit card providers

Check around to see if you can find a credit card with a lower rate than the one(s) you’re currently using. If you find one, call your current card company and ask it to match that lower rate. If it refuses to do so, transfer your balance to that other card.

6. Find a cheaper health club

You really don’t need to spend $100 a month or so on a health club membership. If you shop around a bit you should be able to find a much cheaper one. We have a rec center near us with a great workout facility where we get a card and then buy “punches” so that we’re paying only when we actually use the facility, which puts us in total control or our spending.

7. Pay off your debts

Wouldn’t you like an instant raise of $200, $300 or even more a month? Then pay off your debts. If you have multiple credit card debts, first tackle the one with the lowest balance. You should be able to pay it off fairly quickly. What this will do is free up money you can then use to begin paying off the credit card with the second lowest balance. Do this for a year or two – depending on how much you’re in debt – and you will be debt-free.

8. Stop using those credit cards

Debt is just borrowing from tomorrow to pay for today’s spending. If you stop using those credit cards you’re paying for today, well, today and won’t have to worry about tomorrow’s debt. There is a psychological term called being “mindful.” This simply means stop and think before you do something such as pulling out a credit card. One of the worst things about credit cards is that they are too easy to use. Say that you are looking at an item costing $599.95 and you know you only have $400 in your checking account. It’s just too easy to “card it” and worry about that $599.95 later. But if you’re mindful and think about the consequences of charging that $599.95 you just might decide to take a pass and not pile on more debt.

9. Call your Internet and TV providers

If you ask, you may find that you can get a better deal. More and more people are abandoning cable and satellite television and there are now a number of competitors in the market. Cable and Internet companies are eager to hang onto their customers. This means you may be able to get a deal. The best deals will come from your provider’s customer retention department, which is the one that you call to cancel your service. One person this recently and saved close to $50 a month.

10. Review your cell phone bill

The cell phone carriers are now offering new deals including no-contract and pay-as-you-go plans. If your contract is up see if can find a plan that would save you money. If you find one then should ask your existing provider if it will match that other price or give you a better deal. If it won’t, say sayonara and move to the other plan.

11. Watch that online spending

If you have trouble sleeping at night, it can be easy to go online and start shopping in those wee, small hours of the morning. However, if you’re not careful that type of spending can add up dramatically. One way to prevent this is to unsubscribe from all those email alerts from stores and online retailers that are offering those sweet, sweet deals.

12. Create an emergency fund

Whether you like to think about this or not, you are going to have an emergency of some kind. It could be that the transmission in your car falls out, that you’re in an accident and require hospitalization or you lose your job. If you don’t have an emergency fund, you’ll have to use debt to get through the emergency. If it’s a really serious emergency, you could end up literally thousands of dollars in the hole, which would take you years to pay off. Most financial experts say that you should have the equivalent of six months’ living expenses banked away in an emergency fund. That way when an emergency does occur, you will be able to pay for it without adding big debt.

Family Budget Planning13. Make a budget and stick to it

Whether you use Mint, some other budgeting app or just a piece of paper and a pen, it’s critical to make a budget and stick to it. However, it’s almost bound to fail if you are too stringent with yourself. Be realistic and give yourself an allowance for discretionary spending. Then don’t spend any more than that. Budgeting works and if you’re not taking advantage of it, it’s time to start.

How To Be A Smart Credit Card User

woman breaking a credit cardThere was a time when credit cards were treated with respect. For example, my parents had just one credit card and used it very carefully. They made only a few charges each month and were almost religious about paying off their balances on time every time.

Today, we tend to be more nonchalant about our use of credit cards. They’ve become so commonplace that many of us take them way too much for granted. As a result many Americans are having a problem with debt – due to those little pieces of plastic.

Protecting yourself from overspending

Fortunately, there are things we can do to protect ourselves from credit card abuse. It begins with making some rules about the way your use your credit cards to avoid that sinking feeling of loss when your credit card statements arrive and you see how your balances have swollen to the point where you begin to feel things have become hopeless.

10 tips for avoiding credit card  problems

Here are 10 tips that for smart credit card use than can help prevent this from happening.

