Free Debt Management Tips

Find the best ways to manage your credit card debt

You are here: Home

What are the effective managing skills for eradicating debt?

There is no magical wand to manage your debts, therefore determination and exercising financial discipline can help you eliminate your financial obligation smoothly. When you are planning to pay off your debts through a debt negotiation program then you are required to keep a track of your debt you owe to the creditors. Therefore, managing your debt is a step by step process that you are required to follow to pay off your debts.

Here a few steps to manage your debt and attain financial freedom:

1. Evaluation of financial situation:

cut expenses to eradicate debt
Cut expenses to eradicate debt

When you are planning to pay off your debts then you are required to analyze the amount you owe to the creditors. Check the bills and statement in order to prepare a list of the total amount you owe to the creditors. Make sure that you write down the interest rate on each debt as it will help you estimate the amount you owe to the creditors.

2. Curb your expenses:

If you can keep a track of your expenses then it’ll help you understand where your money is draining out. You can curtail your expenses when you are aware that you are spending recklessly. Prepare a spreadsheet where you can incorporate your weekly expenses like your entertainment expenses, medical bills and gas station bills etc.

3. Make a budget plan:

When you are working on paying off your debts then make sure that you formulate a stringent budget plan. Try to avoid dissuading from your budget plan otherwise you might not be able to get back on the right financial track. Budgeting helps you keep a track of your expenses and refrains from spending beyond your means. You can save considerable amount of money and this extra money can be used for paying off your debts.

4. Assessing the available options:

Make sure that you choose the available debt relief options you have to eliminate your financial obligations. Try to select a program that will be in accordance with your financial situation. If you enroll in a debt management program then the debt arbitrators will negotiate with the creditors to lower the outstanding balance to make it affordable to pay off. When you settle your debts then you pay less than you actually owe to the creditors.

5. Take assistance of a counselor:

If you hire the services of a debt counselor then he’ll suggest a debt relief plan after reviewing your financial situation. A counselor can organize financial education classes so that you avoid getting into debt in future. He’ll give you financial tips to manage your finances effortlessly.

6. Debt avalanche method:

Prepare a list of the debts you owe to the creditors in descending order of the interest rate. Start making payment on the debts with higher interest rate on top of the list. In the mean time, make minimum payments on the remaining debts. Make sure that you continue this process unless you pay off your debts completely.

Therefore, these are the effective six ways you can manage your finances to wipe out your debts.

How To Get Out Of Debt

To learn how to get out of debt you need to understand a few things. You have to know how much your debt is costing you. You have to know your debt management options. You have to know your income and expenses. You have to know what you can afford to pay towards your credit card debts, medical bills, student loans, and IRS tax debts each month to hopefully one day become debt free.

Getting out of debt is not easy. Some debt management plans are quicker than others but neither is totally painless. Sorry there is no quick fix solution that will wipe out your debts in a matter of days. Any company promising such fast debt relief is a scam and should be avoided.how to get out of debt

As you can see on most of the other personal finance bloggers out there getting out of debt starts with spending less than you earn. If your expenses exceed your income and you have to pull out your credit card to charge groceries at the end of the month you will not be paying off your debts anytime soon.

You can start looking at your income and expenses with these links to free budget worksheets. Knowing how much you are spending each month is the first step. Stop spending so much money on the latest iPhone, iPad, iPod, or Android smartphones. You can work on paying off your debts first and then get the latest iPhone 6 or iPad 4 when they come out in a couple years.

Once you have your personal budget printed out it’s time to start cutting expenses and working on increasing your income.

Let’s talk about cutting expenses first. When was the last time you shopped for car insurance? Home insurance? You see all those funny TV commercials because they want your business. You can get quotes online and possibly save $50 to $100 bucks each month with a new company.

How about trimming down the cable bill and using Netflix or other streaming video service more?

We also talked about DIY auto repairs to save money.

Can you hold off on buying a new car or truck for a year or two? How about getting a certified preowned and saving several thousand dollars compared to buying new? You’ll have a much lower monthly payment which you can use towards paying off your credit card bills, medical bills, student loans and IRS tax debts.

