Debt Relief Archives - Free Debt Management Tips

Things You’ll Need to Give Up to Become Debt Free

June 5, 2017 debtmanagement

How good would it feel to be debt free? Some people say it would feel like getting out of prison. Others say it would feel like they’d gotten a 500-pound monkey off their backs.

Regardless of how it would feel to you, make no mistake about this. Becoming debt-free requires work, patience, and discipline. You need to have a budget and the self-discipline required to stick with it. You have to be patient because it won’t happen overnight, and you need to be willing to work at it. If you owe $20,000, or even more then becoming debt-free won’t be a sprint. It will be more like a marathon. In addition, things you will need to give up include one that may be very painful.

Checking social media obsessively

Are you addicted to checking social media like Facebook, Twitter, and Snapchat? Many people are. But if you truly want to become debt free, you need to break the habit as it can just lead to spending more money. Avoid checking to see what everyone else is doing. It’s easy to get in trouble when you see one of your friends has taken a fabulous vacation and you want to have one too. Turn off your social media and learn to live simply. You’ll likely find this is much easier said than done due to the addition of filtered content and targeted ads on Facebook, Instagram, and TV. The only way to beat this is through self-discipline – just stop checking your social media accounts except for maybe once a day.

Eating out

Eating out several times a week – for lunch or dinner – can add up to a lot of money. If you don’t believe us, get one of those money tracking apps like Mint, BillGuard, or DollarBird. Use it for a few weeks and you may be astonished to see how much you’re spending on eating out. If you’ve been in the habit of going out for lunch, stop it. Start packing a lunch instead. It’s easy to do if you just spend a few hours on Sunday preparing a large batch of food that you can then eat throughout the week.

Denial

As the old saying goes, denial isn’t just a river in Egypt. If you tell yourself you have your debt under control when you don’t, you’ll only prolong things and pay more in interest. Do you feel as if your debt wasn’t your fault, that you were tricked into debt? If this is the case, you’ll need to tell yourself a new story – that you are responsible for your debt, that you don’t have it under control, and that there are things you must do. For example, is your problem student loan debt, and you’d like to pay it off quickly? Then, you need to find ways to earn more money and reduce your spending. Doing just one of these things won’t get you there.

Your other financial goals

If you’re really serious about becoming debt-free, you’ll need to give up on your other financial goals like buying a house. You will need to be very single-minded and focus exclusively on getting your debts paid off. This may mean sacrificing Starbucks and giving up your health club membership. If you’re investing, you may have to stop. You may even have to raid your emergency fund. None of this will be easy, and you’ll need to keep reminding yourself how good it will feel when you’re debt free.

Your job

Eliminating those morning drive-throughs, those restaurant lunches, and trimming your grocery bill can only get you so far. At some point, you’ll need to look at the other side of the equation, which is how to increase your income. Some people have been able to do this very successfully by moving out of the corporate world and becoming entrepreneurs. Of course, this may not be for you. You may have to work for a promotion, get a new job at a better salary or take on a side gig. It’s easy to make extra money these days thanks to the Internet. It’s also easy to get part-time jobs like driving for Lyft or Uber, or in retail. Spend a few minutes thinking about how you could tweak your income, and it’s likely you’ll come up with a number of other ideas.

In summary

As you have read, it’s not easy to become debt free. However, if you give up the things mentioned here and are willing to be patient and exercise some self-discipline, you will become debt free. It’s not a matter of if, it’s just a matter of when.

7 Tips for Being a Successful Debt Negotiator

May 3, 2017 debtmanagement

Here are two statistics that may surprise you.

Households that have credit card debt have balances averaging $16,748
Households that have any kind of debt have a total average of $134,603 in debt, including their mortgages.

Where do you stand?

If your family has more than $16,000 in credit card debt or more than $134,000 of total debt, the first thing you need to do is admit that you have a problem. Step two, of course, is figuring out what to do about it. This means you basically need to become your own debt negotiator. However, being your own debt negotiator can be complicated and requires a lot of fast thinking. Do you believe you have what it takes to be your own debt negotiator? If, so here are seven tips that can help you be successful.

