Debt Management http://www.wisebread.com/taxonomy/term/7681/all en-US 5 Things Debt Collectors Don't Want You to Know http://www.wisebread.com/5-things-debt-collectors-dont-want-you-to-know <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-things-debt-collectors-dont-want-you-to-know" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_debt_collector_000085025055.jpg" alt="Woman learning what debt collectors don&#039;t want you to know" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're already struggling with bills you can't pay. And now a debt collector is on the other end of the phone, demanding that you come up with the cash. And if you don't, that debt collector sure makes it sound like a lot of terrible things could happen to you.</p> <p>But here's what you might not know: The federal government, through its Fair Debt Collection Practices Act, gives you certain rights. If the collection agency calling you violates any of them, you can report it to the Federal Trade Commission or your state's attorney general.</p> <p>The debt collector calling you might not share this information with you. Just like it might keep other debt-collection secrets to itself. Here are five secrets that collection agency doesn't want you to know.</p> <h2>1. You Can Stop Their Calls With a Letter</h2> <p>Tired of receiving calls from a collection agency? You can stop them by writing the agency a letter requesting that they refrain from contacting you in the future. Debt collection agencies are required by the Fair Debt Collection Practices Act to honor such a written request. Be aware, though, that the <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt" target="_blank">debt you owe</a> still exists. And if you don't pay it back, collection agencies are allowed to take legal action &mdash; they can sue you &mdash; to force you to pay up. If a collection agency does decide to take legal action, it is allowed to contact you to let you know, even if you've written a cease-and-desist letter.</p> <h2>2. You Can Request a Payment Plan</h2> <p>Collection agencies prefer that you come up with all the cash that you owe at once. If that's not possible, these agencies will seek the biggest possible payment that you can afford. But you can request a repayment plan that works within your budget. Negotiate with collection agencies to work out a smaller monthly payment, one that won't drain your bank account. Collection agencies aren't required to accept a payment plan. But it never hurts to request one, and many debt collectors understand that an affordable monthly payment plan is often the best solution.</p> <h2>3. Debt Collectors Have Limits</h2> <p>Under federal law, debt collectors are not allowed to call you several times a day or at odd hours. This is a bit vague, but collectors shouldn't be calling you five times a day or ringing your phone at 4:00 a.m. Debt collectors also can't call you at work if you request that they not do so. And&nbsp;debt collectors can only contact your neighbors, family members, friends, or coworkers to find your current address or phone number. The Fair Debt Collection Practices Act forbids them from talking to other people besides you and your attorney about your debt.</p> <h2>4. You Can't Go to Jail Because of Debt</h2> <p>The United States does not throw people in jail because they owe money. There is no debtors' prison here. So, debt collectors can't say that you'll end up in prison because you owe money. Debt collectors also can't threaten to sue you unless they actually do plan to begin legal action against you. Federal law also forbids collectors from using threatening or profane language when trying to collect a debt.</p> <h2>5. Debt Collectors Have Certain Responsibilities, Too</h2> <p>Collection agencies have to follow certain guidelines when trying to collect unpaid debts. One of the biggest? Within five days of contacting you about an unpaid debt, the agency must send you a written notice stating how much you owe and the name of the creditor that is seeking the money. The letter must also spell out the steps you can take if you don't believe you owe this money. You can also request that a debt collector verify any debt that you owe. Collectors can't make any additional phone calls until they send you a written letter verifying that you do indeed owe what your creditor claims. Only after sending this letter can a debt collector resume contact with you.</p> <p>It's easy to feel overwhelmed when a debt collector calls. But don't forget your rights. Be sure, too, to let debt collectors know that you understand your rights and that you will take action if the collector violates them.</p> <p><em>Have you ever been pestered by a debt collector? How'd you get them to stop?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-things-debt-collectors-dont-want-you-to-know">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-annoying-things-bill-collectors-cant-do-and-how-to-stop-them">4 Annoying Things Bill Collectors Can&#039;t Do -- And How to Stop Them</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-signs-you-arent-making-enough-money">6 Signs You Aren&#039;t Making Enough Money</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-debt-management-questions-youre-too-embarrassed-to-ask">5 Debt Management Questions You&#039;re Too Embarrassed to Ask</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/prioritize-these-5-bills-when-youre-short-on-cash">Prioritize These 5 Bills When You&#039;re Short on Cash</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-deal-with-collection-agencies">How to Deal With Collection Agencies</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management bills Collection Agencies debt collectors federal government federal trade commission harassment Fri, 27 May 2016 09:00:11 +0000 Dan Rafter 1718092 at http://www.wisebread.com 6 Signs You Aren't Making Enough Money http://www.wisebread.com/6-signs-you-arent-making-enough-money <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-signs-you-arent-making-enough-money" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_stressed_computer_000044901658.jpg" alt="Woman learning signs she isn&#039;t making enough money" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Living paycheck to paycheck can take a toll on your stress levels and emotional wellbeing. It can also greatly impact your financial wellbeing both in the present and in the future. If you aren't confident about your financial future, then it's time to make a change. Here are a few signs that you need to spend less &mdash; or make more.</p> <h2>1. Your Bills Are Overwhelming</h2> <p>If you don't make enough to pay your bills every month, then you need to make more. Even paying the minimum amount on your bills is not enough. You should be working to pay off your debt, without having to worry about making enough to buy food every month.</p> <p>Overdrawing your checking account, paying your bills late every month, or ignoring your financial obligations altogether can make the problem much worse. If you commit any of these bad habits, then you'll have to worry about overdraft fees, bounced check fees, and may even be sent to collections. (See also: <a href="http://www.wisebread.com/how-late-payments-affect-your-credit?ref=seealso">How Late Payments Affect Your Credit</a>)</p> <h2>2. Your Budgeting Isn't Enough</h2> <p>The best way to get more out of every paycheck is to simply spend less. Creating a budget can be the right step towards making lasting changes that will pay off big in the end. However, what do you do if you have already created a budget and cut out all the unnecessary spending you can, but still aren't making enough? You'll need to find a way to make more money.</p> <h2>3. You Have No Savings</h2> <p>If you aren't able to pay down your debt and set aside money for your savings and retirement accounts, then you simply need to make more. In the event that there is a large unexpected expense coming your way, you should have some savings to cover it. It is crucial that you set aside money for your future, and if you aren't, then you need to do something to change the present.</p> <p>It's important to keep your money goals and future finances in mind. It's essential that you are saving for your future, in the event that you experience a pay cut or layoff. Saving for retirement is also one of the most important things you can do for your future self. If you aren't reaching your short and long-term financial goals, then you aren't making enough money.</p> <h2>4. You Keep Relying On Credit Cards</h2> <p>If you find that you are relying on your credit cards just to make ends meet, and are only paying the minimum on your credit cards month after month, you're heading towards prolonged debt and a host of other problems. This can result in a <a href="http://www.wisebread.com/7-ways-to-increase-your-credit-score-quickly" target="_blank">lower credit score</a> and less money available for your savings account. In the long run, you'll also be responsible for higher interest charges and credit card payments.</p> <h2>5. Your Paycheck Disappears in No Time</h2> <p>If you spend the bulk of your paycheck in the first couple of days, then there's a problem. You should have more than just enough to pay your bills. There should be money left to save and invest towards retirement. Everyone has a bad month from time to time, but if you find that your paycheck runs out within the first week of every month, then you may be overspending or simply not making enough.