Debt Reduction

Two Steps Toward Freedom From Credit Card Debt

April 23, 2016 By Twila Van Leer

Balance transfers help you get out of credit card debt.

There are perfectly legitimate ways to reduce the interest and ultimately pay off credit card debt. Personal finance experts suggest you use them.

First Step

Find a card that offers a 0 percent introductory balance transfer promotion and transfer your balance to it. These cards often offer new customers as much as 18 months during which no interest is charged on the transferred balances. The experts consistently track all the cards to find that ones offering these terms and there are reviews that are available to the public. Check bankrate.com.

It pays. Think of it: on a $10,000 balance, $100 to $200 of your monthly payment is sucked up by interest, leaving only about $50 to be applied to the principle.

Second Step

After you have found a card that will charge no interest for a certain period of time, use that time to break free of the debt. Continue to make the payments you would have done previously. Add a little if possible. You will see the overall debt dip very quickly.

After having been swimming upstream trying to make headway against your credit card debt, you’ll see immediate improvement. There simply is no way to make inroads until the high interest can be eliminated as a factor. Use this formula and then repeat the process with additional credit cards to see real progress.

5 Excuses Keeping You From Being Debt-Free

April 3, 2016 By Twila Van Leer

The only solution to debt is to stop the leakage and resolve to get rid of it.

There are many reasons why you may be stuck in debt and they’re not all necessarily related to the state of your finances. In fact, your money woes may be exacerbated by your mindset. Your beliefs are often what guide you, and if you’re carrying around problematic ones, you’ll have a much harder time getting debt-free.

Here are five excuses that could be keeping you in the red.

I Deserve It

One of the most common phrases debtors bandy about is “I deserve it,” Jeff Jones, a Certified Financial Planner in Huntsville, Ala., wrote in an email. “It’s an excuse and that transcends financial matters … but this usually comes at the expense of a larger, long-term goal.” This mentality, for instance, enables people to reward themselves with a lavish vacation (on credit) or a new car (and the payment to go with it), Jones added, when instead you should be thinking about becoming debt-free or saving more for retirement.

I Don’t Know Where to Start

Facing debt is overwhelming. It involves owning up to whatever got you there in the first place and taking responsibility for paying it off. Add to that the sinking feeling that comes with realizing how much you owe and the whole thing starts to become one sad situation that seems insurmountable. How will you ever get out from under this mountain of expenses? Fortunately, there are options, including, for instance, debt consolidation, balance transfer credit cards or the help of a credit counselor. You just have to be willing to face your debt head on and put the time in to research what strategy may work best for you.

I’ll Deal With It Later

Another day, another excuse. “I’ll draft a budget in the new year” or “When I get a better job, I’ll start paying off debt.” And on it goes. The problem with this mentality is that the timing will never be right. It’s like keeping a diet: If you always find an excuse to get out of it, you’ll never reach your goals.

I Only Need to Make the Minimum Payment

Initially choosing to make only a minimum payment on your loan obligations can be a hard habit to break. “This one is invidious because it anchors you to making a payment, which means that, in the case of a credit card, it will take, say, 10 years to pay off, assuming you don’t add to the balance,” Jason Hull, a Certified Financial Planner in Woodbury, N.J., wrote in an email. “We tend to become attached to the first number we see, so when we see the minimum payment, we assume that’s what we should pay. Instead, we should pay as much as we can on our credit cards to pay them off as soon as possible — and make sure that we’re not adding any more to the balance.”

You can see just how much adding a few dollars to your monthly payment can impact your debt-free timeline using this credit card payoff calculator.

Remember, high credit card balances can damage your wallet and your credit. You can see how your credit card debts may be affecting your credit score by viewing your free credit report summary, updated each month, on Credit.com.

I’m Not Responsible

It’s easy to blame our debt woes on external forces, like car repairs or a medical emergency, but when all’s said and done, we need to take responsibility for our actions. That could mean not living like an upper-class family on a middle-class paycheck, being able to sign off of our favorite shopping sites when we know our credit card bills are already too high and avoiding “friends” who spend to have fun (and encourage you to do the same.) It’s a good idea to try to stop justifying your habits with the idea your debts aren’t your fault — someone got into debt, and whether you acquired it by marriage, co-signing, or on your own, it’s yours, and yours alone, to pay off.

Coping With Debt PDF: Developed by the Federal Trade Commission, this pdf was designed to help consumers stay ahead of their debt. 20 pages of self help techniques that can help you through your financial difficulties.

Should I Cut The Cable Cord?

March 15, 2016 By Twila Van Leer

Dropping Cable Or Satellite TV? Make An Educated Choice

Thinking of dropping live tv. — Many people are trying to decide whether to drop live tv.

The great majority of Americans, some 83 percent as of 2015, pay for TV service, according to Leitchman Research Group. They put out money for cable, satellite or fiber-optic providers. The percentage actually has dropped slightly since 2010, when it was at the 87 percent level. The difference, according to the researchers, is that fewer households are signing up for cable to replace those who have dropped the service. And some couples moving into their first home don’t sign up as a matter of course.

The percentages may continue to drop as people catch on to the fact that they don’t need cable or satellite to watch their favorite TV shows. Streaming, downloading, library discs and network TV are all reasonable alternatives.

