The One Way To Lose Your Debt

I’ve said it before and I’m going to say it again. If debt to income ratio is so high that you are only making minimum payments on your credit cards and still have month left at the end of the paycheck, simply making a budget isn’t going to help you. you need is basic credit education. You need a professional who understands how to get you out of debt and more importantly, how you got that deep into debt.   You need a debt professional who’s going to hold your hand, take you through the process, and be there on the other side to help you rebuild your credit. Don’t try to do this on your own. Creditors generally will not deal with individuals. You’ll end up frustrated, confused and in a worse spot than you’re already in.

There are four alternatives to solving debt problems, and while I believe that a “Debt Negotiation Program” is the best solution for most consumers, I want to educate each and every person strggling with debt on the alternatives and let them make the choice that is best for their solution.

• Credit Counseling
• Debt Consolidation
• Bankruptcy
• Credit Card Monthly Payment

Credit Counseling

The main problem with Consumer Credit Counseling organizations is that they are secretly working for your creditors! This may seem unbelievable, but it is true - and it is why you end up paying about three times more money to pay off your debts in Credit Counseling than in a “Debt Negotiation Program.” Most Consumer Credit Counseling firm’s claim non-profit status and pretend to be independent. But in fact, these non-profits are funded and supported by the very people you owe money to; the credit card companies. That is why Consumer Credit Counseling companies do not negotiate your debts down. They merely try to come up with a plan to make sure you keep paying your credit card bills every single month. They want to force consumers to pay as much money as possible to your creditors. Sure, they may help lower your interest rate a few points, or eliminate a late payment or two, but the credit card companies are happy to do this when they know you are going to keep making payments that a debt arbitrator could have negotiated away for pennies on the dollar. Additionally, since you are repaying 100% of your debt balance plus interest charges (even after they are reduced by Consumer Credit Counseling), you could be in a Consumer Credit Counseling program for 5 years!

Compare that to 2-3 years in a debt settlement program. In a “Debt Settlement Program” you can be out of debt twice as fast and for about 1/3rd of what you’d be paying in a Credit Counseling.

Debt Negotiation Program

Why not become debt free as soon as possible, as opposed to being stuck in a consumer credit counseling program for several more years. Once you learn about the alternatives, the decision becomes easy to choose a Debt Settlement Program. Furthermore, most Consumer Credit Counseling companies require you to make all of your payments to them and then they pay off your creditors. Recently, a state Attorney General sued one of the largest Consumer Credit Counseling firms because they were not actually passing on all the money they get to the credit card companies, they were keeping it themselves! In fact, the IRS has recently stopped granting non-profit status to credit counseling firms. Debt Settlement firms receive no payments from your creditors, so their incentives are aligned with yours. They make money when you save money and the only money you send them is for their fees, if and only if they save you money.

Debt Consolidation

Unfortunately, a Debt Consolidation Loan is one of the most common solutions people think of when they fall into financial difficulties. This is a problem because most people who get a debt consolidation loan find themselves in much deeper financial trouble than they were in to begin with. Debt consolidation loans transfer debt from one place to another. While this may sound good, since many times it can be appear to lower your monthly payments, a debt consolidation loan will not reduce the amount you owe. We have yet to find someone who has solved their debt problems by borrowing more money through debt consolidation. You will still pay back 100% of the debt consolidation loan, plus interest. The interest rate is sometimes lower than before, but this is because debt consolidation loans are usually secured loans that cannot be lowered or negotiated. Once you sign up for a debt consolidation loan, you have just gone from an unsecured debt to a secured debt and have put your personal assets (e.g. your car or home) at risk. At that point if you can’t pay your bills your creditors can come and take your personal property - thus creating a bigger problem than you had to begin with. I think the best solution is to deal with financial problems through Debt Negotiation, not debt consolidation. This way you are dealing directly with the problem, not temporarily avoiding debt problems.

Bankruptcy

Bankruptcy is a way to potentially get out of your debts. Unfortunately, it leaves a long lasting scar, and comes at a high price - financially, emotionally, and socially. It is a long and painful process and the repercussions can last for over a decade. The financial impact is severe; a bankruptcy will stay on your credit report for 10 years. Every time you apply for credit, whether it is a home, a car, a lease, or insurance, you will be impacted. The long-term effect of higher rates many times greatly outweighs the shorter-term impact of filing bankruptcy. Additionally, most people do not realize that bankruptcy can stay on their court records for over 20 years - which means it can follow someone for the rest of their life. If you apply for a job, a loan, rent an apartment, or even insurance your bankruptcy filing is easily uncovered. Lastly, I have yet to find someone who is proud of filing bankruptcy. Most people will do anything to avoid filing bankruptcy Bankruptcy is not an easy or even quick fix. It is a very serious decision with serious consequences. If you are considering bankruptcy, you should consider contacting a lawyer to discuss this option.