</p> <p>Special occasions occur for most people several times per year. During these times, you'll want to have a little money set aside (for holidays, anniversaries, birthdays, and other occasions that can cut into your pay). The last thing you want to worry about is breaking out the credit cards just because you need to buy gifts for the kids.</p> <h2>6. You Feel Undervalued</h2> <p>If you feel you aren't being paid enough at your current job, then you may get resentful and less productive. Consider speaking with your manager about what you bring to the table and ask for a raise. The worst they can say is &quot;No.&quot;</p> <p>If you decide to ask for a raise, then you need to first determine <a href="http://www.wisebread.com/are-you-underpaid-how-to-figure-out-what-salary-you-deserve">what your time is worth</a>. Use a salary calculator or salary comparison site, and find out what the average salary is for your career so that you have that information on your side when you speak with management. (See also: <a href="http://www.wisebread.com/getting-the-most-out-of-salary-comparison-sites?ref=seealso">Getting the Most Out of Salary Comparison Sites</a>)</p> <h2>Is It Time to Make a Move?</h2> <p>If you realize it's time to make a move, then there are several steps you can take. If you haven't <a href="http://www.wisebread.com/build-your-first-budget-in-5-easy-steps">worked on a budget</a> yet, then it's time to do so. You can also take steps to reduce your rent, find alternate forms of transportation, or simply spend less. You may also need to consider changing employment or taking on a weekend or side job.</p> <p><em>Do you know of other signs that a person just isn't making enough? Please share your thoughts in the comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/andrea-cannon">Andrea Cannon</a> of <a href="http://www.wisebread.com/6-signs-you-arent-making-enough-money">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-to-keep-holiday-spending-from-blowing-debt-repayment">6 Ways to Keep Holiday Spending From Blowing Debt Repayment</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-good-reasons-to-become-a-contractor">8 Good Reasons to Become a Contractor</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/are-your-financial-habits-just-bad">Are Your Financial Habits Just Bad?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/prioritize-these-5-bills-when-youre-short-on-cash">Prioritize These 5 Bills When You&#039;re Short on Cash</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-debt-management-questions-youre-too-embarrassed-to-ask">5 Debt Management Questions You&#039;re Too Embarrassed to Ask</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Budgeting Career Building Debt Management asking for a raise bills paycheck to paycheck salary underpaid wages Mon, 23 May 2016 09:30:20 +0000 Andrea Cannon 1714251 at http://www.wisebread.com 6 Common Debt Reduction Roadblocks — And How to Beat Them http://www.wisebread.com/6-common-debt-reduction-roadblocks-and-how-to-beat-them <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-common-debt-reduction-roadblocks-and-how-to-beat-them" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_stressed_work_000088581529.jpg" alt="Woman beating common debt reduction roadblocks" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Debt is big business in the United States. Currently, credit card debt alone is <a href="http://www.voanews.com/content/us-credit-card-debt-nears-one-trillion/3275222.html">approaching $1 trillion</a>, or around $5,700 per household. (For those with a revolving balance, it's closer to $16,000!) Paying it down can be a daunting prospect, so we often build mental roadblocks to avoid it. However, that only prolongs the problem &mdash; and increases the costs. Learn how to get past the following six mental roadblocks, and finally deal with your debt once and for all.</p> <h2>1. I'll Pay It Off Later</h2> <p>This is probably one of the biggest roadblocks of all time, and one that we've all fallen victim to at one point or another. There's so much time left to pay down that debt, but right now, you need as much money as possible from your paycheck. So, you pay the minimum on credit cards, and promise that next year, or the year after, will be the time to start paying down debt.</p> <p>The problem with that strategy is that time literally equals money. Interest <em>loves </em>time, and the longer you wait to pay down a debt, the more interest you accrue. You may even see minimum payments creep up as you add more to the balance each year. Before you know it, a year or two has passed, the debt is even bigger, and it becomes even easier to say &quot;I'll pay it off later.&quot;</p> <h3>How to Get Past This Roadblock</h3> <p>Calculate how long it'll take you to pay off the debt at your current rate, using a <a href="http://money.cnn.com/calculator/pf/debt-free/">repayment calculator</a>. Then, look at your monthly budget. What can you eliminate and apply to the debt payment? Be thorough. Can you double your monthly payment? Can you triple it? Put those figures into the calculator, and you will be amazed at how much sooner that debt is eliminated. Print that out, and put it somewhere you can see it every day. Check off each payment, and count down the months until you're debt free.</p> <p>A balance transfer can be an effective tool to use as part of your debt repayment plan. Once you&rsquo;ve narrowed down the timeline you can pay off an amount, use a credit card with a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">0% intro APR offer on balance transfers</a>. Most cards will charge a balance transfer fee (between 3-5%) on the balance transferred. The best option is the <a href="http://www.wisebread.com/chase-slate-visa-review?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">Chase Slate card</a>, which offers 15 months 0% intro APR <em>and</em> no intro balance transfer fee (balance must be transferred within the first 60 days), <em>and</em> it has no annual fee. It literally costs nothing to move your balance over and get a break from interest for 15 months. Just be sure that you can, and will, pay off the entire balance within those 15 months, or else you&rsquo;re right back where you started. (See also: <a href="http://www.wisebread.com/which-balance-transfer-credit-card-is-the-best-for-you?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=article">Which Balance Transfer Credit Card Is Right for You?</a>)</p> <h2>2. I Don't Want to Spend My Money on Debt Payments</h2> <p>Let's be honest. Not one person reading this article gets excited about the prospect of using their hard-earned money on debt reduction. After all, you worked hard for that money, and you want to use it on something fun, or meaningful &mdash; a vacation, a new appliance, a night out, or just putting it into savings. It's way better than giving it to some credit card company that has more money than a small country.</p> <p>But, when you're not spending money on debt reduction, you're allowing the debt to get bigger. And bigger. Eventually, you will have to pay it off, and you'll be spending <em>even more</em> of your money on that debt. Plus, don't forget who got you into debt in the first place. You didn't spend your hard-earned money at all; you borrowed it to get those nice things you wanted.</p> <h3>How to Get Past This Roadblock</h3> <p>First, come to terms with the fact that when you're not spending money on debt reduction now, you'll be spending more on it later. Also, realize that you borrowed this money, and at a cost. The longer you wait to pay it down, the more you'll owe. Use an amortization calculator to see the cost of the interest you're accruing while you only pay the bare minimum. In some instances, your monthly payment is literally going towards nothing but interest, and that should be a sharp wake-up call.</p> <h2>3. I'd Rather Live Well and Be in Debt</h2> <p>Fancy shoes. Big car. Year-round tan. Jewelry. Designer clothes. They are all status symbols, and give the owner a feeling of pride and accomplishment. That is, until the owner gets home and looks at the stack of bills and debts that have mounted up. It sure does feel nice to have expensive clothes and accessories, but the cost can be more than money. It can equate to stress, illness, and broken relationships. Living well on borrowed money is no way to live at all, and eventually, the piper will come calling.</p> <h3>How to Get Past This Roadblock</h3> <p>Calculate the true cost of the things you think you need now &mdash; not just the price of the item, but the interest you're paying on it over time. A $200 item at 12% interest will actually cost $279 if you pay only the minimum of $4/month on it. And it will take four years to pay that off. That's money down the drain. Instead, if you must have brand names and high-end items, look at eBay, Craigslist, and thrift stores for good quality used options. You can maintain your image (no one is going to ask where you got it), and save a ton of money.