Debt Management Tips

Personal Debt Management Tips

While Americans enjoy what seems to be a bulletproof economy, at least for now, personal debt continues to rise.

The vast majority of our economy (around 70%) is made up of consumer spending. For now rising oil prices and a declining housing market have yet to slow our economy.

Consumer spending has continued to overshadow these other potential issues for our economy. But it is not without a price! That price is the massive amounts of debt carried by the consumer.

Sooner or later, if you are carrying a lot of personal debt, you will need to tackle it. The best time to do this is when the economy is still doing reasonably well.

And of course the longer you wait to do it, the bigger the sacrifice it will take. Using your personal debt burden will not only improve your financial health, but he can go a long way with improving your mental health as well.

There are several simple steps you can take that will quickly start to tip the scales in your favor. Many people think that increasing their income is the only way to truly get out of debt.

And although increasing your income will certainly go a long way towards getting rid of your debt, it is far from the only way to get the job done. For most of us, having a healthy financial life requires us to live within our means.

In recent years the banks and financial institutions have made it easy for us to live outside our means. They have been more than eager to extend credit to people without concern for their ability to pay it back.

And unfortunately for many of those people, one late payment on any credit account is now resulting in higher interest rates on all their debt.

The good news is, there is light at the end of the tunnel. Apply some of the following steps into your personal financial life, and you can quickly have a brighter future.

Stop Unnecessary Spending

Stop Unnecessary SpendingIn order to reduce your debt you need to lower the balances.

It’s a lot easier to hit a stationary target than one that keeps moving.

Stop the bleeding now, no unnecessary tapping into available credit.

Your balances will go down a lot faster if they stay where they are right now.

Remember there is a big difference between what you need and what you want!

Cut into Those Balances

Now that those balances become a stationary target, it’s time to start paying them down.

If you’re able to get over time at you job, take it. Consider working a part-time job.

Maybe a few nights a week, or even over the weekends.

Apply any extra income you make directly to the debt. Cash in your Cd’s or money market accounts at the bank.

The interest you are earning on this money is likely inconsequential compared to the interest being paid on your debt. I wouldn’t recommend using your entire savings towards your debt.

It’s always good to have some cash sources available in the event of an emergency. But only keep as much as you need, apply the rest directly to your debt.

If you can, take a loan on your 401(k). This way you’ll be paying the money back to yourself.

There are also other ways to get cash quick. In Alabama, for example, you can use this recommended service to apply for a payday loan online or in a store near your location. It’s fast and easy, but you have to remember to pay the loan back on time in order to save your credit.

Reduce Your Spending

Take a good look at where your money is going. Do you eat out a lot? If so, prepare these meals at home.

Do you have the premium cable package? Drop it down to a cheaper package. Take a good look at all your utilities such as cell phones, Internet service etc..

Trim some of the extra fat you don’t really need. Remember the old adage, a penny saved is a penny earned.

Prepare a Monthly Budget

The proof is in the pudding! Sit down and prepare a monthly budget, see where all your money is going.

You probably don’t realize how much money you’re wasting. When you get it all down on paper, you’ll be amazed at all the opportunities there are to save money.

Many families have a hard time realizing just how their money is spent until they can visualize it on paper.

You’d be amazed at how far a little sacrifice can go towards getting you out of debt. Work out your budget together as a family.

Make Your Purchases in Cash

By paying in cash you will not only realize exactly how your money is being spent, but also stop paying interest on your purchases as well.

Paying with credit all the time is deceiving, you’re spending money but still have cash in your pocket. When you run out of money, time to stop buying.

Adjust Your Withholding

If you get a big tax return every year, you probably are having too much money withheld from your check each week.

Adjust the withholding accordingly. The federal government does not pay you interest on your money all year long.

That extra money each week can be applied directly to your debt.

Check Your Insurance

Verify that you are not over insured. It’s not necessary to carry $1 million in life insurance when you only need $250,000.

See if you can get better rates by combining your automobile, homeowners, life and other policies to one company.

Shop the rates on all your policies to see if you can get better ones.

Garage Sale

Sell off any household items that you don’t any longer use or need. If you’re laying out monthly fees for a storage unit get rid of it. Time to get lean and mean.

Part of having a sound financial life is learning to live within your means. As you utilize these steps to get out of debt you’ll come to realize it’s not that hard to live within your means.

Many people are under the impression they have to sacrifice an awful lot in order to get out of debt.

The truth is for most of us, a little bit of sacrifice along with some trimming of the fat is all it takes to brighten up the financial future.

It will take desire and discipline to accomplish your financial goals, but when you do finally eliminate all of your personal debt you will find that it was worth every step you took.

Help DIY Negotiate Special Repayments

I teach part time and was not given a class load until after July 2012 when the fiscal year ends. I just called American Express who’s charging me 30% on 2 credit cards.