A “Debt Negotiation Program” is a great alternative to bankruptcy. Your credit rating is protected from bankruptcy and your debts are reduced. Best of all, your creditors accept the settlement amounts as payments in full, making you debt free without having to suffer the long-term financial, emotional, and social impacts of a bankruptcy. Many people are ecstatic to find an alternative to bankruptcy that still solves their debt problems.

Credit Card Monthly Payment

Unfortunately, millions of Americans who are struggling with their Credit Card Debt continue to just barely make their monthly payments. Most of these people just keep doing whatever they can to continue making minimum payments for the rest of their lives. If you are facing severe financial hardship, this is a no win situation. If you are only meeting your minimum payments, you are paying almost entirely interest charges; not paying down your debts. This means that if you owe $10,000 today, it will cost you more than $20,000 over the next 20-30 years before you are debt free. And if you can’t keep making their minimum payments, the creditors will begin harassing you. If you don’t find help, you could end up with judgments and garnished wages as well as liens against your property. A Debt Settlement Program allows you to minimize creditor calls, avoid bankruptcy, avoid new debt and come to an agreement with creditors on your terms, not theirs.

Lets talk about Debt. How we’re getting out. How we got there in the first place. I’ll be standing by here to chat with you!

Help! I’m Having An Identity Crisis

“Stupid is as Stupid does.” So said Forrest Gump and now I understand that quote.

A while back, my vehicle was vandalized. Not much really, a broken window that the insurance company took care of (they raised the premium after the claim). What was so stupid was that I had left my purse in the car while I ran into the drycleaners. The doors were locked and I’d only be a minute. Well, yeah you guessed it. Some delinquient teenager, broke the window, took the purse and ran. I wasn’t a happy camper, but who could I blame? I left it there. I ran a list of who I needed to contact through my mind, my employer (paycheck was in there), credit card companies, bank, social security, the state (I’d need a new driver license) the list got longer and longer.  In the end, the purse, minus the cash and credit cards was found a few days later. A neighbor called, his son had found the purse in a storm sewer near his house. (What the kid was doing in the storm sewer I don’t know). But thank goodness for that kid!  Fast forward 6 months. I’m thinking of buying a new car. So, I check my FICO score, which has gone down a head spinning 200 points. Why would that be? I check my credit report and BAM! I find the reason. Little Johnny Cool, who broke the window, and stole the purse, took the ID and credit information and proceeded to have fun with my credit information! I’m finally out from under that nightmare. And I hope never to have it happen again. I purchased Identity protection from LifeLock.com and their $1 Million dollar guarantee tells me it won’t!

If I had purchased Life Lock protection, before this nightmare, I would only have had one phone call to make. With their WalletLock protection, that comes free with every LifeLock membership, if your wallet is ever stolen or missing,  a WalletLock specialist will help you contact each credit card, bank or document issuing company, cancel your affected accounts and complete the paperwork and steps necessary to replace your lost documents, including your credit/debit cards, driver’s license, social security card, insurance cards, checkbook - even travelers checks - at no additional cost. (This doesn’t include pictures or cash). At less than $10 a month it’s  a small price to pay for total identity protection !

You and your family should NOT be without this program. Build it into your budget under insurance. To get the best deal enter RD9 in the promotion code box or give the code to the operator when you call. You’ll even get 30 days FREE!! That’s right, FREE! You’ll be glad you did ! I know I am!

1 Day To Financial Freedom

I opened my first checking account the day I graduated high school. It was always a given that I’d do business at the same bank my father and his father had done business with. Besides in those days they gave you free stuff if you opened an account. My free gift was a coffee pot. (Perfect for the dorm room) Besides, all banks seemed the same in those days. Walk in, deposit your money, write your paper checks on that lovely safety check paper that was, by the way, free. Balance your account on the back of the statement at the end of the month. Easy enough. I did business with that bank until 5 years ago. I despised that bank. They were constantly finding new and interesting ways to charge my account and eat up more of my money. If I hated it so much, why didn’t I do something about it? Well, simply put, I never found the time. Besides, it was Daddy’s bank. If it had been good enough for him and his father for all these years, it couldn’t be all that bad could it?

Eventually, they stepped on my toes, one too many times. They failed to stop payment on an automatic draft that I had and cost me nearly $300. That was the day I got my rear in gear. I left work a few hours early, closed my account and started fresh with the competition. It was one of he best financial decisions I have ever made.

That one thing, took only an hour to accomplish. Imagine what could be done in 8 hours. If you have grand financial plans that you never seem to be able to get around to, consider taking a Finance Day. Take one day off from work; make it a normal working day (when banks and the like are open) and get things done! Don’t be concerned with wasting your vacation time on “nothing”. This little trick will save you many times over, and for years.