</p> <p>Put that money you saved into your debt reduction fund. Find Groupons and coupons for eating out and other activities. Bring lunches to work to subsidize the costs of your nights out, and must-have purchases. Even CEOs bring lunches to work, no one is going to think you're a cheapskate. And finally, figure out what living well really means. Things are just that. They are not what make life worth living. Family, friends, and memories &mdash; these are the things that matter.</p> <h2>4. It's Free Money!</h2> <p>You'll be amazed at how many people think credit is free. They see $15,000 credit limits and their eyes widen like saucers. A spending spree ensues, and after a few months, that card is maxed out. But who cares &mdash; you just pay the minimum and get another card!</p> <p>This is the state of mind that gets people into all sorts of financial trouble, and credit card companies love these people. In fact, people who pay off their cards each month are called &quot;deadbeats&quot; by creditors; they don't make them any money. They love the customers who carry high balances, and pay only the minimum each month. It can take 20, 30, or even 40 years to pay off debt in that way, as so little of the payment goes to the principal. It is not free money. Not even close. If you don't pay debt back in full each month, it costs. And that cost can equate to many thousands of dollars in interest payments every year.</p> <h3>How to Get Past This Roadblock</h3> <p>First, you need to tell yourself repeatedly that this money is not free. Next, look at your household expenses, and see how much of it you're actually putting on the credit cards. If you're not paying that off every month, you're spending more on groceries and clothing than you should be. Find a way to stop using those credit cards for a few months. Use your debit cards, checks, and cash to pay for items, instead, and concentrate on paying down the debt you have accrued. After a few months without credit, you can assess your situation and see if you really need those cards, at all.</p> <h2>5. Everyone Has Debt</h2> <p>This is not strictly true, although the numbers are staggering. Around 80% of Americans are in debt, but 44% of that is mortgages. If we examine credit card debt alone, only 39% of Americans carry a balance month-to-month. That's far from a majority, and certainly not a group you want to be a part of. And besides, just because a lot of people do something, it's hardly an excuse to do it, too. Over 42 million Americans smoke cigarettes, but that's not a compelling reason to join them.</p> <h3>How to Get Past This Roadblock</h3> <p>Forget about everyone else. Yes, they may have credit card debt and loans, but they are not you. And what's more, you have no idea what kind of financial trouble they're in. They may not be managing their credit cards well at all, and may be painting on a smile to cover the stress they're under. Concentrate on yourself, and your own debt.</p> <p>Lay it all out on a spreadsheet, or even a notepad. What are the balances, what are the interest rates, and how long will it take to pay each one off at your current rate? Can you consolidate loans? Can you transfer a balance to another card for 0% interest for one year? That will help pay it down. Make a start, and decrease the balances each month. You will feel good knowing that you're making progress, and can be proud of the fact that you're about to join the 61% of Americans who don't have a revolving balance.</p> <h2>6. I'll Never Pay It Off &mdash; What's the Point?</h2> <p>Debt has unfortunately become a way of life for many of us, and we feel like it'll never go away. But it's simply not true. Debt doesn't have to be a part of anyone's life. Maybe you fell on hard times, and the credit cards and loans bailed you out. Maybe you had some unexpected expenses, and had to turn to credit. Regardless, debt doesn't have to become a way of life.</p> <h3>How to Get Past This Roadblock</h3> <p>Tell yourself that your debt is something that can be beaten. Then, gather your bills, and arrange them from the smallest balance to the largest. Figure out how much money you can put towards a payment, and then, <a href="http://www.wisebread.com/a-comprehensive-guide-to-the-debt-snowball-method-0">snowball your debt</a>. Start with the smallest balance, and pay off as much as you can each month, applying minimum payments to the other balances. When that first debt is paid off, apply the payment to the next largest debt, and so on. This is one of the best ways to see progress, and give you hope.</p> <p>It can be daunting to try and take on the big debts first. And as you see so little progress month-to-month, doing it in reverse gives you a sense of achievement, and this will help you stay on course to finally pay off your debt.</p> <p><em>What are you doing about your debt?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/6-common-debt-reduction-roadblocks-and-how-to-beat-them">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-reasons-your-debt-isnt-diminishing">12 Reasons Your Debt Isn&#039;t Diminishing</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-debt-management-questions-youre-too-embarrassed-to-ask">5 Debt Management Questions You&#039;re Too Embarrassed to Ask</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-the-best-way-to-get-out-of-debt">What&#039;s the Best Way to Get out of Debt?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-do-a-credit-card-balance-transfer-and-how">Why Do a Credit Card Balance Transfer, and How?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-this-one-thing-every-day-to-defeat-out-of-control-spending">Do This One Thing Every Day to Defeat Out-of-Control Spending</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management balance transfers budgeting excuses repayment roadblocks snowball method Tue, 17 May 2016 10:30:04 +0000 Paul Michael 1709865 at http://www.wisebread.com 12 Reasons Your Debt Isn't Diminishing http://www.wisebread.com/12-reasons-your-debt-isnt-diminishing <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/12-reasons-your-debt-isnt-diminishing" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/scissors_cutting_money_000035636770.jpg" alt="Learning reasons why your debt isn&#039;t diminishing" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your 2016 New Year's resolution was to <a href="http://www.wisebread.com/my-2016-budget-challenge-why-i-need-to-find-31k-this-year" target="_blank">finally pay down all your debt</a>. But it's now May, and your balance has hardly budged. What's going on? Here are the top 10 reasons why your debt isn't dwindling &mdash; and what you can do to get debt-free by the end of the year:</p> <h2>1. You Are Still Using Your Credit Card</h2> <p>To quote my old sailing instructor: &quot;The boat is taking water, Missy. You might want to plug that hole before you start bailing. A'yup.&quot;</p> <p>Don't add to the debt you are trying to pay down. Leave your credit card at home, freeze it, or even cut it up. Just. Stop. Using. It. If you cannot pay cash for something, then you cannot afford it.</p> <h2>2. You Don't Have an Emergency Fund</h2> <p>Your car breaks down. <a href="http://www.wisebread.com/my-2016-budget-challenge-everything-breaks">Your computer breaks down</a>. You break down. If you don't have an emergency fund in place, all those unplanned costs go right back onto your credit card. Before you start reducing debt, you should first put $1,000 into a savings account.</p> <p>Life happens. Think of your emergency account as the financial equivalent to your car's air bag. It's more likely that you'll walk away from an accident if you've got something to cushion you against the crash.</p> <h2>3. Your Income Is Too Low</h2> <p>If you are using your credit card to pay for necessities like groceries or utility bills because you are short on cash, you will be in debt for a long time. Credit cards are a very expensive method of borrowing money.</p> <p>If you are in this situation, you need to raise your income by any (legal) means necessary. Can you get a part-time job? Can you save on housing by renting out a room in the house, even if that means you have to sleep in the living room or share a bedroom with your kids? Can you apply for food assistance? Now is not the time for vanity. Vanity is for rich people. (See also: <a href="http://www.wisebread.com/100-ways-to-make-more-money-this-year?ref=seealso">100+ Ways to Make More Money This Year</a>)</p> <h2>4. You Are Keeping Up With the Joneses, and the Joneses Are Stupid</h2> <p><a href="http://www.wisebread.com/is-peer-pressure-keeping-you-poor">Peer pressure keeps you poor</a>. It's true. Many people would rather struggle to pay their huge credit card bills than admit that they can't afford lunch, concert tickets, private school for the kids, car insurance, etc.</p> <p>The people who make you feel bad about not spending money that you don't have are never the people who will help you get out of debt. Don't let other people dictate how you spend the money that you earned.</p> <p>Shut down the Joneses by telling them that you are saving up for your dream. For example, anytime anyone pressures me to spend money that I don't have I say, &quot;That sounds lovely, but I can't afford that because I am saving up for a camera body so I can work professionally as an architectural photographer.