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7 Out Of 10 Americans Say Debt Elimination Is Not Possible

Credit equals HouseDid you know that 7 out of 10 Americans feel like they can never make debt elimination a reality in their lives? This is according to the study published on It is revealed in their study that 80% of Americans carry some form of debt. Whether it is mortgage, credit card debt or student loans, they all have debt. The study revealed that most Americans have more assets than debt. However, you need to understand that one emergency could tip their financial situation over the edge.

What is more unfortunate is the 7 out of 10 Americans who believe that debt is a necessity. They do not like debt – but they have accepted the fact that they cannot live without it. How sad is that way of thinking?

We all want to eliminate debt, but the reality is, we need it as some point in our lives. At least, this is true if you want to expedite the growth of your finances. There are things that debt can bring that will benefit your financial life – at least, if you know how to use it to your advantage.

2 reasons why debt cannot be eliminated completely

Some people may think that those who opt to get into debt simply do not want to wait until they have saved enough for the purchase. There are also those who think that people who opt to be in debt are those who cannot make the sacrifices to allow savings to fit in their budget. They also lacked the foresight to just save for the expense instead of relying on debt to buy the expensive purchase.

While it is true that you can save for every purchase that you will make, that is not always the practical way to do things. Think about this reasoning. If you are renting an apartment in New York for $2,600 (the average rate), wouldn’t it be more practical to get a home loan worth $400,000, and pay the monthly amortization of the same price? Why wait for a couple of years to save up the amount if you can loan it and save on your rental costs in the process?

Apart from practicality, there are also two reasons why debt elimination is not entirely possible in our society.

Credit score

The first is what we call, the credit score. There is an article published on that mentioned how your credit score is actually more important than your GPA. Obviously, this is directed at college students. The article is encouraging students to take care of their credit history because it will probably be more important than their grades. For instance, their GPAs will not matter a few years after graduating because employers will soon start looking at their job history more than their grades. A wrong credit move, on the other hand, will stay on your report for the next 7 years – which will have an effect on your credit score.

Now why is this score very important? One of the reasons provided by the article is for your future purchases. When you have a low credit score, you will be given a high interest rate on your future loans. That can compromise purchases like your home loan or car loan. There are other things that will be affected if you will not take care of your credit score. It shows how responsible you are when it comes to your money.

If you want to keep your credit score high, that means debt elimination is not possible. A credit report, where you get the data to compute your score, requires you to use debt in order to gauge your behavior towards it. If you exhibit good behavior in handling your debts, then it will reflect well in your credit score. Deciding not to use debt is will not give you the chance to show how good or bad you are when it comes to handling your credit.

Expensive expenses

The next reason why you cannot pursue debt elimination is because of the expensive expenses that you need to spend on in order to improve your personal finances. Take for instance buying a home. We mentioned how it is more practical to just borrow money for this expense. However, it is very rare that people can buy it in cash. It is too expensive to do so. If you will save up for it and rent while you are still coming up with the funds, then you will be wasting money.

Borrowing money to buy a home makes more sense. By doing the right calculations you will know how much you can borrow so your monthly amortization will be the same amount as your current rental price. As you pay your amortization, you get to increase your home equity. Instead of making your landlord rich, you are adding more into your personal net worth. Not only that, if there is an increase in the value of your home, your net worth will benefit from that increase too.

Another expensive expense that you can make is putting up a business. Instead of slaving away in your 9-5 job, you can pursue your passion and possibly earn more because what you are doing is something that you love to do. Some people cannot pursue this potential because they do not have the capital to support the business that they want to put up.

These expenses are all expensive but you know that you cannot wait to save up for them because you are wasting the opportunity to grow your financial worth. The solution is to just forget about debt elimination and simply borrow the money that will get things started for you.

Three ways to define if debt will do you good

Now that you have the reasons why debt should not be eliminated, you need to understand how you can define the type of credits that will do you good. Not all debts can increase your personal net worth. Some of them are actually bad for you.

Here are three ways that you can ensure that debt will only do you good.

It must put money in your pocket.

Qualification number one is it should be able to put money in your pocket. An article published on said that debt costs you money – that is because of the interest rates. Instead of using that money to improve your financial situation, it goes to your creditors and lenders. While this is the usual scenario, there are debts that will put money in your pocket. For instance, when you buy a home, try to look for one that has a basement or garage that you can rent out. That way, the lease that your tenant gives you can be used to pay off the monthly amortization of the mortgage. If you price it correctly, there may be money left from your tenant’s rent to add to your monthly cash inflow.

It must create opportunities.

Another qualification that will tell you that the debt is good for you is when it can open opportunities for you. Take for instance student loans. Regardless of what you hear or read in the news, this is a good debt. You can get a lot of opportunities when you get a college degree. It allows you to seek out higher paying jobs after you graduate. Student loans becomes a necessity when it is the only way that you can get a college education. If there is no way that you can finance your college degree, then proceed with the loan because that is how you can open opportunities to grow your finances.

It must not cripple your financial future.

The last qualification that will make a good debt is when it does not cripple your financial future. You want to set up your future right so you are financially stable. This means the debts should not keep you from future financial opportunities just because your income is tied up to your debt payments. We’ve mentioned earlier that debt costs you money. Well this money that you will be spending on your debt is in your future. When you take on debt, you are setting up your future self to pay for the expenses of your past. Instead of being able to use your money to enjoy the pleasures of today, you are using it to pay for what made you happy in the past. Most of the bad debts are purchases that already mean nothing to you once you are paying them off. The good debt, however, are credits that does not compromise your financial future in any way. As mentioned earlier, it has to put money in your pocket – or at the very least, be able to pay for itself.

If you can follow these rules, then you do not need debt elimination to protect your personal finances.

How To Handle Awkward Situations To Avoid Debt

woman with empty walletOur society is not keen on encouraging us to avoid debt. In fact, the financial industry have invented a lot of products that will make debt very easy to do. Take for instance credit cards. This purchasing tool made borrowing money easy. Not only that, it made being in debt the norm. There was a time when buying through credit cards made you feel rich.