1. Be prepared to pay some money up front. Many lenders will want at least 50% of your overall debt up front. In fact, some won’t even begin negotiating with you until they’ve received some money.

2. Don’t be surprised if you have to deal with an attorney. Most lenders have customer service reps or agents to handle their debt negotiations. However, at some point, you may see a lawyer involved that is representing one of your lenders. But there normally needs to be a large amount of money involved before you see a lawyer involved.

3. When you make payments to a creditor, use a money order. You might never have thought of it this way, but if you make a payment to a lender with a check, it will have all of your pertinent banking information. So, if you are sued, the lender will have a much easier time getting at the money in your account.

4. Try to have the debt reported as “paid in full.” The whole idea behind debt negotiation is to pay off a debt for less than you owe. This is possible because most lenders will settle for less so they can at least get something back. The way you want the debt reported to the credit bureaus is as “fully paid” or “paid in full.” The way you don’t want it reported is as “settled,” “settlement” or “settled for less than the full amount due.” That’s because if the debt is reported that way, it will have a very bad effect on your credit score.

5. Consider hiring an attorney. If a lender refuses to negotiate with you, or if it fails to live up to its promises, you may have to file suit. This means getting a lawyer involved to strengthen your position. You’ll need to spend money to hire a lawyer, but a good one could save you more than she or he costs.

6. Be realistic in your negotiating. The customer service rep you’ll be dealing with will be a very experienced negotiator. He or she may convince you to back down a bit and accept a payment that is still more than you can afford. Don’t let this happen. It’s a mistake to agree to any debt settlement that you can’t comfortably handle. Be honest. Let the other person know what you’re willing to pay. If that doesn’t work, pull out the big guns and threaten bankruptcy. This will generally get what you want because lenders understand that if you’re forced into bankruptcy, they won’t get anything.

7. Determine how far the lender will go. Remember the adage that once you name a number you can’t go higher, you can only go lower. Make your first offer a low one. You might be pleasantly surprised as the lender might accept it. Are you asking it to waive your payments for a few months? If it offers three months, ask for six. In other words, always ask for more than you think you can get. The worst that can happen is that you’ll get a no. The important thing is to always aim high, and to know how much room you have for negotiating within your budget.

In conclusion

If you think you have what it takes to negotiate your debts, then go for it. But, if at the end of 90 days, you haven’t been able to negotiate any debts successfully, it might be time to hire a debt settlement company.

Trapped in a Quagmire of Debt? Take This Tip to Get Out

April 25, 2017 debtmanagement

If you’re faced with an unmanageable amount of debt, It can affect you emotionally and physically. This is due to the stress related to dealing with those debts. A 2009 Associated Press/AOL health poll found that 27% of people stressing out over their debts had ulcers or digestive tract problems. A total of 44% reported they had migraines or other headaches, while 29% suffered from severe anxiety.

If you’re experiencing one of these physical problems, drugs probably won’t help. You need to get to the root of the problem, which is your debts.

Fortunately, a fairly simple path out of your debt exists. It’s called consumer credit counseling.

How to find a good credit counseling agency

Reputable credit counseling agencies generally belong to the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). Some are actually sponsored by local Better Business Bureaus.

How it works

Reputable, credit counseling agencies are nonprofits. If you go to one of these agencies, you will need to take your household budget (if you have one), and a list of your debts with each one’s interest rate. You will also need to take a list of the debts you are behind on, your assets and what you could sell them for.

The agency will assign you a trained and certified credit counselor who will go over all this information. She or he will review your budget to determine if it’s realistic, and may suggest improvements or additional cuts. Your counselor will also show you a realistic picture of where you stand financially and may suggest you revise your budget to generate more cash flow.

You could get a debt management plan

If your counselor finds that your finances are in really bad shape, he, or she may suggest you pay them off via a debt management plan (DMP. If this happens, he or she will explain how a DMP works and will discuss its pluses and minuses. You should also be given a general idea of how much you will be required to pay on your debts each month.

It will work with your lenders

Your counselor will figure out exactly how much you can afford to pay your unsecured creditors each month to eliminate your debts over a three- to five-year timeframe. She or he will then contact your lenders to see if they will agree to let you pay those amounts. Your counselor will likely ask your lenders for other concessions like lowering your interest rates, and waiving or reducing any fees you owe.