&quot; What's your dream? A home? A vacation? An education? Early retirement?</p> <p>Your dream is also a great motivator to get out of debt. My husband really wants to go to Easter Island for his 50th birthday (he's currently 48). He got serious about paying down our line of credit when he realized that we won't have the time to save up for that vacation if we don't pay down our debt by the end of this year.</p> <h2>5. You Are Only Paying the Minimum Balance</h2> <p>Banks love it when you only pay the minimum balance. The longer you take to pay down your debt, the more money they make by charging you interest. Even if you can only pay $20 more than your minimum balance per month, every little bit helps.</p> <p>For example, say you are carrying a $5,000 balance on a credit card with a 12% APR. If you pay the minimum monthly payment of $100, it will take you 70 months to pay off the card and you will pay an additional $1,966 in interest! But, if you raise your monthly payment to $120 per month, you can pay off the card in 50 months and pay $1,500 in interest. Just about anyone can create a <a href="http://www.wisebread.com/find-a-side-gig-at-these-4-best-micro-jobs-sites">side hustle</a> to make an extra $20 per month. That little bit of extra work will save you $466 in interest!</p> <h2>6. You Aren't Paying Off Low-Balance or High-Interest Cards First</h2> <p>According to a Gallup survey, the average number of credit cards Americans carry in their wallets is at an all time low. (Good job, Americans!) Although 33% of Americans only have one or two credit cards, 18% of Americans have three or four cards, and 7% of Americans have more than seven cards. So, if you have debt spread over multiple cards, how do prioritize which card needs to be paid down first?</p> <p>There are two main schools of thought when it comes to paying down debt quickly: Pay off the loan with the highest interest rate first (the Avalanche Method) and pay off the loan with the lowest balance first (the Debt Snowball). (See also: <a href="http://www.wisebread.com/snowballs-or-avalanches-which-debt-reduction-strategy-is-best-for-you?ref=seealso">Snowballs or Avalanches: Which Debt Reduction Strategy Is Best for You?</a>)</p> <p>When budgeting for either method, remember you will still have to pay the minimum balance each month on your other cards.</p> <p>With the Avalanche Method, you devote all your extra funds to paying down your credit card with the highest interest rate first. Obviously, the higher the interest rate, the more expensive it is to borrow money using that card. So, you will pay less interest in the long run, if you pay down your high interest rate card first. Once you pay down your card with the highest interest rate, you move on to throwing all your extra cash against the debt on the card with the next highest rate. Repeat until all your debt is gone.</p> <p>The only downside to this method is that your highest interest rate might also be the card with the highest balance. If this is the case, it will be a marathon, not a sprint, to pay down that debt. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=article">How to Use a Balance Transfer to Cut Out Interest Fees</a>)</p> <p>The Debt Snowball is similar to the avalanche method except you use all your available cash to pay down the card with the lowest balance first. With this method you get the sense of accomplishment by paying off a card quickly, which can give you the motivation to continue throwing money at your debt.</p> <p>Both methods work if you are diligent. Use whichever method works best for you.</p> <h2>7. Your Payments Are Going Toward Fees</h2> <p>The best card is the one that combines the <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">lowest APR</a> and annual fee with the greatest perks for your life. In order to compare cards and loans, you need to know how much you are paying in interest and fees on each tool.</p> <p>Speaking of fees. Don't be late with your payments. Late fees are a totally unsatisfying way to spend your money. If you get dinged with a late fee, call your lender and see if they will waive the fee for you. Lenders often have secret grace periods for late payments, but you have to ask. Pro tip: ask nicely.</p> <p>Banks also love to charge extra should you happen to use the wrong ATM. I have seen ATM fees as high as $3 per transaction! If you are like me and live far away from where you bank, make sure that you withdraw enough cash to pay for your life between bank runs, and be crystal clear about what ATMs you can use without getting dinged.</p> <p>Before you travel, make sure that your debit or credit card doesn't charge you an additional money exchange fee on top of the ATM fee.</p> <h2>8. You Are Buying for Reward Points</h2> <p>Many reward cards are more expensive than cards that don't have perks. Not only do reward cards generally have higher APRs, they also tend to come with a yearly fee. Are your rewards worth the extra cost? Do the math. (See also: <a href="http://www.wisebread.com/how-to-decide-if-an-annual-fee-credit-card-is-worth-it-for-you?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=article">How to Decide If an Annual Fee Credit Card Is Right for You</a>)</p> <p>It's important to note that most reward card perks are only perks if you don't pay extra interest costs. If you cannot zero out your card balance every month, it might be less expensive to just buy discount airfare instead of trying to <a href="http://www.wisebread.com/how-to-use-miles-and-points-for-a-big-award-trip?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">use mileage points to travel</a> on the cheap.</p> <p>Even if you are one of those rare birds who pays off their card every month and never accrues interest, you can still fall victim to purchase acceleration. People often buy things on credit that they would not have bought with cash if they know they are close to &quot;earning&quot; a reward.</p> <h2>9. You Don't Understand the Scope of Your Debt</h2> <p>A recent study showed that people have a pretty good idea about <a href="https://www.newyorkfed.org/medialibrary/media/research/epr/2015/EPR_2015_comparisons_brown.pdf">how much they owe</a> on their homes and their cars, but are terrible at estimating other types of debt. Researchers found that people estimate their credit card debt to be 40% less than what lenders report, and families underestimate their student loan debt by 25%!</p> <p>I have more than one bank account. I have more than one loan. I have more than one retirement fund. I use Mint.com to get a snapshot of all my banking on one page. This kind of <a href="http://www.wisebread.com/10-free-or-almost-tools-and-resources-for-creating-a-new-2015-budget">finance app</a> is good for keeping track of all your accounts.</p> <h2>10. Your 0% Balance Transfer Period Has Expired</h2> <p>Obviously if you go from paying 0% interest to paying anything more than 0% interest for the privilege of using credit, it is going to cost you. But before you move your debt, do the math. Is it cheaper to pay the fee to transfer your debt to another credit card with a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">0% balance transfer period</a>, or is it cheaper to just pay down your existing debt quickly?</p> <p>It's important to note that every time you open or close a card, your credit score will take a hit. Even if you are turned down for credit, just the act of having your credit checked by a lender will ding your credit. The lower your credit score, the harder it will be for you to get the best home or car loans. Think strategically.</p> <h2>11. You Are Not Talking to Your Lender</h2> <p>Have you called your credit card company recently and asked them to lower your APR? If you have been a longtime customer or have received a better offer in the mail, call your credit card company and ask for an interest rate reduction.</p> <p>While we are on the subject of lenders, have you talked to your bank or credit union about a debt consolidation loan? The interest rates on a Home Equity Line of Credit or a debt consolidation loan are often much lower than credit cards.</p> <h2>12. You Lack a Plan</h2> <p>Only one out of every three Americans has a <a href="http://www.gallup.com/poll/162872/one-three-americans-prepare-detailed-household-budget.aspx">detailed household budget</a>. This means that the majority of Americans have no clue where their money goes. It is impossible to make smart financial decisions if you are only guessing how and where you spend your money.</p> <p>People that successfully pay down their credit cards quickly throw every spare dollar at their debt. The only way to find every spare dollar is to <a href="http://www.wisebread.com/build-your-first-budget-in-5-easy-steps">create a budget</a>. If you have never created a budget, don't stress. It is way easier than you think.</p> <p><em>Have you successfully paid down a debt? What did you do? Share your debt-killing techniques with your fellow readers in the comments section.