We all know that this is one of the most popular debt traps designed for consumers. You may feel rich using your credit cards because it gave you unlimited buying power. But what you do not realize is that you are not actually buying with your own money. You are borrowing from your creditor. If you fail to pay the creditor in time, you will pay them with interest. Now isn’t that a waste of money?

The truth is, our society seems unable to avoid debt. According to, the household debt in America has grown again. The report said that it actually stayed flat because the growth is only 0.2%. Seems like a small amount – until you realize that the 0.2% is actually $24 billion. Isn’t that astounding? That is what you get when the overall credit is currently at $11.85 trillion.

This is a really scary scenario. How have our society come to this? How can we look at a $24 billion debt growth and say that consumer debt stayed flat? If you think that you will get support in your pursuit of a debt free life, you are sadly mistaken. The importance given to credit scores can prove this. Society will not tell you to give up debt. You need to be in debt in order to get a good credit score.

Living in a society that puts importance in credit means feeling awkward about saying no to situations that will put you  in debt. It means feeling ashamed that you have to say no because you want to avoid debt.

Well society might feel differently about you avoiding situations that will get you in debt. But if you think that it is the right thing to do, then you need you stick to what you feel is best for your finances.

2 awkward situations with friends that can put you in debt

When it comes to awkward situations that can put you in debt, we can think of two scenarios that you might get involved in. Let us discuss both of them and see how you can handle them without damaging your pride – at least, not too much.

Backing out of what turns out to be an expensive plan.

Here is the scenario. Let us assume that you and your friends plan to travel. When you are part of a group, you usually assign one person to take care of the booking details when you are travelling with. If that person is a high spender, you might end up with quite an expensive trip. If everyone agrees to the details of the plan but you know that you cannot afford it or it will be beyond your budget, what would you do? Would you back out without a second thought and say that it is a trip that is beyond your budget? Or would you go through with it and just use your credit card to pay for the trip?

According to a survey done by the American Institute of CPAs and the Ad Council, Millennials have admitted that they rely on the financial habits of their friends to set their own habits. The press release published on indicates that if they have friends who are high spenders, the chances are, they will be too. If they want to become savers, they need to look for people who are more inclined to save.

You know that the right thing to do is to choose the first option. It is not a good idea to go through with a trip or any other entertainment expense just because everyone else is doing it. This is even true for that weekly night outs. If you know that it is something that can ruin your budget, you need to be honest and say that you cannot afford it. Do not feel ashamed. If they are your real friends, they will understand. The next time you make plans with them, they will consider your budget.

Saying no to a call for financial help by a friend.

Now we all need to help out our friends right? We need to be there for each other. But what if that friend of yours want to borrow a huge amount of money from you? Or what if they ask you to co-sign a loan with them? What should you do?

Before you say no, you need to consider your finances first. Do you think you can afford to help them out? When it comes to lending your friends or co-signing loans for them, you need to know that you are not just putting your finances on the line. You are also endangering the relationship that you have with them.

Instead of doing what they ask, why don’t you go to the root of their problem to help them? It is not just about you trying to avoid debt. For instance, if they need a co-signer, that means their credit score is not good enough for them to be able to borrow on their own. Instead of co-signing, why not help them fix their credit score? If they need a loan, why not give them what you can and help them save up for the rest of the amount that they need? Giving them even a small amount without asking for anything in return will let them know that you are there to support but that they cannot rely on others for what they need. It is better to let them solve the problem on their own than to rely on others for help all the time.

Do not make any of these financial mistakes – regardless if they will put you in an awkward situation or not. It is still better to avoid debt than to look good in front of your friends.

Three habits that will keep you from acquiring debt

If you really want to keep yourself from being in debt, you need to follow certain habits that will keep you from unnecessary borrowing. Here are three habits that can help you out.

  • Have a budget plan. This plan can help you avoid debt because it makes you aware of your financial position. When you know how much you can afford to spend each month, you can make better decisions about the transactions that you will involve yourself in. You do not have to think twice about saying no to that expensive trip that your friends are planning. Or, you will know what expenses to sacrifice in order to afford that trip. Either way, a budget will help you avoid debt.
  • Budget for entertainment expenses. As you create your budget plan, it is important that you allocate an amount for entertainment purposes. According to an article published on, entertainment expenses amount to $17,000 a year. At least, this is for the whole family. But if you are single, you can still base your estimates on this amount. You want to be able to join your friends somehow. If you cannot join them all the time, you should budget to be with them at least for some of their hangouts. That way, you do not need to sacrifice your friendship and your finances at the same time.
  • Build up your emergency fund. The last thing that you need to work on is your emergency fund. This is one of the effective ways that you can avoid debt. Sometimes, people fall into debt because they are unprepared for unexpected yet important expenses. In order to get out of a tight spot, they are forced to borrow money. This is the reason why you need an emergency fund. If you have one, you do not have to put yourself in a position wherein you have to borrow money in order to pay for an emergency.

Although these habits are effective, you need to be cautious of the financial habits that you are implementing in your life. Even the good money habits can sometimes have negative effects if you are not careful. Here is a video that discusses 4 good financial habits that when done in extreme, can cause negative repercussions.

Best Practices After Debt Relief

debt relief signDebt relief is a necessary step towards debt freedom. Of course, that is easier said than done. Although you are earning a lot of money, you cannot just dump all of that towards your debt payments. You have a lot of expenses to think about too. This is why a lot of consumers take forever to finally get rid of their credit obligations.

Depending on the amount that they owe, it takes them years and even decades to say goodbye to debt. For some, being free from debt will never be a reality. Even before they can completely pay off what they owe, some consumers continue to borrow more money. Some do it by choice, while others are forced into it. Those who are forced into it wait for a miracle to help them achieve debt relief. But miracles, when it comes to finances, are hard to come by right?

Not for the 350,000 students that will be granted debt relief by the US Secretary of Education. According to the news published on, more than $3.5 billion worth of student loans will be forgiven by the government. It is believed that the borrowers of these loans were victims of fraud. They were forced into taking huge student loans by the online schools owned by Corinthian Colleges. This for-profit college closed and filed for bankruptcy – in the midst of fraud charges. The Education Department will forgive a lot of federal loans owed by these students because of their enrollment to the schools of this college company.