Before signing off on your DMP

When your counselor has prepared the final version of your debt management plan, be sure to get a copy. Don’t sign your DMP until you have read it very carefully, understand it all, and are sure you can live up to it.

Paying the credit counseling agency

Once you sign off on your DMP, you will be required to pay the credit counseling agency each month, and it will then distribute the appropriate amounts of money to your lenders. You will get regular monthly updates as to the status of your DMP, and this should include confirmation that your creditors were all paid per the terms of your plan.

What consumer credit counseling agencies cost

The advice and counsel you’ll get from your credit counselor will be free. However, if you sign up for a debt management plan, the agency may charge you a small monthly fee of $25 or $35 to administer your plan. Or, it may do it free. This varies among credit counseling agencies. Be sure to ask if you will be charged anything to administer your plan before you sign off on it.

Alternatives to consumer credit counseling

Good alternatives to consumer credit counseling exist but whether they would make sense will depend on your financial situation. For example, if most or all of your debt is credit card debts, you might consolidate them by transferring all of their balances to a new card with a lower interest rate. Or, if you qualify, you could transfer them to a 0% interest balance transfer card, where you would have as many as 18 months interest-free.

Other options for debt consolidation include a home equity loan and a homeowner equity line of credit. Of course, you would need to have equity in your home to qualify for either of these loans.

Debt settlement

Finally, there is the alternative of debt settlement. It’s grown a lot in popularity as it represents the only way to pay off debts for less than what you owe. The trustworthy debt settlement firms such as National Debt Relief are usually able to get debts cut by as much as 50% or even 60%. Of course, they are for-profit firms and charge for their services. However, if you owe more than $10,000, then using a debt settlement firm could still save you money.

Four Signs You Have a Serious Problem with Debt

April 4, 2017 debtmanagement

Have you thought much about your debt lately? The thing about debt is that it can creep up on you. You charge a couple of lunches here, a new coat there, and then an overnight stay at a nice hotel. You haven’t paid any attention to what these charges are doing to your total debt. Why not continue to ignore it?. After all, what you don’t know can’t hurt you, right?

Wrong.

Trying to ignore your debt is like trying to ignore your shirttail relations. Neither is going to go away and in the case of debt, things are only going to get worse.

Are you in serious trouble with debt?, Here are the signs to look for.

Your debts are growing

If your debts are not shrinking, the odds are they’re growing. As painful as it might be, you need to add them up, and then compare this total with where you were A month ago and two months ago. If you find your debts are increasing, there’s one simple reason. Your spending more than you earn. Fortunately, there’s an easy fix for this. You need to either find ways to increase your income, or you need to reduce your spending.

You’re getting hit with late payment fees

Late payment fees mean you’re not paying your bills on time. This is a sure sign that you’re having a problem with debt, plus it’s costing you money. Let’s say you’re being charged a late fee of $25 on your credit card payments. While that may not seem like much, it can add up over time. Get more than 180 days behind on a payment and you’ll be in default. The odds are that your lender will then sell your debt to a collection agency, which is something you definitely don’t want to have happen.

You have a “bad” credit score

Have you checked your credit score recently? If not, you absolutely need to. You can get your score free on-site such as CreditKarma.com or CreditSesame.com. You could also get it from one of the three credit reporting bureaus – Experian, TransUnion, and Equifax. If you find your score is below 600, you have at best a “poor” credit score. This is costing you money in the form of higher interest rates and higher insurance premiums. It’s also a big sign you’re having a problem with debt.

You live from paycheck to paycheck

When you’re two or three days away from a paycheck, do you wonder if you have enough money left in your bank account for a drive-through latte? Do you have to postpone having lunch with a friend because you’re close to flat broke? This means you’re living from paycheck to paycheck, and that’s never a good thing. It’s not only a sign you’re having a serious problem with debt, but it’s also just no way to live.

What happens if you pay off your debt?

Paying off your debt can be an amazing stress reliever. For that matter, the stress related to dealing with your debts can actually cause you to experience physical problems.