I’ve done credit counseling before, and apparently, I could have done the same thing on my own. I was out of debt once, and I’m back in it. So I want to try to do it myself.

Amex essentially told me “good luck and see what you can do,” they won’t make any “special” arrangements at all.

Any tips that worked when you called a credit card company directly to make special arrang—Éments so you can continue to make monthly payments?

Thank you in advance.

Just wanted to say I have Amex and they are the worst to deal with. They wouldnt negotiate with me either. Very nasty people. They sent me to collections. The collection agency reps called and told me how stupid i was and ill never have a good job or a house because my credit is bad. They told me Amex is not like other credit cards and wont help you or settle. I hope things work out better for you. I had the Optima card by the way. The one where you DON’T have to pay the balance in full at end of each month.

I’m in the same boat you’re in. Fortunately, I’ve been given classes each semester but none of these companies seem to understand the concept of part time teachers or “seasonal” work. In my case, I’m essentially unemployed in four months of the year. And unemployment (since they deduct for any work you do) makes it undesirable to find other employment.

I am in the middle of a DIY myself, and thought I’d share my experiences, because I’ve been surprised by what has happened …

A year ago I went into foreclosure (and got behind on cc’s and loans). With the attorney’s fees added on, I could only catch up by making payments in installments. My mortgage company set me up on a forbearance plan for 12 months, and now I only have this month’s and next month’s payments and I’m done!

Also last year, I paid lots of “stupid taxes” by way of payday loans … So things were a mess by the end of the year. It was all my own doing – nothing catastrophic took place that caused my debt, just my own overspending. CCCS would not be helpful for my situation, so I decided to do it myself …

I feel very fortunate to have found this blog, as I’ve said many times, because it’s given me invaluable information and support … and Dave Ramsey. So I dug in and got started … I set up my spreadsheet and started with the first step – getting current.

Fast forward a few months – I spent lots of time on the phone negotiating with creditors. I can see why people turn over this process to settlement companies, because it definitely is time-consuming and stressful. I was behind in almost everything.

But here’s the thing … creditors did work with me, and in many cases were even sympathetic on the phone, and spoke to me in a manner I can only describe as fairly gentle. Odd. That had not been my experience in the past.

I think this is the reason: I paid my mortgage on time for the last 10 months, extra $400 per month and all. I have made good on all my payment arrangements with my creditors these past months. When they set something up for me that lowered my interest rate and allowed me to catch up, I followed through as I’d promised.

Recently, Wells Fargo offered me a deal to split up my balance ($2000) into 12 payments, at 11% interest (down from 24%). AND they said when I’d finished that, they’d reopen my credit card account. Very odd, considering my FICO score is in the tank. Now before you caution me about reopening my account, let me say I have no intention of doing so. It’s just that what seems a gesture of good faith surprised me. Again, if I’m reading things right, I think it’s because I’ve been making good on all the arrangements I set up.

Even my credit union, where I have been chronically one month behind for the last year on my loan, is now very friendly and warm (really odd) when I go to make my payments … they sign my receipts with a little smiley face.

I know it might seem like phony friendliness – but I am pretty cynical about stuff like this, and I do believe it’s been genuine.

So, I think the surprising lesson I learned is that if you can get some good faith established by setting up payment plans and then establish a history of following through with them … I think the other creditors will follow suit, and cut you a break.

I still have a good amount of debt to pay off, and am almost current on everything. And I believe if I continue to follow through with the arrangements I have going, it will make a lot of difference, because my payments got lowered.

Perhaps others in this group have had this same experience. I never did before (but I’ve never had this much debt before), and it’s giving me hope that I can keep going, and maybe even one day be debt free …

Thanks to everyone for your invaluable information and advice.

To all who’ve replied so far, thank you.

  1. Amex is the hardest to deal with, I’m going to call the other creditors. My biggest debt is with JP Chase. Others have good experience with them?
  2. I could keep pointing back to how good I’ve been paying, with an occasional late payment (exceptions vs. rules)

I owe $23,000 to Chase and I called them last week telling them I lost my job (didn’t volunteer further details — why didn’t I think of this before as a strategy to lower the interest rate. They didn’t ask for verification of job loss). My interest rate was 30%.

Learnings:

  1. Confirmed that multiple calls talking to different people in the same company can give you different answers. I found this out by “accident.”
  2. There are some nice people on the “other side,” who’d truly work with you. I was constantly asking “What would you do since you know the ramifications of the options” from the bank’s side.

My monthly payment of $820 was reduced to almost half. Yippee!

No luck with Amex, but success with JP Morgan. I’m gearing to use the same technique for the other high interest cards.

Thank you all for your positive financial energy!