We cannot really say that it was divine intervention that caused the forgiveness of this debt but one thing’s for sure, a lot of students will be feeling debt relief because of this event. It is great that these students were kept from financial demise caused by a loan that would apparently – do them no good.

Not everyone is as lucky as they are but this loan forgiveness is not the end of everything. If you want the debt relief to last, you need to maintain it. You can think of it as achieving your ideal weight after dieting so hard. Your efforts will not stop as soon as you see your target weight in the scale. You need to maintain that by eating right and continuing healthy activities like exercising.

What to do after you have paid off your debts

After debt relief, things will not be a tough anymore. But that doesn’t mean no effort will be spent. You need to exercise self control and discipline to maintain the financial state that you are currently in. For those who benefitted from loan forgiveness, the chances of going back into debt might be more likely to happen. That is because they did not work hard for their debt freedom. Those who worked hard and painstakingly saved every penny just to get out of debt would be more motivated to stay out of debt.

If you really want to turn your financial life around, you may want to follow these important activities that will keep you debt free.

Build up your emergency fund.

First and foremost, you have to make sure that you have an emergency fund. This is the money that you will put aside so you have something to spend in times of emergencies. This is a great way to stay out of debt. Usually people end up in debt because they were forced to borrow money after an unexpected expense arose. If you want to stay out of debt, you need to be prepared for these incidents. Since you no longer have debt payments, you can use the money allocated for this to grow your emergency fund.

Set up other saving goals.

Once you have enough emergency fund, you may want to set up other goals that you can save up for. If you want to buy your own house, you can save up for it. The more money you can pay towards the down payment, the lower amount is needed for your home loan. If you want to replace your car for a more fuel-efficient one, it is better for you to save up for it instead of getting a car loan. We all know that cars depreciate as soon as you drive it from the dealer. That means you will be paying way higher than the value of the car – especially if you add to that the interest that will be added to your loan amount. There are other saving goals that you need to look into like retirement or the college fund of your children. According to, American families are still finding it hard to save money for a new car, college or retirement. But with some discipline, you can remove yourself from this statistic and save up for the right goals that you want to have in your life.

Invest your money.

Another task that you can do after debt relief is to invest your money. The first two are tasks that you need to do so you can protect yourself from the uncertainties of the future. This task, investing, will help you grow your personal net worth. You can choose an amount that you are comfortable risking and invest it in stocks, bonds and mutual funds. These will help grow your money better than a regular savings account will. The interest rate of investments is bigger than that of savings accounts.

Reward yourself.

Once you have taken care of the first three, you can think about rewarding yourself for freeing yourself from debt. Allow yourself to feel that debt relief is the secret to a happier life by rewarding yourself. You can buy yourself something that you have been depriving yourself for so long. Of course, you need to make sure that the reward that you will buy yourself is reasonable. And that you will pay for the reward in cash. Do not splurge too much that you will put yourself in a dangerous financial situation again. Buying a luxury car may be too much of a reward. A vacation with the family should be a great prize for what you have achieved too.

Spend smartly.

Now that you have achieved debt relief, you need to maintain it so you will no longer be burdened with debt again – at least, not unless you really have to. That means you need to spend your money wisely from now on. Be careful with your decisions. If you think that a purchase is unnecessary, do not buy it even if you know that you can afford to pay for it in cash. There are better places to put your money in – like your savings account or investment.

How to use credit without falling into a financial crisis

Truth is, although it is very hard to get debt relief, you should not be afraid of debt. Believe it or not, there are good and bad debts. According to an article published on, a debt is categorized as good or bad depending on how it affects your credit reputation and finances. In other words, any debt that you should take from now on should be something that will improve your financial life. If it puts money in your pocket, borrowing money makes sense.

Instead of being scared of debt, you need to learn how to manage it so it works in your favor. Here are some tips that you need to follow when borrowing money.

  • Borrow so you can put more money in your pocket. This simply means you need to choose the debt that you will borrow. Credit card debt is fine but you need to consider what you are using it for. If it will be used to buy a product that will help you function better at work, then you can go ahead and use it. Just try to pay it off in full when the bill comes so you do not have to pay interest on it. Spending on updating your knowledge and skills is also a great reason to be in debt. As long as it can help increase your ability to earn money.
  • Have a plan to pay it back. With any debt that you will borrow, make sure that you have a repayment plan in place. It does not have to be detailed but you need to know where you will get the money to pay it off. If you do not know where to get the payment for the debt you will take, then do not borrow the money.
  • Include the debt payment in your budget. As soon as you know the amount that you need to pay off on a monthly basis, include it in your budget. That way, you will never forget it. This will also allow you to consider how your income will deal with this additional expense. If this expense is beyond your income, you can immediately choose another expense that you can give up so you can afford your debt payments. One of the budgeting mistakes that you can commit is failing to include debt payments. You will be charged with late penalty fees if you fail to pay on time.
  • Limit new credit until you pay your current. Lastly, you need to limit any new debt until you have paid off your existing. Even if you know that the bank will approve your loan, do not borrow money. Leave some room in your budget for your savings. It is better to pay for purchases in cash rather than credit. You can really enjoy your purchases if you know that you have paid for it in full before using it.

Want To Be Debt Free? Be A Minimalist

woman with arms stretchedThe US economy is 70% driven by consumers who are all looking for ways to be debt free. The more people spend and buy, the better the economy will be. A survey revealed that as the consumer spending in the country goes up (currently at $98 as a daily average), that is good news for the economy. It shows that Americans are confident about their finances – more than they had been in the past few years.

However, that does not mean the economy is asking consumers to throw caution in the air and buy items left and right. It will not help the economy in the long run if people purchase a lot of items and and are unable to meet the payments. Getting in debt is a big possibility if purchases are made on a whim.

Some people say it is better to spend two dollars for a one dollar item that you need rather than spend one dollar for a two dollar item you do not need. Smart spending is at the core of US economy. Stopping altogether with consumption could be the end of the economy. But at the same time, smart spending and careful expense budgeting is the key in moving forward.

This is where minimalism comes in. Sometimes referred to as life hacking, frugality or simple living, being a minimalist comes down to being able to focus on what is important. But this is not about eating on the floor and dumpster diving. Even a frugal lifestyle can be fun and minimalism can be just the same. It is also a very real solution to a very real problem. There are successful people who took on a minimalist lifestyle and became debt free.

