Friday, December 27, 2013

About Debt Relief Goals And How To Effectively Achieve Them

Debt relief goals are a great way to jump start your journey towards debt freedom. This is not the easiest endeavor that you will go through. However, you have to understand that the sacrifices are usually necessary to reach your target. By defining the goals in your debt relief efforts, you are able to motivate yourself as you try to reach your financial destination.

Just like a racer is urged to reach the finish line, you also need to see your goals. But here’s the thing - some people over think their debt relief goals to the point that it becomes too difficult to accomplish. While we want to reach our dreams, it is also important that you know your capabilities. We want to fly but our bodies are not built for flight. That is why we came up with airplanes to help make it possible.

Given that, you need to make your debt relief goals realistic so that you can effectively achieve them. But the question is, how can you make it happen?

First of all, you want to look at your financial capabilities first. Even if you plan on using the help of a professional or you will work on your own, there are debt relief qualifications that you have to satisfy. Check your debt list and your income. Compare them so you can determine if you will need to simply restructure your debt payments and implement some strict spending discipline. Or maybe you are in a deeper financial crisis that you need debt reduction. The information that you will get from this will help set the bar to make your debt relief goals a realistic one.

The next step is asking yourself what are you willing to give to achieve debt freedom. You need to be very honest about yourself when answering this question. Ask yourself how you will limit your spending or how much of your time you are willing to sacrifice to earn more money. Obviously, you need to grow your disposable income. Your debt is evidence that your expenses are more than your income. You need to rectify this by either decreasing your expenses or increasing your income. In most cases, the latter is more difficult but more rewarding because there is no limit to what you can add to your income. Cutting back is easier but you are limited by the amount that you can stop spending.

These two, your financial capabilities and your personality are the important considerations in setting your debt relief goals. Only then can you really set a goal that you know you can attain. You may think that you are capable of making a huge sacrifice on your budget - only to falter in the end because your life became too miserable.

You need to keep yourself happy and motivated even as you get out of debt. Do not completely eliminate the things that you know will make you very happy. If that morning latte really gets you started every day, then just limit it to every other day and brown bag your lunch to work. That should compensate for the expense and still keep you on track in your debt relief goal.

Friday, December 20, 2013

Lessons From The Detroit Bankruptcy

A couple of weeks ago, the federal bankruptcy court approved the petition of the city of Detroit to declare themselves bankrupt. This means the city’s debts will be discharged - municipal bonds, pension debts, healthcare benefit debts, and other credit obligations to financial institutions. They are asked to submit a restructuring plan on March of 2014 that will indicate the city assets (e.g. art collections) that they can sell off. The profit will be distributed towards their creditors and whatever cannot be paid will be discharged.

The reason why Detroit had to file for Chapter 9 bankruptcy is because of their dwindling revenues from taxes. The local government had to rely on credit to pay for running their city and providing the benefits that they needed to satisfy. It was really a disaster waiting to happen and we can learn a lot from their mistakes.
Here are some of the lessons that we can get off of them.

  • Take action now. In our own personal finances, we always try to make light of many things to keep ourselves from feeling too depressed about our mistakes. While this is okay for motivation’s sake, it can sometimes be dangerous. If you can act on the problem now, then make the necessary sacrifices to avoid further destruction of your finances. Stop deluding yourself that your debts will go away if you ignore them. If you need to earn more, there are legitimate work at home jobs that can help you grow your money for debt payments. It is better to sacrifice your time now if it means you can save yourself from bankruptcy later on.
  • When all else fails, it is okay to opt for bankruptcy. In case things have gotten out of hand and you have no choice but to declare yourself bankrupt, then just dive into it. If you think that no second job or negotiation efforts will save you from your creditors, then just file for bankruptcy. Prolonging the situation after exhausting all the other options and still be in a financial rut will only make things worse. The interest, charges and other fees will only add up to grow your debt even more.
  • Let go of the disappointment. Bankruptcy, although it paints you as a financial failure, should be taken as a positive light. Do not wallow in self pity and just be as optimistic as the mayor of Detroit. He encouraged his city to just move forward and concentrate on fixing their city.