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/max-wong">Max Wong</a> of <a href="http://www.wisebread.com/12-reasons-your-debt-isnt-diminishing">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-manage-your-debt-in-10-minutes-a-week">How to Manage Your Debt in 10 Minutes a Week</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-simple-way-to-decide-which-credit-card-to-pay-off-first">The Simple Way to Decide Which Credit Card to Pay Off First</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-common-debt-reduction-roadblocks-and-how-to-beat-them">6 Common Debt Reduction Roadblocks — And How to Beat Them</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-debt-management-questions-youre-too-embarrassed-to-ask">5 Debt Management Questions You&#039;re Too Embarrassed to Ask</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-debt-reduction-mistakes-even-smart-people-make">8 Debt Reduction Mistakes Even Smart People Make</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management avalanche method emergency fund high interest paying down debt rewards points snowball method Thu, 12 May 2016 10:30:04 +0000 Max Wong 1707447 at http://www.wisebread.com 5 Debt Management Questions You're Too Embarrassed to Ask http://www.wisebread.com/5-debt-management-questions-youre-too-embarrassed-to-ask <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-debt-management-questions-youre-too-embarrassed-to-ask" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_stressed_laptop_000070731367.jpg" alt="Couple with debt management questions they&#039;re too embarrassed to ask" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There are some questions that we're too embarrassed to ask anyone, particularly friends or family. We certainly don't like the idea of letting others know that we have financial hardships. And all too often, we avoid asking the questions at all, preferring to bury our heads in the sand.</p> <p>This, of course, is never a good idea. So here are five of the most common questions about debt that people are too embarrassed to ask, with answers that shed a little light on the subject.</p> <h2>1. When Do I Declare Bankruptcy?</h2> <p>It's a word that strikes terror in our hearts: bankruptcy. It is interpreted as failure. Destitution. The end of the line. However, bankruptcy is not as bad as it sounds. Many famous and wealthy people have declared bankruptcy, and they do just fine. It provides a means to restructure your debts, working with creditors to pay what you owe whilst getting a level of protection that won't leave you penniless.</p> <p>When to declare bankruptcy? Well, that's different on a case by case basis. But, if you can only make minimum payments on credit cards, and are using them to pay minimums on other cards, that's a big warning sign. If you are living paycheck to paycheck, can't pay bills, are about to be evicted, and have absolutely no savings, you're in trouble.</p> <p>However, a simple test is to add up all of your assets, and compare them to all of your debts. If you have way more debt than assets, and creditors are hounding you day and night, it may be time to declare bankruptcy.</p> <h2>2. How Do I Declare Bankruptcy?</h2> <p>If you have decided that, yes, bankruptcy is the only option, the next logical step is to go and do it. But again, that can be a daunting prospect. You first need to know <a href="http://bankruptcy.lawyers.com/consumer-bankruptcy/choosing-the-type-of-bankruptcy-chapter-7-or-13.html">what type of bankruptcy</a> to declare. You hear talk of Chapter 11, but that's a very complex solution usually reserved for businesses. You will most likely want to file a Chapter 7 or Chapter 13 bankruptcy, instead.</p> <p>Chapter 7, also called a straight bankruptcy, is the simplest. This plan liquidates your current assets, if you have any, to pay off as much of the debt you owe as possible. The remaining debt is then haggled over. Some can be forgiven, and the remainder is put into a repayment plan that you can handle. The big drawback with Chapter 7 is that you may lose almost everything you own, including your home, car, and possessions of value. It's a fresh start, but it really does rip the Band-Aid off.</p> <p>Chapter 13 is therefore a better choice for anyone with property. This option is known as a reorganization bankruptcy, and you may well need to do this, anyway, if your annual income is too high to qualify for Chapter 7. Both options have many rules and regulations.</p> <p>Once you determine the type of bankruptcy you prefer, the process begins by filing a two-page petition to your district bankruptcy court, alongside supporting forms and a fee of about $300. The best thing to do is search for a bankruptcy attorney in your area, as you likely don't want to navigate these waters alone.</p> <h2>3. How Do I Deal With My Massive Credit Card Debt?</h2> <p>Credit card debt can be crippling. Sadly, many people take on more and more credit cards to help cover costs, and before they know it, they are buried in minimum monthly payments they cannot make. If you find yourself in major credit card debt, you have options.</p> <p>First, do you have any way to take that debt and <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">transfer it to loans or other cards</a> with significantly lower rates? A HELOC usually has a much lower rate than a typical credit card, and the repayment terms are much easier, too. Some credit cards offer <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">zero percent interest on balance transfers</a>, with a small fee (2%&ndash;3% of the balance), or sometimes, <a href="http://www.wisebread.com/5-best-credit-cards-with-no-balance-transfer-fees?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">no fee at all</a>. Shop around.</p> <p>Can you cut costs elsewhere to apply more money to your credit card payments? Is your gym membership being used? Do you need all those cable channels? Can you cut down on meals out, or subscriptions to magazines? Find ways to cut everywhere, and apply all of that to your debt.</p> <p>Finally, try the <a href="http://www.wisebread.com/a-comprehensive-guide-to-the-debt-snowball-method-0">snowball method</a>: Apply as much money as you can to pay off the card with the smallest balance, while making minimum payments on the others. Once that balance is at zero, take all of the payment and apply it to the next card down the line. You get a feeling of accomplishment, and the payments get bigger and bigger on each card, snowballing to create a huge payment by the time you get to your last card.</p> <h2>4. How Can I Improve My Poor Credit Score?</h2> <p>Having a low credit score is not only a little embarrassing, it's also very costly. Your credit score directly influences the kind of financial deals you are going to get. If you want to see better percentage rates on loans and credit cards, or avoid being turned down for any kind of credit, you'll need to address the issue.</p> <p>Now, this is not something you can fix overnight. A low credit score takes years of behavior into account, and it will take more than a few weeks to reverse your past misdeeds. But, you can start taking steps to improve it immediately. (See also: <a href="http://www.wisebread.com/7-ways-to-increase-your-credit-score-quickly?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=article">7 Ways to Increase Your Credit Score Quickly</a>)</p> <p>First, get a copy of your credit report from <a href="https://www.annualcreditreport.com/index.action">AnnualCreditReport.com</a>. It's free, and you can see exactly what you're dealing with. Ensure there are no mistakes. And as mistakes do happen to a lot of people, you can begin correcting those errors. Any faulty late payments or delinquencies can be addressed, and your credit score will rise when they're removed.</p> <p>Next, look at all your credit card balances. Do you have small amounts spread over lots of cards? If so, you'll want to consolidate those debts onto just a few cards, and use only those cards going forward. However, DON'T close out the other cards. That can actually hurt your score. Leave them open; they are a history of good credit and they improve your credit utilization ratio, which measures how much of your available credit you have free to use.</p> <p>In the future, you will want to make sure you pay every single bill on time. Technology is a wonderful thing, so use it. Create a calendar on your phone or computer that lets you know when bills are due. And, use auto-pay when you can to avoid any kind of late fees.</p> <h2>5. What's the Difference Between Good and Bad Debt?</h2> <p>Some people even wonder, &quot;How can debt ever be a good thing?&quot; Well, there is a significant difference, and if you know what it is, it can have a real impact on what you spend your money on, and how you spend it. (See also: <a href="http://www.wisebread.com/8-signs-youve-crossed-from-healthy-debt-to-problem-debt?ref=seealso">8 Signs You've Crossed From &quot;Healthy&quot; Debt to &quot;Problem&quot; Debt</a>)</p> <p>Let's start with good debt. This is anything that creates value over time. Most people consider buying a home good debt, because the investment will grow in value, and will ultimately lead to more money at the end of the day. Other examples include student loans, which are an investment in yourself and future income, and business loans, which should ultimately lead to greater revenue. Of course, all of those examples have been marred by things like the collapse of the housing market, or the lack of well-paying jobs after graduation, but as a general rule, they are still considered good debt.