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04-08-2009, 03:43 PM
10 Tips for Getting Out of Debt
March 26th, 2009 ? Laurie Pawlik-Kienlen ? Related ? Filed Under
These tips for getting out of debt are from financial expert Ethan Ewing, of Bills.com. If you?re drowning in credit card bills, medical bills, or mortgage payments - there might be something here that can help you manage your debt better.
?Credit buying is much like being drunk,? says Joyce Brothers. ?The buzz happens immediately and gives you a lift?the hangover comes the day after.?
The hangover is never good - whether it?s from spending or overindulging in anything. For more detailed tips on getting out of debt, click on Debt Cures ?They? Don?t Want You to Know About by Kevin Trudeau. And, read on for Ewing?s expert tips for dealing with credit card and other types of debt?
10 Tips for Getting Out of Debt
1. Understand assets and debts. To understand your financial situation, tally your income and expenses. Detail ongoing, fixed monthly expenses such as rent or mortgage payments, and then add variable expenses that are ?must-buys.? These include food, gas and medicine. Next, set up categories for savings (prioritize building an
emergency fund), unexpected expenses and - if enough remains - entertainment.
Subtract total expenses from monthly net income (the amount left after taxes and other paycheck deductions such as health insurance and 401(k) contributions) to find cash flow. If the bottom-line cash flow is negative or does not help achieve your short- and long-term financial goals, immediately commit to paying off debt. Aim for total monthly debt payments to equal no more than 15 percent of monthly income.
2. Pay off your bills. Credit cards charge an average interest rate of 14 percent. A missed payment can send the rate skyrocketing to 30 percent or more. The result can be interest that mounts up and becomes unmanageable debt.
3. Create a spending plan. Figure out how much money you have to live on each month, and how much you earn.
4. Discipline yourself to live within the budget. If you need to - or if you cannot pay off your credit card bills in full each month - use cash or a debit card for daily purchases.
5. Pay the most on the debt that carries the highest interest rate if you have credit card or other unsecured debt, while making minimum payments on other debt. When the debt with the highest interest rate is paid in full, implement the same strategy for the next-highest-rate debt. Always pay secured debts (mortgage, car) first.
6. Negotiate your debt. If you can?t make minimum payments on bills, try calling creditors and asking for temporary hardship status. Some creditors may work out payment plans. While creditors are under no obligation to negotiate, it is often in their interest to do so, since it makes getting out of debt more likely.
7. Get debt settlement help. A debt settlement firm called Freedom Debt Relief negotiates on consumers? behalf to lower balances due. Consumers pay the debt settlement firm a portion of the savings, which can be up to half the full amount owed. Debt settlement typically provides better repayment terms than a Chapter 13 bankruptcy filing - and with no permanent bankruptcy judgment. Debt settlement will have a negative impact on credit ratings, however, and is best suited for those with large debt burdens who are unable to make required payments.
8. Consult a debt consolidation service. If you?re getting out of debt, beware of high fees of some debt consolidation services - and check the service?s reputation. Those working with a debt consolidator will likely sacrifice two things: the freedom to open and use additional credit lines and, in many cases, their credit profile. The service usually will ask consumers to make one monthly payment, which it will use to pay creditors.
9. Borrow from family or friends. Be cautious with this option for managing and getting out of debt, and make sure to get any agreements in writing.
10. File bankruptcy. Truly a last resort, bankruptcy destroys a credit rating for many years. Bankruptcy is more difficult to obtain than it used to be, and more expensive. Bankruptcy reform enacted in 2005 sharply curtailed filings for Chapter 7 bankruptcy, the type of bankruptcy that eliminates most consumer debt. Chapter 13 bankruptcy filings, which require consumers to repay debt on repayment plans, are available to those whom their state determines, through its means test, have enough income to pay back at least some of their debt. Repayment terms generally are less favorable than those found with debt settlement.