As Detroit is trying to get back up to rebuild their city, so you need to start looking at how they will do it to find motivation to get yourself back up as well. This whole event makes you realize that financial difficulties can target anyone. You need to stop deluding yourself into thinking that you are immune to it. Even if you are earning a lot right now, that is not an excuse to be reckless with your money. Be wise with your financial choices to keep yourself out of financial difficulties.

Friday, December 13, 2013

Things To Check Before Using Debt Consolidation Loans

Although there is no program that you have to enroll into, there are debt consolidation loan qualifications that you need to check before opting for this debt solution. These are all necessary to ensure that you will successfully get debt freedom. A lot of people end up being in a worse situation than before simply because they plunged into this solution without checking if they really qualify or not.

To help ensure that this is the right option for you to solve your problems, here is a checklist of what you have to look into.
  • Will you qualify for a loan amount that can pay off all your multiple debts? At the very least, it should cover most of them. One of the benefits of this debt solution is simplifying your payment scheme so you will not forget any of your debt contributions. If you still have multiple payments after debt consolidation loan, it defeats one of the purposes of this program.
  • Is the interest rate lower than your current average? Most of the time, you use this debt relief option to get rid of high interest credit card debt. However, if you will only qualify for a debt consolidation loan rate that is higher than your current average, then you will not be getting much relief from this. You need to either have a good credit score or a collateral to get a good interest rate on your loan. Otherwise, it may be best to opt for another debt solution.
  • Can it lower your monthly payments? Another benefit of getting a loan to pay off your multiple debts is to lower the contributions that you allot for your credit obligations. The reason for this is not debt reduction but because you distributed your balance over a longer payment period. Make sure that you will have lower payments so your budget can have more breathing space for other expenses or your savings. Otherwise, rethink this option.
  • Do you have a stable income to pay for your loan contributions for the next 3-5 years? Debt consolidation loan usually takes 3-5 years to complete If you cannot afford to pay all the debt at this time because your job was not secure in the first place, you could get into trouble.
  • Can you control yourself to keep from spending your credit cards now that the loan has paid it off? One of the pitfalls of this debt relief program is it can tempt you to use your credit card again. Since you have used the loan amount to pay their balances, you are now left with tempting credit cards. Remember that you did not really pay off your debts. You just transferred it to another lender. Keep your cards or if your credit score can take a hit at the moment, have some of them closed off. This will keep you from using them and accumulating more debt.

When all of these checks out, then you can definitely use debt consolidation loan to get out of your credit problem.

Friday, December 6, 2013

Is A Debt Negotiator Really Necessary?

It seems that when you are in debt, there is more than one decision that you have to make. You have to choose the debt relief program that you will use to get out of debt. You have to choose the expenses that you need to cut back on to afford your debt payments. And you also have to choose if you want to use a professional to help with your debt negotiations.

All of these decisions should not be done lightly because it could really help speed up the process of your debt freedom. But with the part about hiring a professional, you may have to think about that even further.
Some people will think that paying a professional to do something that you can accomplish is a waste of money. Considering the fact that you need to pool in your limited resources to afford all your payments, you cannot afford to spend on something convenient like a debt negotiator. After all, you have some negotiation skills right?
While that is true, hiring a professional does have its merits. It is just like sending your gown to the dry cleaners. You know how to wash your clothes. But there are garments that needs special skill to ensure that it will not be ruined.

The same is true for your debts. Sometimes, you need a professional simply because they know more about negotiating your debts. Of course, you are the best judge because you know your capabilities. But still, here are some of the specific reasons why you may need a debt negotiator.

  • They know who they are negotiating with. Being in the industry professionally, the chances of them having dealt with your creditor is quite high. Their existing working relationship could really help you tip the odds in your favor. Not only that, any agreement that you make with the creditors would be familiar to them. They can warn you of certain clauses that you need to be aware of before signing anything.
  • They are trained to be negotiators. Not only will you benefit from their experience, you will also get a lot out of their expertise. After all, this is what they trained for. They know when a proposal should be held back or put out on the table.
  • They are not emotionally attached to the results of the negotiation. Being directly involved, getting a no from your creditors could discourage you to the point of giving up. Well here is where your negotiator friend can help. They will continue to negotiate even if they get a no. They will not be rattled and will insist on pushing on your behalf.