</p> <p>Bad debt, on the hand, doesn't create any value. It's money spent on disposable items, high-interest rates, and anything else that contributes to &quot;spending without eventual financial gain.&quot; For instance, putting a $1200 clothes spending spree on a credit card is bad debt. A new car loan is actually bad debt, because cars depreciate in value. Even dining out is bad debt if you keep ringing it up on the credit card, and only pay off the interest each month. So, be careful. You may think it's good debt to put a new suit for work on your credit card, but if it isn't leading to a legitimate financial payoff, it's actually bad debt.</p> <p><em>What are you too embarrassed to ask about debt reduction?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/5-debt-management-questions-youre-too-embarrassed-to-ask">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/prioritize-these-5-bills-when-youre-short-on-cash">Prioritize These 5 Bills When You&#039;re Short on Cash</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-times-bankruptcy-is-the-right-move">3 Times Bankruptcy Is the Right Move</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps">How to Rebuild Your Credit in 8 Simple Steps</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-signs-you-arent-making-enough-money">6 Signs You Aren&#039;t Making Enough Money</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-common-debt-reduction-roadblocks-and-how-to-beat-them">6 Common Debt Reduction Roadblocks — And How to Beat Them</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management bankruptcy bills credit score embarrassing questions snowball method Tue, 10 May 2016 10:30:04 +0000 Paul Michael 1703948 at http://www.wisebread.com How to Manage Debt While Unemployed http://www.wisebread.com/how-to-manage-debt-while-unemployed <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-manage-debt-while-unemployed" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000050909676_Large.jpg" alt="trying to manage debt while unemployed" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When you're unemployed, it can be harder than ever to manage your debt. But with the right strategy, you can stop worrying about debt and start focusing on finding a new job. Here's how to get a handle on your debt during unemployment:</p> <h2>Assess Your Assets</h2> <p>First consider all assets and possible sources of income available to you. Can you accept part-time work, sell belongings on eBay, or take a local babysitting gig to make a little extra cash for the necessities? This can make it easier to stay afloat and make your minimum monthly payments on-time. And if you haven't already done so, visit the <a href="http://www.dol.gov/">U.S. Department of Labor</a> to apply for unemployment benefits.</p> <h2>Create a Survival Budget</h2> <p>Determine what your basic living expenses are, such as food, mortgage, utilities, transportation, insurance, and medical costs. Create a budget that details every single dime you spend each month so that you can determine what can be cut during this time. Once you find new employment, try to stick to this survival budget so that you have extra funds available to pay down debt or invest in an emergency savings fund.</p> <p>Assess your remaining costs to determine if there is anything that can be cut. For instance, try reducing your credit card and cable bills, forego the land line, cancel any magazine subscriptions, cut back on entertainment expenses and streaming services, and reduce or eliminate costly habits (such as drinking, smoking, and eating out). Look for other creative ways to save money, such as relying on public transportation and finding easy ways to cut back on utilities. (See also: <a href="http://www.wisebread.com/10-ways-to-save-money-when-you-are-unemployed?ref=seealso">10 Ways to Save Money When You Are Unemployed</a>)</p> <h2>Set Priorities</h2> <p>Prioritize your debts. Determine which bills need to be paid first, once your basic living expenses are taken care of. Secured credit accounts, like credit cards, loans, and car payments should be paid next.</p> <p>The goal is to preserve your savings, so don't try paying off any debts early at this point. Make only the minimum payments on your credit cards and avoid using any sort of credit for as long as possible. Once you find new employment, you can start working on paying down your debts as quickly and efficiently as possible.</p> <p>If you have a federally-backed student loan, there are a number of payment options available during tough times. Often, the loans can be deferred until you find work again. Check with the <a href="http://www.ed.gov/">U.S. Department of Education</a> for more information.</p> <h2>Negotiate With Creditors</h2> <p>Speak with your mortgage lender and credit card issuers at the first sign of trouble. If you wait to contact them until after you've already missed a payment, it's less likely creditors will work with you to find a reasonable solution.</p> <p>Your creditors may be able to help you ease loan terms, reduce your monthly payments, or even put your payments on hold for a short period of time. While there are no guarantees that they will work out an arrangement with you, it's worth a shot.</p> <h2>Pursue Alternatives</h2> <p>There are alternative options, such as debt management, debt settlement, debt consolidation loans, and bankruptcy. Speaking with a <a href="https://www.nfcc.org/">credit counselor</a> can provide you with precise information on the options available to you. (See also: <a href="http://www.wisebread.com/11-steps-to-take-when-bankruptcy-is-your-only-option?ref=seealso">11 Steps to Take When Bankruptcy Is Your Only Option</a>)</p> <p><em>Do you have other tips for dealing with debt when you're unemployed? Please share your thoughts in the comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/andrea-cannon">Andrea Cannon</a> of <a href="http://www.wisebread.com/how-to-manage-debt-while-unemployed">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-its-time-to-destroy-debt-start-with-a-goal">When It&#039;s Time to Destroy Debt, Start With a Goal</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-pay-down-debt-first-or-invest">Should You Pay Down Debt First or Invest?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-allocate-your-cash-when-you-are-broke">How to Allocate Your Cash When You Are Broke</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-get-back-on-track-when-youre-behind-on-your-bills">How to Get Back on Track When You&#039;re Behind on Your Bills</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-debt-lessons-from-darth-vader">5 Debt Lessons From Darth Vader</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Creditors negotiating out of work Paying Off Debt survival budget unemployed Mon, 02 May 2016 10:00:11 +0000 Andrea Cannon 1700680 at http://www.wisebread.com 6 Ways Life is Wonderful When You're Debt-Free http://www.wisebread.com/6-ways-life-is-wonderful-when-youre-debt-free <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-ways-life-is-wonderful-when-youre-debt-free" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_carefree_smile_000074865831.jpg" alt="Woman learning ways life is wonderful when debt-free" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Some people think debt is the norm rather than the exception. To each his own. Just know that this type of mindset can become dangerous, especially if you develop the habit of financing anything and everything.</p> <p>Credit cards and other loans can put what you want within financial reach, but a life without debt can be rewarding. Here are six ways life is frickin' awesome when you're not burdened by a negative net worth.</p> <h2>1. You Have the Freedom to Work Less</h2> <p>The more debt you have, the more you have to work to keep up with monthly payments. Whether it's a house payment, a car payment, or credit cards, debt holds your freedom hostage and keeps you stuck in a career or job you don't like. Think of how great life could be if you had fewer bills. Rather than working a 40- or 50-hour week, you might get by working only 20 or 30 hours a week. With fewer financial pressures, you can quit a high-stress job and find satisfying work, although you might earn less.</p> <h2>2. You Can Retire While You're Still Young</h2> <p>Even if you know the importance of early retirement planning, debt can limit how much you stash for the future. Eliminating needless debt and reducing monthly expenses frees up disposable cash, allowing you to grow your retirement account faster. A sizable account might be the difference between working into your 60s and retiring young while you're still healthy and energetic. And that's not even considering how good the &quot;everybody envies me&quot; factor is gonna feel.</p> <h2>3. You Can Finally Have a &quot;Real&quot; Savings Account</h2> <p>Not only can debt-free living boost your retirement account, there's also an opportunity to grow your personal fund. Imagine what you could do with a &quot;real&quot; savings account. I'm not talking about $500 or $1,000, but rather tens of thousands of dollars. This is money that can be used for an emergency, home improvements, investments, or a good time. You can take a much-needed (and deserved; do you, boo!) vacation or deal with home repairs without relying on a credit card.