1. Pay more than the minimum. If you pay only the minimum amounts due on your credit cards each month, you’re basically sentencing yourself to credit card hell. In fact, if you do this you might literally never get out of debt. One example of this is if you owed $10,000 and made just a minimum payment of $30 or $40 every month, it could take you as long as 18 years to become debt free. On the other hand, if you were to make more than the minimum required payment, you’d be out of debt in no time. As an example of how this works watch the following video to learn how one family paid off  $12,712.65 in credit card debt in just a year.

2. Pay off your cards. This may seem obvious but the best way to stay out of trouble with credit card debt is to pay off your cards. If you have a card with small balance, pay it off first, then go to work on your other cards. If you concentrate on knocking off your debts one at a time, you might be surprised at how quickly things get better.

3. Be smart about how you charge. Make sure you never run up a card to its limit. When you use a card sensibly, it will have a very positive effect on your credit. Conversely, if you run up your balance to the max, this will have a negative effect. The reason for this is that when a financial institution checks your credit one of the most important things it will look for is how much credit you have available vs. the amount you’ve used. This is called your debt-to-credit ratio and the lower it is, the better. So if you must have a balance on one of your cards, make sure you keep it low.

4. Don’t take cash advances. Cash advances come with much higher interest rates than when you use a credit card to make purchases. If you have an emergency and no other choice, it might be acceptable to take a cash advance but otherwise, stay away from them – especially those “checks” you probably get periodically from one or more of your credit card companies.

5. Always pay on time. No matter what else is going on in your life financially be sure to pay your credit card bills on time. Most financial experts say that just one late payment can drop your credit score by as many as 50 points. This could easily move you from having “good” credit to “poor” or even “bad” credit, which could cost your money because of the higher interest rates you will be charged.

6. Don’t be afraid to negotiate. Go online periodically and check to see what other cards might be available with lower interest rates than the ones(s) you have now. If you find one with a better interest rate, call your current credit card provider and ask it to match that better rate. Smart consumers do this almost every month. And if your current credit card issuer won’t match the other card, transfer your balance to it.

7. Keep an eye on your account. If you’ve been paying any attention at all to the news recently you know that there was a credit card breech that affected more than 90 million Target customers. Now, more than ever, you need to keep an eye on what’s happening with your cards. Go online and check your balances regularly – at least once a week – to make sure all the purchases you see are yours If you spot any fraudulent activity, contact the credit card company immediately and alert them as to the problem.

8. Be careful about transferring your credit card information. Don’t send your credit card information via the Internet unless you’re positive the site is secure. There are phishers out there just waiting to steal your information. Never transfer a credit card number, your social security number or other important financial information to a site unless you’re positive it’s secure and trustworthy

9. Keep your credit card accounts open. When you pay off a credit card, don’t make the mistake of closing the account. This will lower your credit score because one of the five components used to calculate your score is “length of credit history.” If you were to close out an account you’ve had for a long time this would definitely ding your credit score. Plus, it would affect the total amount of credit you have available, which in turn would damage your debt-to-credit ratio.

10. Get your credit reports on a regular basis. There was a report issued by the Federal Trade Commission last year that one in five Americans have errors in their credit reports and that 5% have errors so serious, it could be damaging their credit scores. You can get your credit reports free once a year, either from the three credit reporting bureaus – Experian, TansUnion and Equifax – or on the site www.annualcreditreport.com. The best way to get your reports is one at a time at three-month intervals. That way you would be able to monitor your reports yourself and avoid the expense of paying some company to do it.

What to look forSample credit report and key

When you review your reports, look for negative items such as late payments, defaults, accounts that have gone to collection and missed payments as these are what would damage your credit score the most. If you do find one or more of these items, make sure they aren’t errors. If you do find a mistake, you need to immediately write the credit bureaus and dispute it. You will need to have documentation supporting your claim. But if you do this the credit bureau is required by law to contact the financial institution that provided the information and ask that it be validated. If the institution that provided the information can’t validate it or fails to respond within 30 days, the credit-reporting bureau must, by law, delete the information from your credit file. As you might imagine, this could give your credit score a nice and immediate boost – maybe by as many as 50 or 100 points.