A professional debt negotiator could get you better chances to get a favorable agreement with the creditor and that should make the service fee worthwhile. And being knowledgeable of personal finances and debt, most of them give out relevant tips to make sure that you will not land in debt again. They will help you get out of debt and will give you the tips that will help you stay out of it.

Friday, November 29, 2013

Two Debt Reduction Options When In A Financial Crisis

Even if you are in a financial crisis, that does not mean your debt obligations will cease. Regardless of your situation with your money, your debt responsibility remains the same. You still have to pay it off and the problem of making all your payments fit within your income is all yours.

However, that does not mean you cannot get any help. What you need is to reduce debt payments and there are two debt relief programs that can provide you with that. Definitely, creditors will be fighting you for this reduction but if you implement the right program, you have a chance to make it happen.

The first option that you have is the one that is most associated with debt reduction. We are talking about debt settlement. This program involves a negotiation process that will aim to convince your creditors that you are in a financial crisis. You will prove to them that you can no longer afford to pay what you originally owe. But instead of not paying a cent, you will acquire a lumpsum amount of money that you will offer to your creditors as a settlement fund. This amount can be something that you will save on the side or get from your savings. Some people get it from their retirement fund but that is not really advisable. You will offer to pay pennies for every dollar that you owe. The creditors will haggle with you of course, but make sure that you will not agree to an amount that is beyond what you can afford. When you get to an agreement, make sure that you get a signed document from the creditor that paying the agreed amount will forgive the rest of the debt that you owe. Basically, that means the amount that your settlement fund cannot cover will be marked as forgiven and the whole debt will be considered completely settled.

The other debt reduction option that you have is bankruptcy. There are two ways that you will qualify to file for bankruptcy: Chapter 7 or Chapter 13. You have to go through a means test to determine which Chapter you will file. This means test will basically compare your salary with the average median salary range in the State where you filed.

If you are lower than the average, you can qualify for Chapter 7. In this type of bankruptcy, the courts will get the eligible assets that you have and liquidate them. The money generated will go to your creditors to settle what you owe. Anything that is not covered will be considered discharged - and you will no longer owe anything on these credit accounts.

If your income is higher than the average, then you have to file a Chapter 13 petition. This is when the bankruptcy court will impose that you go through a repayment plan. This is something that you have to pay off in a couple of years. This usually helps pay off a portion of what you owe. Anything that is not covered here will be discharged by the courts.

Both debt settlement and bankruptcy may be appealing because of the debt reduction but you have to know that they can ruin your credit score. But if you really cannot afford your usual debt payments anymore, then you need to let go of your credit score and just deal with the debt problem the best way you can.

Friday, November 22, 2013

Use Debt Management To Be A Smart Spender

Debt management is a great way to consolidate credit card debt. However, did you know that it will do more than just consolidate your multiple credit obligations? It can also help you become a smart spender. It all has something to do with the process and details of the whole program.

This debt solution begins with a credit counseling session wherein a certified credit counselor will review and analyze your debt and financial situation. This information will allow them to give you professional and effective advice about the best course for your debt situation. Whether that is debt management or something else, a sincere credit counselor will give you their honest opinion.

When you qualify for debt management, you will be creating a debt management plan or DMP with the credit counselor. This is basically a payment plan that doubles as a proposal and agreement with your creditor. Will hold your proposed lower monthly payment plan and when approved and accepted by the creditor, you need to follow it to the letter. Failure to meet the payment details on this DMP can cost you the whole agreement and bring you back to your old payment scheme.

But how will it make you a smart spender?

First of all, the credit counseling session will include personal finance lessons. You will be taught budgeting, saving and proper financial management skills. Budgeting is something that will help you make smart choices about your expenses because it will tell you just how much you can really afford to spend. Combined with your debt management plan, you can determine how much is left after your basic needs and debt payments are met. Whatever money remains is what you can use for your other expenses. You can make a smart decision as to how you can stretch that money to meet your needs. You can choose which expenses to prioritize and you can be smart about it. By thinking about your expenses you are beginning to practice the skills that will help you become a smart spender.

Another reason why debt management will help you become a smart spender is because your creditors will freeze any account that you will enroll in the program. At least, this is true for your credit card accounts. You will not be able to use it until after you have completed the DMP. This act will force you to use cash for your purchases.