Finding debt freedom through minimalism

There are people who took on being a minimalist and even has the results to show that it is possible to pay down debt with this particular mindset. One such story is of an olympic rower Rachel Jonat who was staring down at $82,000 in debt with her husband. Using a minimalist approach, they were able to pay everything down in just one year and seven months after they started. Below are their learnings from the experience as shared by

Recognizing the problem

The number one point in trying to be debt free is recognizing the problem and the source of it. For Rachel, she admits that debt has been a way of life from the time she was 17 and got her credit tool. She has been charging expenses and as an olympian, she racked up these items quickly. She had a dream of going into the olympics and participating as a rower.

Rachel was able to pursue her dream while the financial obligations that came with it was left for the credit cards to handle. She was charging items to her card and at one point, her mom even took out a second mortgage on their house just to help out. This is not the usual circumstances where you take out a second mortgage but they did it just the same and debt just became a part of their life.

Even after Rachel got married, they all charged the expenses on their credit card. This will take them back in their attempt to be debt free but it was already done. It was only when they had to renovate their home where they able to sit down and look at their expenses and debt. This is when they realized that they have racked up debt that they do not know what to do.

Minimalism can be a debt solution

Among the other debt solutions out there, the family opted to makeover their lifestyle entirely by letting go of consumerism and becoming minimalists. Here are the reasons why this lifestyle helped them get rid of their debts.

  • It opened their eyes about the role of “stuff” in their lives. Rachel initially got into the idea of minimalism when her sister sent her links to articles about it. She was skeptical at first but she soon realized that it is not about the number of stuff – it is about the idea of the stuff “owning” you. When they own you, the compulsion to have a lot of “stuff” becomes a measurement of your success.
  • It promotes frugality. Frugality can help change lifestyles just as minimalism can be a great help in reaching your objective of being debt free. Being frugal is similar to minimalism in the sense that it encourages you to to focus on the important things. It is not about the quantity but the quality of what you own.
  • It taught them how to choose the things they need to sacrifice. When the couple decided to change their lifestyle, they just had their first child. They were honest enough to admit that it was not an easy adjustment but it made them more determined to identify the things in their lives that they can sacrifice. For instance, Rachel decided to sell her wedding gown. It was very painful but when she found the perfect buyer and glimpsed how happy the bride-to-be was, she realized it was easier to let it go. When she did that, it became very liberating. It became easy to let go of the other stuff as well.

All of these helped the family break free from the clutches of material possessions – especially the need to amass a whole lot of them. Since the compulsion to buy is no longer there, you are able to free funds to help you pay off your debts a lot faster.

Do you have what it takes to eliminate debt and be a minimalist

Towards the end of the article, the Jonat family revealed that although they credit minimalism in being debt free, it was not without any challenges. This is why you need to understand minimalism completely so the changes that will happen to your life will be more acceptable.

There are three important truths about being a minimalist.

  • You have to change your perspective. It is on how we see things that can propel how far we can go. We need to change our outlook on life and see that minimalism isn’t deprivation of material possessions, it is discerning what is essential in your life and leaving behind those that serves no purpose.
  • You need to find what is important. Having focus and knowing your goal is an important aspect of minimalism. You need to put your goal on top of mind and everything you do should push you towards that direction. In this process, you get to appreciate the more important things in life. It can be more time to pursue your passion of reading and writing rather than being glued to the TV. Eliminating the clutter gives you focus and clarity.
  • You learn to put money in its rightful place and role in your life. You start to see money as a tool and not as a master. Minimalism makes you realize that you need to be in control of your money – not the other way around. Once you do that, you will find yourself more in control of your financial decisions. It will give you that initiative to spend not based on what you can afford, but what you really need in life.

Here is a video of Graham Hill as he talks about how less makes you more happy. He gives three important steps to help you achieve a minimalist lifestyle. It is not about how much you own but how much room you have for the important stuff.

4 Extreme Measures To Increase Your Debt Payment Fund

get out of debtAre you one of the millions who are constantly trying to get relief from credit problems? Millions of Americans are still in debt and it seems like they are bound to stay that way for a very long time. It seems that all of our budgets will always include a debt payment fund entry. Will we ever be free from credit obligations?

In an article published on The Wall Street journal website, consumer debt continues to rise. Although it was the slowest in 6 months, fact remains that it continues to grow. As the article on reveals, the non mortgage debts of Americans grew by 4.8% in November. It was slower than the 7% back in October. The statistical information mentions that the slow growth in caused by the lower credit card spending.

Despite this slow growth, you need to remember that even if it is smaller than the past, it is still an increase. It still means we need to pay off more than what we owe in the past.

That being said, getting a foothold on your finances means growing your debt payment fund significantly. But what can you do to give it an increase that is enough to put a huge dent on your debt balance?

4 ways that you can significantly boost your debt payment fund

Although people would increase their income to pay off debt, there are extreme ways that you can cut back on spending to grow your debt payments. We have 4 suggestions for you that will require a huge sacrifice from you and your family. If you want to get out of debt fast, no sacrifice should be too great to get what you want to happen.

Live on one income.

You know how couples decide to have a child and they have to make huge adjustments so they can survive on one income? After all, being their for your child is the greatest gift that you can give them. This is also something that you can do. You can discuss with your spouse or partner how you plan to do this but make a commitment to cut back on your spending so you can afford to live on one income. You can choose to live on the income of the one who earns the most. That should give you more room in your budget.

If you think that this is too extreme, you can try to adjust to it slowly. During the first month, you can allocate 25% of one income entirely for debt payments. As each month passes by, increase that by 25%. By the fourth month, you should be able to put the whole income into your debt payment fund.

Get rid of your car.

This is another extreme measure that you may want to seriously consider. If you think that you cannot live on one income alone, what about giving up your car? Did you know that the average annual expense that a person spends on a car is more than $9,000 a year? At least, this is what reports back in April 2013. If you gave up your car, you will have to deal with the hassles of commute but you get to add $9,000 in your debt payments. You don’t have to worry about car maintenance/repair, insurance, rising gas prices and other expenses associated with owning a car. You can opt to join the commuters or you can ride your bike to work – whatever is applicable. If you opt for the latter, you get to exercise as you go to work and back.