In summary

The net-net of credit card usage is actually pretty simple. Just use your credit cards wisely and with common sense. Don’t run up huge balances you can’t pay off at the end of the month, never take cash advances and keep an eye on your accounts. Do this and you will be able to take advantage of the convenience of having a credit card without the danger of a person or an originator of the will and of falling into credit card debt hell.

Could You Actually Use Credit To Get Out Of Debt?

Woman holding bills in both hands and looking confusedI’m sure you’ve heard that old proverb that, “you can’t borrow your way out of debt.” And for the most part that’s true. Take debt consolidation loans for example. If you owed $15,000 on credit cards, took out a loan and paid them all off, you would still owe $15,000. The only differences are that you would owe the money to a different lender, you would have a lot more time to ` off the debt and you would have a lower – in some cases a much lower – interest rate than you’ve been paying on your credit cards. However, there are some ways you could use credit to sort of get out of debt and here are three of them.

0% interest balance transfer cards

If you could qualify for a 0% interest balance transfer card you debts wouldn’t be eliminated but it could be a useful tool. The way these cards work is that when you transfer the balances on your other credit cards to the new one, you would have a debt-free introductory period of anywhere from six to 18 months – depending on the card you choose. The benefit of these cards is that all of your payments during your introductory period would go to paying down your balance and not for any interest charges. If you could make two or three times the minimum payment before your introductory period expired, you could have your balance completely paid off.

Interest-free financing offers

There are cards that are similar to balance transfer cards in that they offer the opportunity to save money with 0% APR financing on new purchases. This would allow you to keep enjoying the convenience and security of your credit cards but without being charged interest on your purchases. If you use the money you save to pay down your debt, you should be able to pay off your balances much faster.

Low-interest credit cards

If you can’t qualify for or choose not to get a 0% interest balance transfer card, you could at least transfer your high-interest balances to a lower interest credit card. Look up the interest rates you’re currently paying and you might find they’re as high as 19% or even higher. You could save a substantial amount of money by transferring the balances on those cards to a new one with a much lower interest rate. For example, as of this writing there were cards available with an interest rate of 13.2%. Get one of these, transfer your balances to it and again you would free up money you could use to pay down your debts.

Use a credit card repayment calculator

Whether you realize this or not, thanks to the CARD Act of 2009 your monthly statements now show how long it would take you to pay off your balance if you made only the minimum payments and how much you could save if you paid off your balance in three years. This information can be very helpful. But if you’re having a problem with debt, you might need a more powerful tool that could help you create a plan to pay off your balances as quickly as possible. One that we like is the Credit Card Repayment Calculator on the Federal Reserve Website. Or you could use the Credit Card Pay Off Calculator on Credit.com. It’s very flexible and will show you how long it will take to pay off your balances given your interest rates and different payment amounts.

For more tips

If you’d like some additional tips on paying off credit card debts, watch this brief video.

How to save money with your smart phoneMobile Banking On Smart Phone

Have you ever thought of your smart phone as a tool for saving money? They can actually be a sort of Swiss Army Knife what with all the different apps available for use on them. In addition to using your smart phone to take photos and make phone calls, you could have, as the Manning brothers revealed in that funny video, football on your phone. Plus, you could use it a variety of different ways that would save you money. Here are nine apps you should have and the best part is that most of them are free.

Redlaser

Why pay the full price for anything when you could have this free app on your iPhone, Windows Phone or Android phone? It’s great for comparison shopping because when you find something you want to buy, you use it to scan the item’s bar code. It will then automatically search, compare and spit out the best prices available at all online and brick-and-mortar stores within a few miles of where you’re shopping.

Retail Me Not

This free app is, unfortunately, available for use only on an iPhone. It provides you with access to tens of thousands of retailer deals and coupons almost instantly. You can shop online on your phone and then drag promotional codes into the Retail Me Not website to boost your savings or even redeem the coupons directly from the app in the store – without ever using a printer.