When we buy in cash, it usually becomes more difficult to push through with the transaction. If you have a $100 in your wallet, you will not spend all of it. You want to make sure that you have a couple of dollars left there. The $100 credit in your card will not get the same treatment. Also, since parting with cash is more painful for spenders, you will end up thinking harder about every purchase. In essence, that will make you a smarter spender. When you do it a couple of times, you will get used to the habit of thinking before spending.

These are the two main reasons why using debt management will not only free you from debt, but also teach you the skills that will help you stay away from debt again.

Friday, November 15, 2013

What Can You Teach Your Kids About Credit Cards?

There is no such thing as a financial lesson that is taught too early. Pre-schoolers can be taught saving and even elementary kids can already learn about budgeting. When they get their allowance, you can give it on a weekly basis so that they will learn how to stretch that to last until Friday. That is a great way to teach them the fundamentals of budgeting. Bottom line is, you want to teach your child the right habits that will make them great managers of their own money as early as possible.

But what about credit card lessons? More specifically, you want to teach them about the devastating effects of credit card debt. This is probably a more difficult lesson to teach because the issues are a little bit more complex but you can start to give them the idea about the use of credit cards.

The best way to begin your lesson is through example. More than what you will say, children will get more out of what they will see you do than what you will tell them. So if you want to give them the best lesson about the proper use of credit cards, you may want to ensure that you are on your best behavior whenever they see you use your card.

The first question that you might be asking right now is when should you start the lesson? Well only a parent can really determine that but as soon as you think your child is able to understand your budget plan, they should be able to comprehend the basic issues about credit cards.

To start your lesson, ask you child what they think credit cards are. Ask them to give you an honest answer about these cards. Whatever their answer is, do not laugh at them - no matter how ridiculous it may be. Just listen patiently and tell them if they got any ideas right and if they got some of it wrong. Give them the following concepts about credit cards.

  • A credit card is not the extension of your wallet. Having it does not mean you have more cash.
  • When you use your credit card, you are not using your money, you are using the money of the creditor. That makes it a debt that you have to pay back.
  • Any balance on the credit card that you will not pay immediately at the end of the billing statement’s due date, will have an additional finance charge.
  • Explain that a finance charge is based on the balance of your card and the high interest rate of the card. This can get to be more complicated so save the computations for a more older child. You can use allegories when explaining to younger kids. For instance, when you borrow 4 apples from a friend and you were not able to return it the next day, you have to give back 5 apples instead of just 4.

Feel free to educate your child as soon as you can. The earlier they understand, the better they can apply and implement the financial habits in their lives. Also, it doesn’t even have to be a one time lesson. It can progress as you start to show them how you are properly using your card.

Friday, November 8, 2013

Do You Want Debt Freedom For Christmas?

Given the current debt situation in the country, it is certain that a lot of consumers are wishing for debt freedom. As they prepare for the holidays, they are surely trying to think of ways to learn how to pay off debt. That way, they can sincerely enjoy the holidays without worrying about money for once.

While this is true for almost all household, you don’t have to ruin your holidays just because you have some debts to your name. What you have to do is to come up with a resolution that you will follow so you can deal with your debt problem once and for all.
Do not be discouraged but at this point, the debt problem will be tough to eliminate by Christmas. So instead of obsessing over that, why not create a solid plan to get out of debt and concentrate on it? Analyze your financial situation, look over your debt relief options and choose the program that you will use to get out of debt. When you have that plan in place, make a commitment to follow it and then you can put this aside so you an start enjoying the holidays.
Instead of trying to eliminate the debt, why not aim to acquire zero debt this season? It may be tough because the gift-giving season encourages us to spend left and right. But with proper planning and the right amount of skill and research, it can be done.

Let us start with the gifts. How can you not be in debt with such a long list of people you want to give gifts to? It will require some effort but you can opt to create your presents from scratch. If you know how to bake, then whip up a batch of cookies, put them in plastic containers, wrap it in decorative ribbon and then you have a gift for family and friends. If you are good with arts and crafts, you can create small toys or even simple Christmas cards to send to family and friends living far away. You can even get your kids to help out. That should be a fun activity for the whole family.