If you have two cars, you can opt to give up just one car and carpool with your spouse/partner. Or you can give up both cars. That will mean an additional $18,000 a year to be sent to your debt payment fund. Do not worry because you really do not have to give up on a vehicle forever. This is only until you pay off all of your debts.

Downsize your home.

Another extreme adjustment that you can do to pay off your debts is to downsize your home. Mortgage loans are still the biggest debt that the average American household owes. If you can get rid of this, you can really put a lot of breathing space into your budget. We are not saying that you give up home ownership like our suggestion with your car. But what we are trying to say is to just live in a smaller house. This will really benefit you in more ways than you know. Instead of having all the extra rooms, just live in a home that has one room for the couple and one for each kid. Or have them share. One dining room and living room should be enough too. You do not really need a big backyard or front yard. You can sell your big house and buy a smaller one in cash. Settle your other debts and live debt free. The upkeep on a bigger home is more costly. Not only will you solve your mortgage problems, you can significantly lower your monthly expenses.

Stop using your credit cards.

Lastly, you can increase your debt payment fund if you stop using your credit cards. These card purchases can be quite a burden if you end up letting them grow. If you are used to making purchases with your card, you have to stop doing that. At least, you can give it up until you have full control of your finances. Buy things in cash for now. It is one of the most effective ways to make sure that you will live within your means.

If you do not want to close cards, you can use it every now and then – like once or twice every six months but only for small purchases. And make sure that you will pay them off immediately. What you are paying on interest can be added to your debt payment fund instead.

How to make paying off debt successful

Doing these extreme measures will really help you solve your debt problems. Increasing your budget for debt payments is one way that you can quickly get out of debt. As you diligently send in your monthly contributions, you can go on your way to achieve a life of financial freedom.

But before you can really achieve that, you have to completely pay off your debts first. Here are some tips that will help you pay off what you owe.

  • Get the support of the whole family. Everyone in the household should do their part as you try to grow your debt payment fund. Even your kids should be in on the effort. If anything it will help them understand the repercussions of irresponsible financial behavior.

  • Put off major purchases. It is not a good idea to make expensive purchases while you are still paying off your credit obligations. If it is not a matter of life and death, opt to use the money to get rid of your balance first.

  • Be very frugal with wants. We are not saying that you should completely eliminate your entertainment activities but you may want to be very frugal about it. Look for cheap alternatives that will help you enjoy your favorite activities without compromising your debt payments.

Getting out of debt can be as fast as you want – but that means you need to make some sacrifices. It doesn’t matter how you choose to get out of debt. There will always be changes in your life that has to be implemented. You cannot live the way you used to because that got you in debt. And if you have to make changes, why not make it as drastic as you can. The more you can sacrifice, the faster you can get out of debt.

Be Careful Of Debt Relief Scams: Tips To Protect Yourself

scammer surrounded by billsIn September of 2013, the federal court in the State of Florida helped the Federal Trade Commission (FTC) in their quest to crack down the lingering debt relief scams that are trying to prey on struggling American consumers.

According the the press release found on the site, the court found the defendants to be guilty of violating the FTC Act by doing the following:

  • Misrepresenting the interest rate reduction services on credit card debts.

  • Misrepresenting policies about refunds.

  • Sending unauthorized billing to consumers.

  • Direct violation of the Telemarketing Sales Rule.

This is just one of the many stories of fraudulent companies that the government is trying to track and shut down to protect the unsuspecting consumers. They are actively campaigning to help consumers learn how to avoid debt relief scams so they will not be swindled out of their hard earned money.

Illegitimate debt relief companies prey on the desperate

The thing about debt problems is it will really cause you to go for desperate measures just to save what little money that you have left. Some people are attracted by “too good to be true” campaigns that are simply just that – too good that it ends up being a fraud.

The Better Business Bureau ( reports that in 2011, the FTC reported that 10.8% of Americans are a victim of fraud. That is equivalent to 25.6 million. The survey from the FTC that was discussed in the BBB article mentioned how most fraud cases happen online. Although the convenience of transacting on the Internet is there, you need to be very careful because a lot of people are easily victimized by all sorts of scams. One of them are debt relief scams.

Among the type of scams on the survey, Credit Repair rank 6th place with 1.7 million victims. On 7th place are debt relief scams that victimized 1.5 million consumers. Mortgage relief scams rank number 10 with 800,000 victims.

According to the FTC survey, a high percentage of the victims did not finish high school or have had a recent negative experience like divorce, illness or a job loss. Those who admit to having a lot of debt are also among the people who are most likely to be a victim of these fraudsters.

Obviously, nobody wants to be a part of this statistic. And since these people are really very sneaky, all you can really do is to do your research and find out how they go about scamming people. Here are 5 signs that you are about to be a victim of debt relief scams:

  • Upfront fees. One defining characteristic of legitimate debt relief companies is the fact that they are able to provide services without asking for upfront fees. This is one quick way of knowing if you are dealing with a fly-by-night company or an established one. The legitimate ones try to earn your trust by showing you that they mean business and they are not collecting anything before they have done their job.

  • Fraudulent practices. There are fine lines in debt relief and even in credit repair that scammers are not too scared to cross over. This is a perfect example of the means not justifying the end. One glaring example is being advised to secure new social security numbers. This is a wrong practice and should not be tolerated. Illegitimate companies would be the type to ask those in debt to consider this to start over a clean slate.

  • Absolute promises. Debt is a case to case basis and there are varying degrees of work that is needed to be debt free. But this knowledge comes only after knowing and assessing every situation carefully and looking at different scenarios and debt relief programs. Scammers will most likely skip this critical step and give big promises of eliminating your debt is given at the start

  • Leaving everything to chance. Debt brings an overwhelming emotion of fear and stress. This is a bad combination and we usually jump on the first “lifeline” thrown our way without thinking it through. Debt relief scams know this and exploit this very weakness debtors have. It is tough but composing oneself and checking emotions outside the door before making decisions will go a long way.  It is important to know the background of the companies by researching first and dealing with them after.

