Debt reduction

I have read a lot about the federal debt reduction initiative and I must admit none of it has been good. From everything I am seeing, they are trying to separate you from your money. This tends to be more of a problem when people are looking for help. It seems like there is a scammer ready to tell you what you want to hear and take your money and run.

There is no such thing as a federal debt reduction initiative. You can use a nonprofit credit counseling company or a debt settlement company, but there is no direct government agency that is going to help you get out of debt. But if an organization is trying to appear trust worthy, it always sounds good if they sound like they are affiliated with the federal government.

If you have debt, you are going to have to decide how you want to manage it. But if you are going to seek help, make sure you know who you are doing business with. Find out what the BBB has to say and also see what the forums are saying. Just because someone has a complaint against them does not mean that they are dishonest. These companies are in a business that is not pleasant and not everyone likes what they have to say. This sometimes causes people to file a complaint. Any reputable company will do their best to resolve the complaint in a professional manner.

A nonprofit organization is your best bet. Rarely would a scammer go the nonprofit route. Keep in mind that just because they are nonprofit, that does not necessarily mean they are free. They do have expenses and need to make money to cover them. Debt counseling agencies normally charge a setup of fee of about $50 and a monthly fee of $30-$50 per month. If they are trying to hold back your first month’s payments, look elsewhere.

By: Marjorie Salada

A surprisingly large number of people with debt will simply pay the bare minimum payment amounts they’re told to pay. Sadly, when you’re over-burdened with debt it’s often difficult to see a clear place to start!

Here’s an easy plan to help reduce your debts.

1) Add It Up

Before you can get to your destination, you need to know your starting point. This means adding up everything you owe to everyone. Write it all down in a list, putting the name of the company alongside each debt figure.

When you know your total debt figure and how much you owe each person or company, we’re ready to move to step 2).

2) Prioritize

From your list above, figure out which company is charging the highest interest rate. Check your statements if you’re not sure. Write down how much you’re being charged each month in the column beside the debt figure.

3) Payments

List down how much you’re currently paying off each bill. It really adds up – but don’t worry too much about this figure for now. We are still figuring out your starting point so that we can create a strong plan to get rid of it all

4) Negotiate

Ring each company and see if they’re willing to negotiate on fees or rates. Even a small cut in either the fees or rates will see your monthly repayments drop a bit. This will help! Write on your list the new repayment amounts.

5) Change Frequency

Just because your bill says “$100 per month” – that doesn’t mean you need to pay it exactly monthly. As long as the company has $100 by the end of the month, it’s fine to pay $25 per week instead. The company is happy because they’re still getting the same money – but your credit score will improve, and you’ll really be paying off your debt faster than you think.

The reason for this is that interest on debt is charged daily and shown on your statements monthly. So if you’re reducing the amount of debt every week, the amount of interest the lender can charge you goes down a little bit each week too.

Over time you will notice that you’re paying off debt faster than you thought just by cutting out some of the compounding interest.

6) Create Your Plan

By now you should know which is the most expensive bill outstanding. Any money you saved in previous tips should now be put toward the bill with the highest interest rate. Pay more frequently and round up any odd amounts (e.g. if your bill is $24.50 per week, round up to $25 per week). It’s not much, but it really adds up over the long term.

7) Action

Once you’ve started reducing the amount of debt on the highest bill, you should see a ’snowball’ effect’ happening. Don’t give in and don’t buy more things on credit. Keep paying down your debt until it’s gone.

Once you’ve paid off the first debt, you should be able to put that SAME money onto the next debt. (e.g. if you’ve been paying $25 per week off the first debt, when it’s cleared ADD that $25 to the amount you were paying on the next debt in line).

If you stick to this, you’ll find your debt levels dropping in no time!

By: Bianca Raven

There are many Americans today literally drowning in debt and one of the reasons for this is the relative ease of credit in the form of readily available credit cards. This problem has become so large that even the USA as a whole is addicted to debt and the US as a nation is a debtor nation to many major countries. Thus bad debt should be reduced in your personal finances so that you can start thinking of more profitable ways to employ your monthly income.

This article will highlight three simple but effective strategies to help you reduce your household debt and hopefully put you in better shape to start using the extra money saved from interest payments to make more money for your household via investment.

Firstly, you can consider using a debit card and stop using your credit card. What is the difference you may ask? A debit card is good only for the amount of money that you have in your bank account and will prevent you from splurging on the big ticket item that you saw in the shop front the other day. It also will help you cultivate the habit of spending the money that you currently have and not exceed your means.

Another variation on this idea is to pay for purchases with cash as this will mentally prevent you from spending on credit and losing your rational ability to manage your finances. We all know that sometimes a credit card generates in us this urge to spend and especially when we are under stress, we end up spending more than we should. Using cash or a debit card would help to counter such influences.

Secondly, make it a habit to pay all your credit card bills on time at the end of the month. We all have the habit of procrastination and so the best policy is to pay all your credit card and other bills in full at the end of the month. Did you know that the credit card companies and the banks make lots of money from consumers who do not pay their credit card bills on time based from the interest payable?

Thirdly, we should take some time monthly to examine our credit card bills and then take a highlighter to consider wasteful expenditure and then take efforts to cut down such expenditure. Some usually suspects include a cell phone plan that could be renegotiated so as to save money monthly. Some membership fees can also be cancelled if you are not going to your gym or country club as frequently as you wanted to.

In conclusion, we all love to make more money, but if your monthly credit card bills and interest payments start eating into the amount of money that you make, you will not be able to enjoy the increased income that you are earning. Spend some time considering the above mentioned three simple things that you can do each month and you might start seeing more cash in your bank account that you can use for other things.

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