Eyeona

Here’s another free app that can be used with an Android phone or iPhone. The way you use it is to photograph all your receipts. If any item goes on sale within the next 30 days, the app will alert you. You can then go back to the merchant, show him or her the lower price and request an adjustment.

Key Ring

Aren’t you tired of carrying around all those store loyalty cards? I know I am. You can eliminate this with the free app, Key Ring. You use it to take pictures of the ID numbers of all your loyalty cards, which it stores away. You can then whip it out and use it whenever you would qualify for a discount or a reward at one of your favorite stores. You can put all those loyalty cards away in a drawer where they won’t be stuffing up your wallet.

Coupon SavingsCoupon Sherpa

You probably know that a Sherpa is a guide that helps people climb mountains in the Himalayas such as Everest. Well, Coupon Sherpa can guide you to some great savings. This app is cool in that it totally eliminates the need to clip and take coupons to the store with you. The way it works is that you find coupons online and then simply flash the phone at checkout to get your discounts. It’s free and is available for use on iPhones and Android phones.

GasBuddy

This app is free for use on Android phones but costs $2.99 in the iTunes store. You type in your zip code and it will show you the lowest gas prices at stations near you – with the stations displayed either as a list or on a map.

CompareMe

This app is available for use only on an iPhone and costs $1.99. What it does is let you quickly compare and convert the prices of products based on many different package sizes, lengths, volumes, and units to find the best deal. It will calculate discounts and premiums and display them directly or you can set prices, numbers and amounts yourself using the app’s optimized keyboard.

FareCompare

If you’re looking for an airfare that won’t break your budget and have an iPhone, you need this app. You use it to find cheap flights at the nearest airport or you can set it to provide up to six alerts a day if the prices drop on an airfare to your favorite destination.

RepairPal

There’s no need to over pay for auto repairs ever again Whether you need service or roadside assistance with a flat tire, this app will show you a list of the shops closest to you along with accurate estimates of whatever it is you need done. RepairPal is free and can be used on iPhones or Android phones.

Four Stories Of People Who Tamed the Debt Monster

Debt monsterIt can be said that a little debt never hurt anyone. And that there’s even such a thing as “good” debt. But big debt generally means big problems. The stress of dealing with debt can cause both emotional and physical problems, including headaches, insomnia, ulcers, high blood pressure and heart problems. What can you do if you’re struggling with big debt? Here are the stories of four people and how they tamed the debt monster.

$140,000 in debt

Our first story is of a couple that was faced with a mountain of $140,000 in debt. Yet, they were able to eradicate it in less than three years. How did they do this? They would be the first to admit it took hard work, dedication, good fortune and perseverance. While they were required to make numerous sacrifices they didn’t starve themselves or make their lives miserable. Where did all this debt come from? It came from student loans.

The good and bad news is that the husband lost his job. However, he received severance pay and when he got a new job was able to use the money to begin paying down the couple’s debt. They then used the money in his savings account along with his new paycheck to pay off $15,386 in debt.

Their next step was to develop a budget where they could live on his salary alone and use all of her monthly paychecks to pay down their debt. In addition, they minimized their monthly expenses as much as possible and used all unexpected income to make additional payments. They cashed out his investments and then used their emergency fund to do a final payoff.

$150,000 – mostly in business debt

Our second story is of a couple that became $150,000 in debt mostly because they lost two businesses. It took them five years to pay off this debt but they were able to do it using a combination of tactics. First, the wife became a mad coupon clipper. Her favorite websites were Southern Savers and Money Saving Mom. The stores she chose were CVS, Target, and Harris Teeter.

Second, they stopped going into debt. They cut up their credit cards so there was no way they could create any more debt. There were some instances such as unexpected medical expenses where they did have to pay them off over time. Plus, they had a bigger tax bill one year and had to pay it off over the following 12 months. But the important thing is that they saw their debt slowly and steadily going down. They had learned the important lesson that you cannot pay off debt while you are continuing to go into debt.

happy familyThird, they followed the advice of Dave Ramsey and snowballed their debts. This meant first paying down the debt that had the smallest balance while continuing to pay the minimum amounts on their other debts. The minute they paid off the debt with the smallest balance, they went to work on the next one and threw all of their extra money at it. They did stay flexible with some of their spending. For example, they sent their kids to a three-day-a-week private school and even bought season passes to a nearby amusement park. Beyond this, their only vacations consisted of staying at a beach condo owned by a family member or by going on vacation with other members of their family.