  • Foregoing the fine print. There are people with a knack for reading between the lines. But this should not be the case with debt relief companies. The fine print explains all the general and vague clauses in the agreement. This explains all the details of the contract between debtor and debt relief company. Once you are forced to sign right there and then without being given time to read the fine print, better think twice about the company you are transacting with.

When faced with the decision of choosing a debt relief company to work with, keep in mind these  tips to avoid falling into the trap of scammers.

The TSR: how to spot the illegal ones

The Telemarketing Sales Rule (TSR) is a law that provide consumers with the protection they need against malicious companies that offer debt relief scams. According to the release about the TSR, companies who do not follow these rules are most likely operated by scammers. One of the latest addition to this law is covering not only outbound calls but it includes inbound calls as well.

Here are the important points in this debt relief law that will help you determine the legal companies from the not.

Illegal upfront fees. TSR has made it illegal for debt relief companies to front-load their fees. This is meant to protect the consumers because illegal companies will just collect fees and just prolong your debt problems or worse, disappear without a trace.

If the debt relief company is doing multiple settlements for you one after the other, they are allowed to collect after every successful negotiation with your creditors. Another option is similar to an escrow account where you deposit money to a separate account meant to pay the debt relief company after the transaction is done.

Disclosing information prior to closing. Being an advocate of consumers, the TSR compels all debt relief companies to disclose all basic and pertinent information to their potential clients before signing them into a contract. This protects the consumers by ensuring they are well aware of all aspects of the contract before signing.

This could include the timeline on when the debt relief company could deliver on their promise. It could also be about the costs involved and how much all the fees would be paid at the end. Another would be the negative effects of employing their services in terms of credit standing. These and more are important to be reminded of before signing any contract.

Misrepresentation. Illegal debt relief companies will promise you the stars and the moon just to get you to sign. This is in violation of the TSR too. Debt relief scams will promise you a huge reduction on your debt and most probably in a short span of time. These are too good to be true and they might be. Ensure that the services being offered by your debt relief company are legitimate and something they will be able to accomplish for you.

If you want to file a complaint on debt relief companies that scam people, visiting the FTC website at or calling 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261 can get you talking to the right people in no time.

Learn what you can about these laws and your rights as a consumer. That way, you will be protected from debt relief scams. They always come up with new ways to trick you out of your money so make sure you will stay vigilant.

When Debt Freedom Is Not Necessarily A Prerequisite To Financial Success

stressed woman with stacks of documents on a tableDebt freedom is an overrated financial situation. It is true that there is nothing better than being debt free. Not having to worry about wasting money on interest and knowing that creditors can never come after you is a dream.

But here is the truth: society, specifically our financial industry will not give you access to a lot of financial opportunities lest you use some form of credit to your name. That is just how things are. Although you may choose to live without your credit card or not, you have to deal with the truth that it will make your credit score suffer. And when you have a low credit score, that will keep you from a lot of financial opportunities.

So regardless of what you think about successful people and debt freedom, it seems that lack of credit is not really a prerequisite of being a financial success. In fact, a lot of millionaires and billionaires are not exactly debt free.

How can you use credit and still be financially successful

But how can you use credit and still consider yourself financially successful? Is this really possible?

Believe it or not, it is very much possible. We’ve mentioned it time and again that the key to be a financial success does not necessarily lie on eliminating debt. The key is to educate yourself about debt so you can use it properly. It can be a tool that you can use to aid in your financial growth.

Sure you can always save up for a business start up or a home – but that will take ages! Instead to fearing debt, you need to learn how to master its use. It all boils down to how you choose to use so it will reflects well in your credit score. If not for these credit reports and the importance of having a credit history, we will not really bother with debt at all.

Here are a few facts that you need to know.

  • A good credit score does not necessarily mean being in debt. If you use your credit card pay your dues on time and in full at the end of the billing cycle, you do not have to worry about debt. The use of your card and your timely payment is enough to reflect well on your credit history.

  • You can have a good credit history if you pay within the grace period of your billing statement. You do not have to pay more than what you purchased. A lot of us think that credit means we have to pay interest on top of the purchase price of our transaction. This is not always true. If you pay within the grace period of your credit card, you do not have to worry about paying more money towards your creditors. No finance charge will be put upon you.

  • Your credit score will not suffer if you keep the activity low. You can even use your card just once a month or once every two months and that should be enough to satisfy the needs of your credit history.

  • You don’t even have to rely on credit cards. Your credit report also takes into consideration other loans like your mortgage, student loans and other personal loans. If you have these, then by all means you can keep your credit cards. As long as you can maintain the payments on these credit accounts, you should be able to keep your credit score high.

  • Monitoring your credit report is also a must to protect your credit score. Sometimes, people are very careful of credit and how they use their money but they fail to monitor their credit report. This is a mistake. You need to keep on monitoring your credit because identity theft can ruin even the best efforts to keep your credit in good condition. It does not even have to cost you a thing because you are entitled to one free credit report from each of the three major credit bureaus (Equifax, TransUnion and Experian) every year. That makes three free credit reports annually. Just visit to download your free copy.

Although our main goal is to be a financial success, you need to understand that role that your credit score will play in your plan. The reason why we are making so much fuss about credit scores is because you will get a lot of financial opportunities with a high score. In case you do have to get a loan for your business or a property investment, you can benefit from a low interest rate that will greatly increase your personal wealth’s growth possibility.

Not only that, your credit score is one of the factors that employers look into when trying to figure out if they will accept an applicant into their company. It is also one of the requirements that help insurance companies compute for your premiums. Even utility companies will take a look at this to determine how much rate they will impose on your bill. The same is true for cellphone companies. And if you want to lease a place in an affluent neighborhood, some landlords will require a good credit score for that.

These are all important in the overall plan of your financial success and no small detail should be left unattended if you want to pave your way clear towards a financially rewarding life.

Key ingredients of your personal finances that will make it a success

What we have just discussed is the answer to why debt freedom is not a prerequisite to being financially successful. However, that is not the whole picture. A major mistake that people make is assuming that the amount that you earn every month is the main factor that defines your success. The truth is, it is not only about how much money you have in the bank. It is how you utilize that money that will define if you are successful in the monetary aspect of your life.

While the money that you make is the catalyst that will make you a financial success, there are other key ingredients that is also needed.