In terms of the food that you will eat, you should plan your meals carefully. If you are hosting a party and you plan to invite other people, ask them to bring food to add to the table. If it is only for the family, make sure that you have plans for the leftovers. It is important to keep the food waste down so you will not waste any money.

It helps to create a budget plan that you can follow so that you will not spend beyond your capabilities. The idea is to monitor where you money will go to so you can keep a tight lid on your expenses. Even if debt is still a part of your life, you don’t have to let it ruin your Christmas.

Friday, November 1, 2013

How To Be Prepared When There Is A Financial Crisis Ahead

A financial crisis can be a scary prospect. While you do not want to keep your mind on negative thoughts, you have to prepare for this. It is just like you have to prepare for growing old or your have to get a health insurance to prepare for any unexpected sickness. If you know that it has the capacity to ruin your life, that is enough reason for you to take the time to think about it. You have to map out a plan that you must do in case it happens.

Recently, we watched as the House and Senate haggled with the budget and the debt ceiling. We also watched in anticipated breath as the government shut down for a couple of weeks. If that dragged out, we could have been subjected to another financial crisis.

Thankfully, it did not but just so we can discuss this, what can you do in case a financial crisis is looming ahead?

First of all, you want to take a look at the current status of your finances. You must make sure that you have enough to last you a couple of months. If not, you need to start working hard to improve your emergency fund. And if you have some debts to your name, you have to enrol in a debt relief program to get rid of that - as fast as you can. It is hard to have debt while you are in a financial crisis.

While you are at it, you have to stop acquiring new debt - at least until you are sure that the crisis will not happen or has passed. Keep your credit cards and override any temptation to use them. With a crisis looming, you want to get rid of your debt - not add to it. That means, any expensive purchase that you may be planning should be put on hold. If you were planning to buy a car or a home, postpone that and keep the money for now.

You also have to bring out your frugal budget and start implementing a frugal lifestyle. At least if you need to pay debts or increase your emergency fund, you need to cut back on your usual spending to meet the needs of any of the two. But if your debts are manageable and you have adequate emergency funds, you can continue living as before - but keep a close eye on the news. You want to be updated to see how the current events are evolving.

It could help your case if you started to look for other sources of income. That will help secure your finances.

Of course, all of these may be unnecessary. You could be exaggerating. But in the end, being paranoid will serve you best in case something bad does happen. It is not like you are doing something drastic. You just have to make sure that you are prepared in case things turn for the worse. Like they said, better safe than sorry.

Friday, October 25, 2013

What You Need To Know About Credit Card Interest Rates

Being responsible with your money does not really require that you get rid of your credit cards. If you think about it, the purchasing tool is not really the issue here. The problem lies in how you choose to use it. There are people who own credit cards but never had any problems with debt. How did they manage that when you can’t even keep up with your minimum payments? Here you are, looking for the best debt relief company to help with your credit problems while others are calmly charging purchases without worrying about their finances going under.

The answer is simple. They know everything about credit cards and they understand how to use it. You need to simply educate yourself about these cards to keep yourself from abusing its use and thus end up in debt.

One of the most important factors of a credit card is the interest rate. You have to understand this if you want to avoid having it on your balance. The high interest of a card account is one of the reasons why this balance can grow immediately. So if you can get rid of it, you should be alright. So how do you do that?

When you use your credit card to make a purchase, that does not automatically accrue interest. You still have the grace period to keep that from happening. The grace period is the time between the date of purchase and the due date of the billing statement where that transaction is included. If you pay within this time, you only pay for what you purchased. You are not wasting your money on interest rates. If you do this for every purchase, you don’t have to worry about the high interest on your card.

The thing about these rates is that your creditor has the right to raise it even when you displayed a good payment behavior. So despite looking for a low interest credit card, that can change and go higher over time.

While the creditor has this right, you also have to know that you have the right to refuse when the creditor implements this change. The law mandates that they send you a notice before implementing the change. You can call them to say that you do not want to accept this interest rate revision. One of two things can happen.

The first is the creditor will accept your request and retain your old interest rate. You have to get a written confirmation that this is what they will do. Follow up until they send you the document.

The other scenario is you will close your credit card account. This is the least likely scenario because the creditor would want to keep you as a client. But in case it does happen, you have to be prepared to pay the balance of your debt. You do not have to worry because the creditor has to accept a payment plan that you can afford.