</p> <p>If you're struggling to build your personal account, be honest and consider whether your lack of savings has anything to do with debt payments eating up your extra cash. If you could eliminate $1,000 a month in debt payments (between credit cards, student loans, and automobile loans), you could save $12,000 in just one year.</p> <h2>4. You Will Become a Smarter Spender</h2> <p>I've learned something from my own experience with debt: It is easier to accumulate new debt when I already have debt. Whenever I have a zero balance on my credit card, I'm more cautious and conscious of how I spend my money and use the card. I'll second-guess or rethink the smallest purchases. It doesn't matter if it's only $5 or $10, I'll wait until I have cash to avoid using the card. But the moment I give in and use the card, I stop second-guessing myself and I continue using the card.</p> <p>I've had debt discussions with others and found that some people feel the same. Maybe it's just our experiences, or maybe there's a connection between existing debt and new debt. Either way, <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt">getting rid of debt</a> can make you more aware of your spending habits. Debt elimination can be a long process. Reflecting on the effort it took to become debt free (and the benefits) is motivation to remain debt free.</p> <h2>5. You Will Experience Less Financial Anxiety</h2> <p>Debt keeps you enslaved to a bank. And sometimes, the amount you owe can heighten your anxiety level. This might be the case if payments stretch your budget beyond a comfortable limit. If you get into hot water, you could lie awake worrying about late payments, a damaged credit score, or collection calls. On the other hand, when you live within your means and don't rely on financing, you enjoy an inner calm and better financial security. When you own your stuff outright, you don't have to worry about anybody taking your items, unless, of course, you fail to pay taxes on your home or car. Then, well, you better hide.</p> <h2>6. You Don't Have to Pay to Borrow</h2> <p>One of the best things about avoiding debt is that you avoid interest. Interest is the cost of borrowing, and most banks charge some form of interest when you take out a loan or use a credit card. The longer you carry the balance, the more interest you pay, which can add up to hundreds or thousands of dollars depending on the amount financed.</p> <p>Borrowers with superb credit may qualify for <a href="http://www.wisebread.com/5-best-credit-cards-with-0-apr-for-purchases">0% financing</a> for furniture, credit cards, or automobiles. But these promotions are short-lived and only beneficial if you pay off the balance during the introductory rate period. If not, interest kicks in. In the case of financing furniture, if you miss a payment or don't pay off the balance during the promotion period, you could end up paying retroactive interest. All this equates to extra money you're spending for which you have nothing to show. A fool's game, for sure. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seealso">When to Use a 0% Balance Transfer to Pay Off Credit Card Debt</a>)</p> <p><em>What would you do if you were debt free? Travel? Retire? Throw the party to end all parties? Let's talk about it in the comments below.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/6-ways-life-is-wonderful-when-youre-debt-free">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/goal-setting-getting-out-of-debt-once-and-for-all">Goal Setting: Getting Out of Debt Once and For All</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/beyond-debt-free-getting-by-in-the-new-economy">Beyond Debt-Free: Getting By in the New Economy</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-you-can-buy-with-5000">What You Can Buy With $5,000</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-inspiring-people-who-each-paid-off-over-100000-in-debt">5 Inspiring People Who Each Paid Off Over $100,000 in Debt</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-youve-crossed-from-healthy-debt-to-problem-debt">8 Signs You&#039;ve Crossed From &quot;Healthy&quot; Debt to &quot;Problem&quot; Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Lifestyle borrowing debt free early retirement financial freedom net worth savings Tue, 19 Apr 2016 10:30:10 +0000 Mikey Rox 1691580 at http://www.wisebread.com 12 Easy Ways to Avoid Student Loan Debt http://www.wisebread.com/12-easy-ways-to-avoid-student-loan-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/12-easy-ways-to-avoid-student-loan-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000070282971_Large.jpg" alt="avoiding student loan debt" title="" class="imagecache imagecache-250w" width="250" height="126" /></a> </div> </div> </div> <p>College awaits, but the shared dilemma all students face is agonizing. Should you go to college and let loans pick up the tab for the ever-rising cost of tuition? Or, join the workforce directly out of high school and risk earning far less than a college graduate? Decisions, decisions.</p> <p>According to the National Center for Education Statistics (NCES), with a bachelor's degree, <a href="https://nces.ed.gov/fastfacts/display.asp?id=77">you'll make 62% more</a> than you will with a high school diploma. Or, with a bachelor's you'll make $48,500 a year, versus $30,000 a year with a high school diploma.</p> <p>The high school grad who doesn't have a big chunk of change must weigh the cost of incurring debt against their projected earnings, and many have opted to risk the debt. Nationwide, <a href="http://www.marketwatch.com/story/every-second-americans-get-buried-under-another-3055-in-student-loan-debt-2015-06-10">student loan debt is rising</a> at the rate of $2,726 per second, with a cumulative tab at about $1.3 trillion.</p> <p>But why does debt have to be the theme of a post-graduate life? You <em>can </em>go to college and avoid debt. Here's how.</p> <h2>1. Grants</h2> <p>Unlike scholarships, grants are based on your Expected Family Contribution (EFC) and financial need. Fill out your free application for Federal Student Aid (FAFSA) as early as you can. Grants from schools go to those who need them the most and those who apply for aid the earliest.</p> <p>You may be eligible for the Pell Grant, which the federal government awards to 10 million students a year. You may also be eligible for state grants: the Federal Supplemental Educational Opportunity Grant (FSEOG), the Teacher Education Assistance for College and Higher Education (TEACH) grant, as well as grants based on your ethnicity.</p> <h2>2. Consider Crowd-Sourcing</h2> <p>There are now websites specifically set up to facilitate crowd-sourced funding for students to avoid loans, or to pay off loans. You'll do volunteer work in exchange for crowd-sourced funds, for example. Several options here are <a href="http://www.zerobound.com/">zerobound</a> and <a href="http://www.sponsorchange.org/">SponsorChange</a>.</p> <h2>3. Score Scholarships</h2> <p>Have you been a good student? Have you done extracurricular activities, excelled in sports, or are you willing to prove you're worthy of a scholarship? There are so many of these available that you can bet there's something for you &mdash; whether it's a $500 <a href="http://www.excel-university.com/scholarship/">accounting scholarship</a> or a $1,000 <a href="http://www.bulkofficesupply.com/scholarships-in-new-york">teaching, art, or entrepreneurial scholarship</a>. Sites such as <a href="http://www.fastweb.com/">Fastweb</a> and <a href="https://www.scholarships.com/">Scholarships.com</a> offer scholarship databases and information. The key here is to look into as many as you can and work hard at getting them.</p> <h2>4. Check Out Work-Study Options</h2> <p>If you qualify for federal financial aid, you may qualify for the Federal Work-Study Program. Work-study will gain you experience in your field of choice and will pay you to go to school, whether you're a part-time or full-time student. These positions get snatched up quickly, so check with your school's financial aid office as soon as your enrollment application is accepted.</p> <h2>5. Work a Part-Time Gig</h2> <p>Although this is likely to prolong the amount of time you spend in college, it will also lessen your debt. Consider looking into what the <a href="http://www.wisebread.com/find-a-side-gig-at-these-4-best-micro-jobs-sites">gig economy</a> has to offer. You could <a href="http://www.wisebread.com/how-to-earn-extra-money-driving-for-uber-or-lyft">drive for Uber or Lyft</a>, you could do freelance writing, accounting, clean houses, or you could be a virtual assistant through <a href="https://www.zirtual.com/">Zirtual</a>. Gigs offer flexibility, options, and a safety cushion. There are cons, such as lack of benefits, but at least you can make your own schedule. (See also: <a href="http://www.wisebread.com/100-ways-to-make-more-money-this-year?ref=seealso">100+ Ways to Make More Money This Year</a>)</p> <h2>6. Talk to Your Employer About Education Benefits</h2> <p>If you're employed, your employer may be able to pay for your college education. Talk to your employer, because the IRS allows them to write off any reimbursement they make to you for tuition, no matter how much it is. They will be especially inclined to do so if your field of study is directly related to your job. If you're unemployed, or your employer doesn't offer reimbursement, apply for a job that does. (See also: <a href="http://www.wisebread.com/15-ways-to-pay-back-student-loans-faster?ref=seealso">15 Ways to Pay Back Student Loans Faster</a>)</p> <h2>7. Consider Community College</h2> <p>You'll be earning experience you can later apply toward your bachelor's at a community college. And on average, tuition and fees for <a href="http://trends.collegeboard.org/college-pricing/figures-tables/tuition-and-fees-and-room-and-board-over-time-2005-06-2015-16">community college are $3,435</a>, while they're $32,405 for university. According to the NCES, an associate's degree only earns you an average of about $11,500 less per year than a bachelor's.