Streaming:

Services such as HULU, Netflix and Amazon Prime give you access to thousands of shows, including past seasons of popular cable series, current episodes of network TV shows and original shows that are only available online. The average price of the services is just $9 per month, only a fraction of the $99-per-month average cost of cable or satellite. An advantage: you can tune in on your own schedule, rather than the network’s.

Downloads:

You have access to many TV shows from iTunes or VUDU for $2 to $3 each. That could become more expensive than cable or satellite if you get all your shows this way. But if you are an occasional viewer or if you want to watch just one particular show that you can’t get through a streaming service, it’s practical.

Library Discs:

Most modern libraries now offer videos for patrons. Check out your local library.

Network TV:

Despite the many delivery choices now available, it still is possible to watch TV the old-fashioned way without any additional fees. All you need is a good antenna, preferably a roof-mounted version. Various indoor antennas also are available if you don’t have easy access to a roof. You can even build your own with instructions from such publications as Popular Mechanics. Online tutorials can guide you in making an antenna from materials that are readily available, such as scrap wood and old coat hangers, cardboard and aluminum foil.

Choosing among the alternatives could save you a bundle. For instance, compare a $99-per-month cable fee with an $8-per-month HULU subscription. Over a year, that’s a $1,092 savings.

An Expert Shares Money Management Secrets

March 4, 2016 By Twila Van Leer

Anna Sergunina of Nerd Wallet has learned how to manage money effectively and she is willing to share. Here are her tips on how to keep a tight control on your personal finances:

Managing Money

Many people accumulate debt because they want things they can’t really afford. But debt also happens when we don’t understand the flow of our income and expenses. We can’t accurately estimate how much money we have available to spend. Sergunina developed a “money flow” system to help her family track spending. Here’s how it works:

Set up two free checking accounts.

One to pay fixes expenses such as mortgage or rent, car payments, utility bills, etc., and one to pay variable expenses such as groceries, gas, clothing, etc.

Create a high-yield online savings account.

This is your emergency fund to handle life’s curve balls such as medical bills, loss of job or other income reduction, major repairs and so forth.

Plan ahead for big-ticket purchases.

The Serguninas agreed to use their one joint credit card for such things as airline tickets and hotel stays. They still have separate credit cards, an essential in maintaining a good credit score. Closing cards could hurt your credit rating.

Create a budget.

To determine how much you will need in your “fixed expenses” checking account be sure to include all the items that come around regularly, including ongoing household expenses, insurances, health care premiums, cable, Internet and phones, membership fees, debt payment, and savings. (Making savings part of the “must pays” helps you avoid putting it off.)

List the variables.

Such as groceries and eating out, gas, clothing, personal services, medical co-pays, entertainment.

When your paychecks arrive, divide the money into the two accounts.

Have the savings deposited automatically. Most fixed-cost bills can be paid automatically as well. That eliminates the need for a debit card. A cushion of several hundred dollars can be maintained to take care of the unexpected expenses or bills that arrive before the paycheck does. With the second account, take care of the variables, remembering to stop when the money is gone. No new shoes if the tank is empty.

Link your “curve ball” savings.

Link to both checking accounts so you can make a quick withdrawal if necessary.

This systematic approach to money management makes tracking less cumbersome, Sergunina says. It eliminates the need for constantly checking account balances and gives you a better “big picture” view of your spending.

Debt-Free People Have Positive Attributes

February 25, 2016 By Twila Van Leer

The bondage of living in debt adds more stress to our lives.

You probably have noticed it among your friends and acquaintances: Some families can pay off $40,000 in debt in two years while others who have much larger incomes can’t seem to make a dent in their indebtedness.

What makes the obvious difference is how they spend their money. They have different priorities.

People who make a conscious decision to corral their personal finances and keep them under control have some characteristics that others do not, financial experts say. They list seven of these traits as:

Being wise.

Those who decide they are through with debt, approach the problem as if it’s a pernicious skin disease that they must get rid of. Now. They make it a priority.

Being patient.

They can walk past sales and other temptations without a qualm because they know that in the long run, they will be better off. Impulse buying is the impatient downfall that defeats debt eradication.

Being confident.

People who are getting out of debt don’t pay attention to friends or relatives who comment on the lifestyle changes they are making. Start out the process with this in mind and stay confident in your decision to stick it out. You’ll achieve the financial peace of mind you are seeking.

Being goal-driven.

Determining to get out of debt is a goal in itself. But it requires more, short-term goals that will aid the process. Proceeding without definite plans could lead to frustration and stymie your objectives. Choose which of your debts you plan to attack first and stick with the agenda.

Being responsible.

Becoming financially mature doesn’t depend on the calendar. If you continue at age 50 to treat money as you did at age 20, you may never get out of debt. Responsibility means getting out of debt as quickly as possible and avoiding it in the future. Being out of debt doesn’t mean you can now spend foolishly. It means putting your debt-free money into saving for huge expenses such as college and assuring your retirement by investing your money wisely.

Refusing to be materialistic.

Attitudes toward money matter immensely. How much importance you put on STUFF will guide your use of money whether you have a lot or a little. There’s an old saying: “You can’t take it with you” that has become such an old, old saying because it is true.

Being willing to make sacrifices.

Eating out and paying big prices for entertainment might have to go by the board while you get out of debt. But these drastic budget cuts are temporary. When debt is in the past, you can start adding these items back into the budget. You may find you can cut back, however, and not miss them. Bottom line: If you are determined to be debt-free you will make the necessary sacrifices. You’ll take the actions that lead to financial peace.