About Bills.com. Based in San Mateo, Calif., Bills.com is a free one-stop portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages, and other loan
:D:o
March 26th, 2009 ? Laurie Pawlik-Kienlen ? Related ? Filed Under
These tips for getting out of debt are from financial expert Ethan Ewing, of Bills.com. If you?re drowning in credit card bills, medical bills, or mortgage payments - there might be something here that can help you manage your debt better.
?Credit buying is much like being drunk,? says Joyce Brothers. ?The buzz happens immediately and gives you a lift?the hangover comes the day after.?
The hangover is never good - whether it?s from spending or overindulging in anything. For more detailed tips on getting out of debt, click on Debt Cures ?They? Don?t Want You to Know About by Kevin Trudeau. And, read on for Ewing?s expert tips for dealing with credit card and other types of debt?
10 Tips for Getting Out of Debt
1. Understand assets and debts. To understand your financial situation, tally your income and expenses. Detail ongoing, fixed monthly expenses such as rent or mortgage payments, and then add variable expenses that are ?must-buys.? These include food, gas and medicine. Next, set up categories for savings (prioritize building an
emergency fund), unexpected expenses and - if enough remains - entertainment.
Subtract total expenses from monthly net income (the amount left after taxes and other paycheck deductions such as health insurance and 401(k) contributions) to find cash flow. If the bottom-line cash flow is negative or does not help achieve your short- and long-term financial goals, immediately commit to paying off debt. Aim for total monthly debt payments to equal no more than 15 percent of monthly income.
2. Pay off your bills. Credit cards charge an average interest rate of 14 percent. A missed payment can send the rate skyrocketing to 30 percent or more. The result can be interest that mounts up and becomes unmanageable debt.
3. Create a spending plan. Figure out how much money you have to live on each month, and how much you earn.
4. Discipline yourself to live within the budget. If you need to - or if you cannot pay off your credit card bills in full each month - use cash or a debit card for daily purchases.
5. Pay the most on the debt that carries the highest interest rate if you have credit card or other unsecured debt, while making minimum payments on other debt. When the debt with the highest interest rate is paid in full, implement the same strategy for the next-highest-rate debt. Always pay secured debts (mortgage, car) first.
6. Negotiate your debt. If you can?t make minimum payments on bills, try calling creditors and asking for temporary hardship status. Some creditors may work out payment plans. While creditors are under no obligation to negotiate, it is often in their interest to do so, since it makes getting out of debt more likely.
7. Get debt settlement help. A debt settlement firm called Freedom Debt Relief negotiates on consumers? behalf to lower balances due. Consumers pay the debt settlement firm a portion of the savings, which can be up to half the full amount owed. Debt settlement typically provides better repayment terms than a Chapter 13 bankruptcy filing - and with no permanent bankruptcy judgment. Debt settlement will have a negative impact on credit ratings, however, and is best suited for those with large debt burdens who are unable to make required payments.
8. Consult a debt consolidation service. If you?re getting out of debt, beware of high fees of some debt consolidation services - and check the service?s reputation. Those working with a debt consolidator will likely sacrifice two things: the freedom to open and use additional credit lines and, in many cases, their credit profile. The service usually will ask consumers to make one monthly payment, which it will use to pay creditors.
9. Borrow from family or friends. Be cautious with this option for managing and getting out of debt, and make sure to get any agreements in writing.
10. File bankruptcy. Truly a last resort, bankruptcy destroys a credit rating for many years. Bankruptcy is more difficult to obtain than it used to be, and more expensive. Bankruptcy reform enacted in 2005 sharply curtailed filings for Chapter 7 bankruptcy, the type of bankruptcy that eliminates most consumer debt. Chapter 13 bankruptcy filings, which require consumers to repay debt on repayment plans, are available to those whom their state determines, through its means test, have enough income to pay back at least some of their debt. Repayment terms generally are less favorable than those found with debt settlement.
About Bills.com. Based in San Mateo, Calif., Bills.com is a free one-stop portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages, and other loan
:D:o