High credit score

Let us begin with the topic that we had been discussing so far: credit scores. You need to have a high credit score because that will enable you to take advantage of opportunities as they come by. If anything, this is one of the best reasons why your credit score needs attention. So keep your credit rating high by practicing the right money management skills.

Have a 9-12 month emergency fund

Your emergency fund will obviously be for unexpected expenses that you could encounter in the future. There is no way that you can predict what will happen in the future and that means you have to be prepared for any event. We strongly encourage you to build up 9-12 months worth of emergency funds. 9 is the average number of months that a person is unemployed so it should be a safe reserve fund just in case you lose your job.

Updated retirement fund

By updated, we mean your current retirement fund contributions should be going along a pace that will enable you to get what you need when you retire on time -or even earlier. When financial experts say that you should pay yourself first, that does not mean buying yourself a new pair of shoes or designer clothing. It simply means you have to pay yourself in the future. Invest in your older self because they deserve to be rewards for all the hard work that they will be doing from hereon.

More than one source of income

Lastly, to be a financial success means you have to set up more than one source of income. This is how you become financially secure. If there is no security, your success could be fleeting. Do not let this happen. You have to try to cover your bases and make sure that if something happens to one income, you will not be left incapacitated.

3 Important Rules To Maintain Debt Freedom

man behind dollar signBecoming debt free is a great experience. You must have gone through a lot to reach this stage in your life. Looking back, you think about the sacrifices that you had to make and the various temptations that you had to overcome. But while you have gone through highs and lows just to become debt free, you need to know that your journey is far from over.

You know how people has to continue dieting and exercising to keep their ideal weight? The same is true to maintain debt freedom. It will not be as tough as losing weight but there is still effort to be exerted.

3 habits that will keep debt problems away

You must understand that staying debt free will entail some work. There is a conscious effort to correct the mistakes that you made in the past. Obviously, your old life is no longer something that you can follow. There are changes that you have to make in order to ensure that you will keep your debt freedom.

There may be any changes but there are 3 important personal finance rules that you need to follow to keep your new found financial freedom. These three are vital because they result in several other habits that will all contribute to making you a smarter manager of your personal finances.


First is budgeting. You want to make sure that you will live within or below your means and the best tool for this is a budget plan. This habit basically encourages you to consult your budget at all times. You have to know when a purchase is to be made or when it shouldn’t. This plan will identify your income and the various expenses that it finances. If you always consult your budget plan, you will never be in danger of overspending. That means you will not have to resort to credit for the important expenses that you have to make. In case you are unsure of how you can do this, you can always go to to find the right template that you can follow. You can start with this and slowly revise your budget as you see fit. Take note that this is not something that you do only once. Your plan should continue to change as time goes by.

Smart spending

The next important rule to maintain debt freedom is smart spending. This can be easily done if you have a budget plan. You simply have to stick to your budget and decide which expenses must be prioritized. But beyond that, it is important for you to remember that smart spending is not just about saying no when you cannot afford a purchase. The real test is saying no when you can afford to buy something. Being smart is prioritizing savings before you purchase unnecessary expenses that you can live without.


Speaking of saving, that caps off the three rules that you have to follow while living a debt free life. It may surprise you but there are actually consumers who never spent more than their income but ended up in debt when an emergency struck. They were not prepared for the unexpected expenses and that pushed them to borrow money to help tide over that immediate cost. If you have your emergency fund, you can avoid this possibility. Another reason to save is for your financial goals. You want to retire in comfort and that means you have to save up for it. If you want to buy a home and you don’t want your mortgage payments to end up ruling your future finances, save up for a portion of home buying price.

All these three will help you reach the personal goals that you have for yourself and your family (or future family). Now that you have reached this stage in your life, it pays to take the effort to make sure you will experience it for a very long time.

Being debt free does not necessarily mean zero debt

There is a popular misconception about debt freedom that you also need to revise. Being debt free does not necessarily mean you will be completely out of debt. When you do not have any debt, you will keep your credit history thin. That will not bode well for your credit score. When the time comes for you to borrow money for your mortgage, you might be given a high interest simply because you have a low score on your credit rating.

Some people are quick to implement credit card debt elimination and while this is helpful, it does not solve the problem. What we suggest that you do is this: eliminate debt but not the credit card. You can continue using your card while keeping yourself free from debt. You just have to make sure that purchases made with your card are budgeted so you can pay for it immediately. Not only that, you want to make sure that you understand the features of your card. That means familiarizing yourself when it comes to finance charges, interest rates and grace periods. Knowing what these are all about will help you make better spending choices when it comes to your credit cards.

Going beyond credit card debt, you also have to identify the type of debts that are actually good for you. These are the debts that will help put money in your pocket like home loans, business loans and student loans. These all contribute to your personal wealth.

How To Find Your Way Towards A Successful Debt Freedom

debt pit with ladderPeople in debt are not just after paying off their debts, they want a successful debt freedom. But what does that mean?

Being debt free is one thing. Unfortunately, if you are not careful, there is a possibility that it will be short lived. You need to go through the right process in order to really learn your lesson. While we all want to get out of debt fast, you need to take it as slow as you can in order to drive the lesson firmly in your head. Just like someone who lost weight needs to continue regulating their meals, you also need to be vigilant about your monetary transactions. That is the only way that you can be assured that you will make your debt freedom last forever.

Steps to a life free from credit obligations

Anyone in debt will tell you that the road towards debt freedom is not easy. While the concepts are simple, they are not without hardships. You will be tempted left and right, you will be asked to restrict your lifestyle and you will have to go through some sacrifices that are necessary to achieve freedom from credit.

There are many ways to become debt free and if you want to be successful in your efforts, you have to accomplish at least the following tasks.

  • Define the mistake that led you in debt. The first step is vital to maintain debt freedom – it is knowing what caused you to be in debt in the first place. While people usually blame bad spending habits, that is not the only cause for debt. Sometimes, people pay their dues and make smart spending choices but since they lack in savings, they got themselves in debt when an emergency struck.

  • Find out how much you owe. When you have an idea about the cause of your debt, only then can you find out the gravity of the problem. Know how much you owe and also, determine if you can stop acquiring debt. In some cases, debt is brought about by an illness and if you haven’t stopped incurring debt because of an on-going medical treatment, that will affect your choice of debt solution.