There are many ways you can look at trimming expenses. You can sacrifice for a short while to get your finances in order and then once you have wiped out your debts you can live a little. Just like what Dave Ramsey teaches.

Now let’s talk about increasing your income to get out of debt.

If you cannot get more hours at your current job then it’s time to start working a second job or doing freelance work.

Just because the unemployment rate is around 8% does not mean there are not job opportunities out there.

As a part time employee or freelancer you would cost a potential employer less than if they hired you full time. They would not have to provide you with benefits. You can get a $8 to $10 an hour job working 20 hours a week during your evenings or weekends and that’s an extra $200 a week or $800 a month to pay off your debts.

That’s about $10,000 per year working only 20 extra hours a week. Would you be willing to work an extra 20 hours a week to pay down $10,000 more in credit card debt this year?

That’s the secret to getting out of debt – spending less than you earn. Trim your expenses, increase your income and in a few short years you could be completely debt free. Now you know how to get out of debt.

Links To The Best Free Budget Worksheets

When was the last time you tried to make a budget and stick to it? How long did your budget last? Do you call it a budget or a spending plan? How can you plan a budget if your income changes from month to month? This applies to me as I am self employed and don’t know how much money I will make each month until the end of the month.personal budgeting worksheets

So what I do is calculate my income and expenses after each month and get an idea of how much I should be spending on certain items and see other areas where I should try and cut back to lower my expenses. They key is creating a personal budget you can live with. Yes you can even include spending for fun stuff and entertainment. You cannot cut off everything you like in your life because that will make it harder to stick to a budget.

But there are merits to having a budget and there are plenty of resources for free budget worksheets. Below are some links to the best free budget worksheets from Dave Ramsey of the Total Money Makeover and Gail Vaz-Oxlade of Til Debt Do Us Part fame plus another site that offers free printable budgeting worksheets.

You don’t need a bunch of different places to look as they are all pretty much the same.

Here are Dave Ramsey budget spreadsheets:

http://www.daveramsey.com/tools/budget-forms/

Dave has a Quickie Budget, a Monthly Cash Flow Planning worksheet and a Irregular Income Budget which is for self employed people like me where your income fluctuates from month to month.

Here is the Til Debt Do Us Part budget binder:

http://www.gailvazoxlade.com/resources.html

Gail has her most requested articles along with several interactive worksheets that can help you manage your finances better such as her interactive budget worksheet and her own up to your debt worksheet which will show you how fast you can pay off your debts in 12, 24 and 36 months based off your monthly payment and their interest rates.

And one more free printable budget worksheets:

http://www.dollartimes.com/download-and-print/

You can use these templates for personal budget planning. These free budget worksheets will allow you to see how much you can allocate to your debt management plan each month and see how quickly you can become debt free. You will be able to see areas where you are overspending when you think you are underspending and vice versa. Take a few moments to print or fill one out and see how much you are taking in compared to how much you are spending and see where you can cut back and use that to pay off your debts faster.

Free Debt Management Tip – DIY And Save Money

When you are trying to stick to a budget and keep your expenses under your income, you should try and do things yourself instead of having someone else do it for you. It is usually cheaper so you will have more money in your pocket to pay down your bills. This is the free debt management tip I want to share with you today.

Recent case in point – diy auto repairs. I recently had the oil changed on my car and was told I need new brakes. I got a quote for $410 from one shop and $385 from another. I went home and got some prices for brake pads and saw they were very affordable. I saw some videos on Youtube about how to change the brake pads and I did it myself. I spent around $85 for both the front and rear brake pads and hardware.

So there’s a savings of at least $300 I could use to pay down a credit card bill.

Are there area in your daily life you can do the same?

How about making your own coffee instead of taking time to go to Starbucks and having them do it for you? You can buy a nice Keurig single cup coffee brewer for about $150 and K cups for around a dollar each. This is much cheaper than $4 and $5 for one cup of coffee at Starbucks.

You can also DIY for negotiating and settling your own credit card bills and medical bills. credit card debt problems

I’ve had a positive experience negotiating with both types of bills. If you talk to your creditors and explain your financial crisis, after a few months of you missing your monthly credit card payment they will be willing to listen to your debt settlement offer. And you may be surprised at what amount they are willing to accept.