Just keep these interest rate facts in mind, make better spending choices and stick to your budget - that should keep you from incurring too much credit card debt.

Friday, October 18, 2013

Does It Make Sense To Use Credit Cards During Emergencies?

It seems like a good idea to get rid of all your credit cards save for one. The purpose of this one credit card that will be left behind is to help you maintain a good credit score and help tide you over an emergency situation.

But then again, is it really a good idea to use your credit card in times of emergency? If you had just gone through the tedious debt consolidation or the risky debt reduction, you are sure to be committed to staying away from debt. Don’t you think that an emergency credit card can push you over another debt pit? There are instances wherein this seems like a good idea but do you really want to rely on it when the unexpected happens?  

The thing about the unexpected is you do not know when or what will happen. There is no doubt that your emergency credit card can handle the amount no matter how expensive it is. However, there are a couple of important facts that you may want to consider.

First of all, you just solved the unexpected situation with another problem. Remember that you just used a credit card to pay for that situation. Although the crisis is past, you have to face yet another problem - paying off the debt on your card. Remember that any purchase that you will make must be paid back to the creditor. If you spent it on an expensive purchase, you will be carrying it over to the next billing cycle. That will incur finance charges and grow your debts. The interest in itself is a waste of your money.

Another problem that you may not realize at first is you will no longer be forced to look for better options. Using credit cards are much more hassle free and convenient. Why go through all the trouble of looking for financial assistance from government agencies when you can easily swipe your card to pay off something? You will be losing the benefits that you could have qualified for.

Lastly, and as mentioned previously, using credit cards to tide you over an emergency situation will endanger you to fall into another debt pit. You do not know how much it will really cost you. One emergency can drag you back into debt. You have to go through the debt relief process all over again.

It is alright to keep your card but it has to be for the purpose of keeping your credit score high. That way, the expenses you make on your credit account will be something that you planned and budgeted for. You can pay it off immediately and that will really keep your credit score up.

But what about emergencies? Simple. You have to save up some cash for it. A cash reserve fund will serve you better than a credit card. When you use it to pay off your emergency situation, you can forget about it immediately. You don’t have to worry about the payments that you have to make after. Your credit card can still be used but only when your cash fund is already depleted.

Friday, October 11, 2013

How Earning More Will Get You Out Of Debt

Your debt means you are spending more than what you are earning. This is a problem that you have to solve if you really want to get out of debt.

There are two ways that you can do this. One is to cut back on your expenses. When you do this, you will eliminate the unnecessary spending that is getting you to spend more than you should. However, if the reason for your increased spending is your debt payment, you actually have no choice but to earn more money.

Some financial experts prefer that debt ridden consumers focus on increasing their income because that is being more proactive. It sets up the consumer to a bigger income that will be more beneficial when they get out of debt.

There are many options for you to increase your cash inflow without burning yourself out. We suggest that you go for work at home options so any extended work hours will keep you close to your family.

Thanks to the Internet, you can build up an online career or business. Online careers include web development, web design, writing, accounting/bookkeeping jobs, programming, graphic design, etc. There are also careers related to social media marketing, search engine optimization, link building and Internet marketing that you can look into. You simply have to look for a client that will hire you for your services.

You can also set up an online business - the most famous is an online store. You can sell products online and generate income from it. Some people partner with suppliers who will do everything for them - keep the inventory, package the product and ship it to the customer. All you have to do is to set up the online shop, make sure you get a lot of orders and organize it so when it gets to the supplier, the orders will be delivered as requested. If you set up your store to be automatic, it will earn you money even as you sleep.

Another option to earn more is through your hobby. If you can cook or bake, why not use that and cook/bake for others? Now that the holidays is upon us, bake cookies and sell it as gift items. If you love to garden, offer to take care of the garden of your neighbors. Even those who love to shop and have a good taste can hire themselves out as a personal shopper. If you love pets, offer to walk the pets of your neighbors.

You can also set up a passive income business. If you are not using your garage, why not convert it to a studio apartment that you can rent out? Or if you have an extra room, rent it out to earn more money.

There are many ways to increase your income you just have to be creative and resourceful about it. Try to choose something that will not tire you out or keep you too long from your family.