  • Calculate how much you can afford to pay. Another factor that determines the debt relief program that you will use is your ability to pay off the debt on a monthly basis. If you are able to pay your debts without a problem, debt consolidation will suffice. But if you need a debt reduction, you will require debt settlement.

  • Decide on the debt relief program that you will use. Based on the information that you have determined so far, you should have an idea regarding the type of program that will best suit your financial condition. Choose depending on your ability to pay and what you are willing to sacrifice. Sometimes, you may be able to afford the payment but you cannot stand the long wait or the credit damage that the program will require from you.

  • Follow the payment schedule. Once you have made your choice, you have to ensure that you will stick to it and follow it to the end. Given the circumstances, you do not want to to waste your time, effort and the little money that you have set aside for your debt payments.

  • Learn the habits that will correct the mistake you made. Since you have defined the mistake that got you in debt, you should find out the habits that will correct that. If it is lack of an emergency fund, you should start building that up. If it is overspending, you need to start practicing smart spending habits.

Follow all of these steps and you should have the things that you will need to keep yourself out of debt.

Key to make your debt free life last

The key to make your new found debt free life last is to practice proper financial management. In the end, you will realize that it is the one thing where you failed at. Debt is caused by several mistakes that you made in the past. You want to make sure that you can eliminate the wrong financial decisions – if not limit them.

Here are some tips that will help you practice financial management skills that will keep you from committing the mistakes of the past.

  • Live below your means. You have to make sure that you start living not just within your means, but below your means. By doing the latter, you will free up some money to be spent on either debt payments or your savings.

  • Create a budget. The only way that you can do that is when you use a budget to help monitor your financial activities. Know your income and list the expenses that you will spend with it.

  • Make smarter spending choices. You have to understand that even if you can afford to buy something, it does not mean you have to buy it. Sometimes, it is better to just put it in your savings.

  • Grow your savings. In the end, your savings will help you out of the unexpected expenses that will come your way. That will keep you from borrowing money just to help yourself out of those tight spots.

  • Equip yourself with the knowledge that will influence your decision making. There are many online resource sites that can give you the education that you need. You have that is a government sponsored website that holds relevant personal finance information.

Here is a video that we created for you to help you understand the emotional process that you have to go through in order to solidify the debt freedom that you want to achieve.

How Budgeting Converts Life Goals Into A Reality

budget and calculatorBudgeting is an important aspect of your finances that will help keep yourself from making a lot of mistakes in your life. We all have goals and dreams and when you know how to budget, you can plan your finances so that it can support their fulfillment.

All budgets must contain your income and your expenses to determine their activities over a specific period. However, you need to be careful about the type of budget that you will implement in your life. provides three different types of budget.

  • Surplus budget – this is the budget that have enough left after all the priority expenses are satisfied.

  • Balanced budget – this implies that the income and expenses are equal – leaving you with no extra money at the end of the budget period.

  • Deficit budget – this is the type of budget wherein your expenses exceed your income. This type of financial condition usually result in debt.

Obviously, you want to have at least a balanced budget in order to keep your monetary activities from ruining your financial standing. However, if you want to ensure that you can reach your life goals, you need a surplus budget to have enough money to save for that goal.

Life goals you need to include in your budget

We all have various life goals and it varies depending on our priorities. Sometimes, we all have the same items on our list but in most cases, the ranking of priority is different. Here are three different life goals that most people usually have on our list of goals.

Debt freedom

When you are in debt, it becomes one of your priorities in life. Debt is one of the things that can really destroy your life and if you don’t do something about it, that can really compromise your future. Although there are various ways to get out of debt, a budget plan should be among one of them. It is the first that you will create in order to help choose the right debt relief program that will get you out of debt. It is important that you can define how much you can contribute towards your debts on a monthly basis. You need to choose based on what program you can afford. When you have your debt payments in your budget, you can ensure that it will always be funded.


Another life goal that we usually want to reach is having our own home. Again, the main role of budgeting is to ensure that you can save up for your home. Just as this plan can help you put aside an amount that will grow your funds to afford at least the down payment of your home. Your budget will help you calculate how much you can afford to put aside for your monthly mortgage payment. That will help determine the value of the home that you can afford to pay for. You can shift your expenses and determine how much you can sacrifice in order to afford the home that you want buy.


The last life goal that we will discuss is your retirement. This mostly involves growing your savings. Just like in your home goal, you can include in your budget the amount of money that you need to put aside for your retirement. The amount actually depends on the age that you want to retire and when you started to save up for your retirement. If you need a big retirement contribution because you started late, your budget will allow you to easily choose which expense you can let go to make room for this savings.

Tips to create a long term budget plan

The thing about this entry in your budget is it will be a long term budget plan. Although it will be part of your overall budget, it will be different from your daily expenses because the culmination of the goal will not come immediately. If you are confused about how you can do this, we suggest that you get an online budget planner that will serve as your template as you create your budget plan. We have a free budget planner worksheet on this site that will help you get started on budgeting.

To help you further, here are some of the things that you can do to make a long term budget plan.

  • Consider your short term goals. Your long term will be supported by the short term so make sure that they are aligned properly. Once you have an idea about what you spend daily, you will have a hard time determining the amount of money that you can afford to put aside for the long term.

  • Consider the lump sum payments that you make. Sometimes, we only focus on the monthly amount and forget about the annual or quarterly expenses. Do not ignore the once a year costs that you make like your property taxes or other things that you have to contribute on.

  • Include the daily and pro-rated annual expenses, add them and subtract the sum from your income. Whatever is left will be the amount that you can put aside for your life goals.

  • Plot all of these detail in your budget plan to ensure that all of them will be funded consistently and regularly.

Of course, you need to ensure that you are not forgetting your emergency fund. While your life goals are important, make room for the unexpected expenses. Otherwise, you will end up spending what you saved up for your life goals when an emergency strikes. If you do not have this, make sure you save up for it first before you really concentrate on your other goals. When you have saved up enough amount, that is when you can pool in your resources for your life goals.

Here is a video that we created to help you learn how to budget for your household.

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