Before you get started, remove any barriers to success, mental and physical that might impede your process toward your goal. Gather all your financial information, bank statements, credit card bills, insurance policies and the like into one spot. Eliminate distractions. (Turn off the cell phone, let the answering machine get your calls, send the kids to grandma’s if you need to) Commit yourself to spending the entire day to taking care of your personal finances. Time to get crackin on all those things you’ve been putting off till you get around to it.

Now you’re ready. FOCUS ON THE BIGGIES!

If you, too, picked a bank because they were handing out freebees, it’s probably time to find a bank that works for you as an adult. If you’re happy with your bank, then call them and ask them to eliminate service fees or to give you better interest rates. If you’re unhappy with your bank, find a new one. A local credit union is an excellent choice. You might also consider internet banks, which often feature better interest rates.

• Find a high rate savings account and set it up. Most brick and mortar banks pay only about 1% on their standard FDIC insured savings accounts. Many online banks pay several points more. Check bankrate.com for comparison charts
• Start tracking your expenses. If you don’t know where you’re money’s going, find out!

•  Carry a small notebook and pen to write down EVERY TRANSACTION.

• Use personal finance software to download all of your banking and credit information.

 Quicken is my favorite, they have an online edition and downloadable products, as well as standard products you can purchase at your local retailer. Two great deals I found are below.
Quicken Online Edition – Try it out for free!
Save up to 36% Off Quicken 2008 Downloadable Products or Try an online budgeting tracker like:

Mint is a modern, powerful, easy and secure web-based solution for managing your finances. And it’s free. You register anonymously using any valid email address, and then add the log-in information for the online bank, credit union and credit card accounts you want to consolidate in Mint.

Mint connects to over 3,500 US financial institutions. Your account information is updated each night. Mint automatically categorizes all your purchases, showing you how much you spend on gas, groceries, parking, rent, restaurants, DVD rentals and more, with amazing precision. An advanced alerting system highlights any unusual activity, low balances, unwanted fees and charges, and upcoming bills so you’re in constant contact with your money – effortlessly

Mint goes way beyond just reporting. Using a patent-pending search algorithm, Mint constantly searches through thousands of offers from hundreds of providers to find the best deals on everything from bank accounts to credit cards; cable, phone and Internet plans, and more. Mint’s suggestions are “unique to you” as they are based on your individual spending patterns. For example, if you have $20,000 in a bank account that’s earning no interest, Mint might recommend a high interest rate savings account from ING or HSBC. Acting on that suggestion would give you an extra $900 in interest income over a year.

I’ve used mint. The only problem I had with it was when it imported checking information it’s recognition of payees is not as good as it could be. Overall I’d give it an 8. Easy to use and secure.

• Get a better rate on your credit cards. If you have credit card debt, getting it under control should be a priority. That’s a whole lot easier to do if your rates aren’t in the exosphere.
  • If you’re FICO score is good (above 700) do some research on credit card rates, then get on the phone with your company and do some negotiating. (More on this tactic later next week.
  • Unfortunately, the more you need a good rate, the less likely you are to get it. If your credit is bad or you’re already behind on your payments, or you’ve maxed out your limit, your credit card company is more worried that you’ll default on your account than that you’ll leave. Make an appointment for credit counseling with a legitimate debt counselor.
• Give your retirement plan a tune up.
  • If you’ve changed jobs in the last few years, roll over those old 401K’s
  • Balance your current 401K. Lots of people select their funds in a willy nilly fashion, not to be embarrassed here, it happens, but you need to balance that fund’s components. Do some research, and talk to your fund administrator about how to get it balanced
•  Get around to your Insurance policies.
  •  Check the deductibles and coverage’s on your homeowners, health and auto insurance. One of the easiest ways to save money is to raise these deductibles. Of course if you no savings, you want to skip this section right now. You’ll be the one to cover the expense of the deductible. In most states, it’s acceptable to carry only liability on your car if it’s past a certain age. This trick will save you a boat load. Check your states requirements then talk to your insurance company.
• Set your goals. Establish a $1k emergency fund. Pay off credit card debt. Save for major expenses. Write your goals down. Use a journal style notebook, or your friendly word-processing software. Just DO IT.
•  Organize yourself. Set up a money file. This can be as simple as a shoebox or as entailed as a complete filing system. You can even keep it in an encrypted file on your hard drive. It simply needs to be an easy-to-access location in which you keep all of your important financial information, including account numbers, service providers, phone numbers, etc. Anyway you do it; all of the information from your money holiday will be in this one central location.

Now what can YOU accomplish in 8 hours? Tell us here, give us your suggestions for getting on track.

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