Another tactic this couple used was to have two separate banks. They had one for everyday spending and a second for savings and sinking funds. Before when they had just one account they found it was more difficult to save money, as the “extra” money they had earmarked for paying off debt would somehow shrink. Now, they put enough to cover their living expenses in an account at their main bank and the rest into their secondary account at a different bank. This helped them save more money each month.

They say the most important lesson they learned is that if the couple agrees to pay off debt it may take longer but it is better than trying to pay it off faster where one of the two is a bureaucratic tyrant.

Paying off $18,500 in debt

This story may not seem as dramatic as the two previous ones but debt is much like art in that it’s all in the eye of the beholder. We’re sure that the $18,500 that this couple had in debt was just as scary to them as was the $150,000 that couple #2 had in debt. The wife admitted that they were this much in debt mostly because of her. So how did she fix things?

Her first step was to create a spreadsheet to review all of her debts. She then created a list of her monthly fixed expenses and developed a spending plan. Her next step was to create a “debt snowball.” This meant ordering her debts from the one with the smallest balance to the largest and then scheduling payments to the smallest debt until she had paid if off while continuing to make the minimum payments on her other debts. She would then move on to the debt with the next smallest balance and concentrate on paying it off.  Think that debt snowballing might work for you. Watch this Dave Ramsey video to learn more about this strategy for becoming debt free.

This woman  initially believed that it would take her 18 months to pay off everything. But she got lucky and received a sizable bonus and was able put $1000 in savings and used the rest to retire her last debt.

Two important things this woman learned about paying off debt is that you should allow yourself a certain amount of money for fun out of each paycheck to help stay happy and motivated. She paid off all of her bills as soon as she received a paycheck including her debt and then viewed whatever she had left in her account as “fun” money. This is what kept her from overspending. Second, she learned that if she had a small setback such as a vet bill or car repair bill to not that eat into her debt snowball or to get her down.

Over $14,000 in debt and no savings

Our fourth story is of a woman who became debt-free after owing more than $14,000 in debt and with no savings. She felt her financial life was totally out of order and didn’t know how to fix it.
In this case, the woman had a full-time job that paid $37,072 a year plus bonuses and side jobs that totaled $5000. This came out to be an average of $3496 a month or about $42,000 a year.

The way she chose to get rid of this debt was to first pay off her credit card debts because they had the highest interest rate and were unsecured debts, which made them riskier. In addition, they had the smallest balances, which made it easier for her to start small and then work her way up. In addition, she created a four-step program for becoming debt-free. Her first step was to create a tough but attainable timeline. In her case it was to become debt free by December 2012.

Her second step was to learn where her money was going and where she could make the necessary sacrifices. This amounted to living on about two thirds of her income, which was definitely rough in the beginning. She viewed her budget as a spending plan that gave her more control over where her money went. She actually learned to love living below her means. What did she have to give up? She had to give up her cable TV, vacations and traveling, dining out at restaurants, movies, a gym membership, and visits to tanning salons. As tough as this was, she soon learned that those activities had delayed her time and production and kept her from reaching the debt-free position she wanted to achieve.

Step three for this woman was to create more income. She spent a good deal of time marketing herself and her skills to increase her income. She had already cut back on her expenses as much as she felt she could so now was the time to maximize her earnings. She did this by freelance writing in her spare time, which added more than $500 per month to her income.

Finally, her step four was learning how to stay motivated and to celebrate even her small wins. To become debt-free is not a sprint. It’s more of a marathon. But as she learned, if you celebrate the small “wins” this can help keep you going. She also learned that while there are also awesome financial tools available, the biggest and most important tool in her financial arsenal was herself – her determination and discipline.

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