When you pay off your debt, you’ll no longer be required to pay interest fees and late charges. A second important benefit is that this frees up your future income. Whether you’ve thought of it this way are not, when you create debt you’re borrowing money from your future self. Stop running up debt, and you’ll have more money in the future and probably a better life.

Once you get your debt paid off, you should be able to use the money you now have to create an emergency fund. Most experts say your fund should be the equivalent of six months’ living expenses. However, that’s just not doable for most people. Try for three months of your net income instead. If even this seems out of reach, try to save at least $1000. Do this and you’ll have money available to help in the event you become ill, lose your job, or the transmission in your car falls out.

Finally, when you pay off your debt, you’ll have money to invest or to save for retirement. If your company’ offers 401(k), be sure to participate. If not, open either a traditional or Roth IRA and start socking money into it. If you have money left over after this, invest it in something safe like a low-cost index fund, and then never touch it.

In summary

If you find you are seriously in debt, you need to go to work and get rid of it. It’s not only the best thing you can do for your future self, it’s an easy way to get a raise without having to wait for your employer to give you one.

Debt Can be Easier to Pay Off if You Rename Your Financial accounts

October 12, 2016 debtmanagement

At least one financial expert says that the names we give our financial accounts can make a huge difference in our relationship with money. If you rename your financial accounts she argues it won’t change the reality of your finances but it can change your attitude about them. And a change in attitude will ultimately make a big difference in everything.

You will need software

Of course, you can’t call your bank and ask it to change that long number that identifies your account to something like Harry’s Special Household Account. You will need to get personal financial software such as Quicken, You Need A Budget or Ace Money in order to change the names of your accounts. You won’t need to rename all of them. What you will need to do is go over your chart of accounts to see if there are some where you have a troubled relationship. If so, then changing their names could help change your attitude about them.

The power of a name

For the sake of an example, let’s suppose you have two checking accounts, a savings account, three credit cards, a mortgage, a personal line of credit and a home equity line of credit. You could consider renaming one of those checking accounts to something that would remind you why you have it. If it’s a joint account and you use it to pay household expenses why not rename it to something fun like “Bob and Tammy’s Domestic Bliss Account”. Every time you write checks on that account its name would remind you of why you have it.

If you hate making payments on your mortgage you might rename the account, you use to make your payments “20 Years to Mortgage Freedom”. That way, instead of thinking of the payment as a drain on your finances, you could think of it as another step towards having it paid off.

Why did you take out that home equity line of credit? It was probably for a good cause. So why not rename that account to something that would remind you of why you borrowed the money. For example, one person renamed his homeowner equity line of credit to “Our Lifesaving Medical Miracle.” So now instead of thinking of the loan as something he struggles to pay off, its name reminds him that the money was used to pay for a life-saving operation his son needed.

Do you have a traditional or Roth IRA? You might find it easier to put money into it if you were to rename it to “Our Retirement Beach Home” or ” Palm Springs Retirement”. That alone could take the sting out of putting money into the account by reminding you that each time you make a deposit, you’re getting just that much closer to realizing your goal.

Three guidelines

Once you’ve identified those accounts where you believe a name change would be a good idea here are some guidelines for changing their names.

Try to be creative
Choose a name that has meaning to you
Take a name that will force you to view the account from a different perspective

A name really does matter

In the play Romeo and Juliet Shakespeare has Juliet say, “What’s in a name? That which we call a rose, by any other name would smell as sweet.” But when it comes to financial accounts we take the opposing view that names can make a big difference in our relationship with money. A retirement account named “Palm Springs Here We Come” would be a lot easier for most people to fund than just a plain vanilla “Roth IRA”. A fun, creative name like this would not only remind you of why you’re saving money but that each month you’re getting that much closer to achieving your goal.

A painless way to save money

Some people – and you may be one of them – like want to have a “fun” savings account or one where you save money for something extra such as a weekend getaway, a special night on the town or tickets to a sports event. The problem is how to fund it, what with all of your other financial obligations. Fortunately, there is a painless way to do this. It’s the app Digit. It can make saving money for fun stuff practically painless and here’s how. Every few days the app checks your spending habits and then if you can afford it Digit removes a few dollars from your checking account and transfers it to your Digit account. It’s easy to withdraw money from a Digit account whenever you like and there are no fees.