When you take charge and take control of your bills you have the power.

And you save money by not having a third party debt settlement firm do it for you. Instead of you saving on average 50% on your credit card debt when you do it yourself, you would only end up saving about 30% after you pay the debt settlement firm’s fees.

There is no rocket science to negotiating with your creditors. You patiently explain that you cannot pay due to a job loss, medical bill, IRS bill, or some other financial crisis and at around 180 days being past due they will be willing to accept a lump sum payment to settle out your account and reduce your balance to $0.00.

You will have to consult a tax professional for the possible tax liability on the credit card debt forgiveness but if you have a negative net worth you may not have to pay anything.

All this happens when you take it upon yourself to get you out of your credit card mess instead of relying on someone else to do it for you.

Do it yourself and you can save money and feel proud of yourself when you accomplish it on your own. And when you try the new brakes on and they work!

Related articles

Compare Debt Management Plan Costs

When you are thinking about signing up with a debt management plan you need to consider how much it will cost you to proceed with that plan. There is no point thinking about a debt management plan if you cannot afford the upfront or monthly cost right?

Compare Debt Management Plan Costs

So let us compare the costs of credit counseling, debt consolidation, do it yourself debt settlement, hiring a debt settlement firm and filing chapter 7 and chapter 13 bankruptcy as these are the most popular ways people use to resolve their debt problems.

Non profit consumer credit counseling may or may not charge an upfront fee or signup fee. Usually this is around $50 or less. And then you have a monthly service fee for the agency to manage your payment and disburse it to your creditors. This usually runs $50 a month or less. There are several that have a service fee at $25 a month.debt management plan costs

Debt consolidation comes in many flavors so there is one way to show you all the possible costs unfortunately. You can choose a home equity line of credit. You can consolidate without using a new debt consolidation loan but just working with  a third party that will manage your bill payments for you (CareOneCredit does this).

Another way to consolidate is to get a new loan and transfer all your balances to the new card with a lower interest rate. Many of the loan options depend on how good or bad your credit is. If you have good credit you can get a good interest rate and save money possibly unless you start racking up more debt. If you have bad credit you may not get approved for a home equity line of credit or debt consolidation loan at all.

As an example if you have $40,000 in credit card debt at a 19% APR and you were able to get a loan at 10% for 48 months your payment would drop from $1196 a month to $1015 a month. So you possibly save almost $200 a month if you can stick to a rigid 48 month repayment plan and do not charge anything else.

Taking a look at the costs of do it yourself debt settlement, there is a course called Zipdebt which offers coaching through the entire debt settlement process along with debt settlement letter reviews. You can get 6 months of coaching and document review for $397 plus S&H and there are no other costs. You can learn how to settle your debts for as low as 20 cents on the dollar in 6 to 18 months.

Hiring a debt settlement firm will not cost you anything upfront anymore thanks to the FTC but you will have to pay at the end when they are able to settle your debts with the creditors. A debt settlement firm will ask for 10 to 25% of the amount saved through the debt negotiation process. So for example you have $10,000 in credit card debt and they get a settlement of 50%. They saved you $5000 and will ask for $500 to $1250 as their success fee. This is just an example. But this is now how debt settlement companies work – on a contingency fee basis. They only get paid when they are able to successfully settle your credit cards.

A debt expert from UK debt management company Gregory Pennington commented that no-one should enter a debt management plan unless they feel the fees are reasonable.

The costs of bankruptcy filings have gone up as more and more people have been forced to go down this road. The cost of just filing for chapter 7 or chapter 13 bankruptcy is around $300. Then you have to add in the attorney fees because you are strongly encouraged to hire a bankruptcy attorney to file. The average attorney cost for chapter 7 is $1000 so that gives you about $1300 for chapter 7.

The average attorney cost for chapter 13 is $2500 so that gives you about $2800 for chapter 13.

So now you have a quick rundown of what it may cost for the popular debt management plans you may be considering. You need to factor these costs into your debt calculations when you decide on how to want to proceed to take care of your debts.