</p> <p>If you choose to go for a bachelor's degree, you'll be in school longer, but by the time you're done with community college, you'll be prepared for university. You may also be able to apply some of your community college credits toward earning your bachelor's. You may also have more money saved up for university tuition than you did when you got out of high school.</p> <p>There are also <a href="http://www.communitycollegereview.com/blog/community-college-scholarships">community college scholarships</a>. They can be merit-based, need-based, or entirely unique. Some schools, such as Metropolitan Community College in Kansas City, offer an automatic, merit-based scholarship for the student with a high GPA seeking to transfer to a university.</p> <h2>8. Live at Home During College</h2> <p>Are you a high school graduate considering a college near your hometown? Most likely, your parents would be happy to let you to live with them if you're paying your way through college. If they are willing to put you up rent-free, you're good to go. You could work a side job at the same time. College isn't about partying and living in a dorm. Sure, it happens, but it's not a requirement. Living at home will help you concentrate on studying and saving money.</p> <h2>9. Forgo College Until You're Financially Ready</h2> <p>Be committed for the long-term when it comes to your career, and your life. The staggering <a href="http://www.wisebread.com/5-sobering-facts-about-student-loan-debt">facts about student loan debt</a> put it into perspective. If you end up with debt, you could end up living with your parents after graduating, as 27% of graduates do. You could end up falling behind on your loan repayments, as 35% did in 2012. On average, it could end up taking you 20 years to pay off your loan.</p> <p>Commit to going to college after you've saved enough money, and your life will be a lot easier once you graduate &mdash; you'll be free to pursue what you want, instead of taking a low-paying job right out of college because you just need the money.</p> <h2>10. Talk to an Academic Advisor</h2> <p>Graduate as fast as you can by planning out your degree. This will minimize money you spend. In other words, decide what you want to major in before jumping into general classes, and find the fastest path to graduation.</p> <h2>11. Pay in Installments</h2> <p>Speak with the financial aid office at the college you want to attend about tuition installment plans. You have to be certain you can pay, but this will make it more like paying rent, which is easier than forking over lump sums. If you're budgeting wisely, living at home, and working part-time, meeting installments shouldn't be a problem.</p> <h2>12. Stick With Federal Loans Only</h2> <p>The Federal Direct Loan offers the most options for income-based repayment, including <a href="https://studentaid.ed.gov/sa/about/announcements/repaye">REPAYE</a>, which fixes your payment at 10% of your discretionary income and forgives your debt after 20 years. The Direct Loan also offers debt forgiveness if you're working in a public service field and have made 120 payments without defaulting. Your interest rate will be fixed, unlike a private loan, which sticks you with a variable rate. Pay on the loan as you go through school, and make the biggest payments so you can to avoid paying too much on interest. When doing your taxes, write off interest payments. And be sure to use tax returns and other windfalls to make large payments.</p> <p><em>Any other easy ways to avoid student loan debt? Share with us in the comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/daniel-matthews">Daniel Matthews</a> of <a href="http://www.wisebread.com/12-easy-ways-to-avoid-student-loan-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-to-get-student-loan-debt-forgiveness">8 Ways to Get Student Loan Debt Forgiveness</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/share-your-thoughts-consolidating-student-loans">Share Your Thoughts: Consolidating Student Loans</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/student-loans-how-to-make-post-college-decisions">Student Loans: How to Make Post-College Decisions</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-sobering-facts-about-student-loan-debt">5 Sobering Facts About Student Loan Debt</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-10-most-common-financial-aid-mistakes-and-how-to-avoid-them">The 10 Most Common Financial Aid Mistakes — And How To Avoid Them</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Education & Training college college debt debt management saving for college student loan debt student loans Tue, 12 Apr 2016 09:30:33 +0000 Daniel Matthews 1688980 at http://www.wisebread.com 8 Debt Reduction Mistakes Even Smart People Make http://www.wisebread.com/8-debt-reduction-mistakes-even-smart-people-make <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-debt-reduction-mistakes-even-smart-people-make" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_blindfold_money_000084064747.jpg" alt="Woman making debt reduction mistakes even smart people make" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Everyone knows it is a good idea to reduce your debt load. With less debt, you save money on interest charges and reduce your risk of financial catastrophe if your income is disrupted and you are unable to make payments. If you don't have enough to make debt payments, you can fund investments and build wealth instead of working to get back to zero net worth.</p> <p>Some people are much more successful at debt reduction than others. What key mistakes prevent people from paying down your debts?</p> <h2>1. High Interest Accounts</h2> <p>It is hard to pay down the principal on a debt when the interest rate is high. Too much of your payment gets burned up paying interest charges and too little actually goes to paying down the debt.</p> <h3>How to Fix It</h3> <p>Use a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">balance transfer card</a> to move debt from a high interest credit card to a <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards">lower interest credit card</a>, allowing you to pay off the principal faster and get out of debt sooner. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seealso">How to Use a Balance Transfer to Pay Off Credit Card Debt</a>)</p> <h2>2. Negative Cash Flow</h2> <p>If your bills and payments are higher than your income, then you are not going to get out of debt! In fact, negative cash flow may be the reason your debt has built up in the first place. There are only two ways to correct negative cash flow: Lower your expenses or raise your income &mdash; or both!</p> <h3>How to Fix It</h3> <p>Consider debt consolidation to reduce your total monthly payments, find ways to reduce nonessential expenses, and look for side hustles to boost income.</p> <h2>3. Faulty Repayment Strategy</h2> <p>I was stunned the first time I saw personal finance advisers offering the advice to pay off your smallest debts first. This strategy for paying off debt is called the &quot;<a href="http://www.wisebread.com/a-comprehensive-guide-to-the-debt-snowball-method-0">debt snowball</a>.&quot; You make minimum payments on all of your debts and put the rest of your available money toward paying off the smallest debt. After that smallest debt is paid off, you use the money that would have gone toward that debt to focus on the next smallest debt. This process is repeated until all debt is paid off.</p> <p>The reason the &quot;debt snowball&quot; strategy is surprising to me is that it is not the fastest way to get out of debt. Simple math shows that you will get out of debt faster and spend less money by paying off your highest interest debt first.</p> <h3>How to Fix It</h3> <p>Having any debt repayment strategy is better than not having a strategy at all. Use the &quot;debt snowball&quot; strategy if this motivates you, but paying your highest interest debt first will save the most money and get you out of debt fastest.</p> <h2>4. Adding More Debt</h2> <p>It you are working to pay down debt, obviously adding more debt isn't going to help. Why would anyone add more debt when they are trying to get out of debt? One reason this can happen is if unexpected expenses pop up and you have directed all available funds to paying off debts.</p> <h3>How to Fix It</h3> <p>Put off taking on new nonessential expenses until after you have paid off debts. Keep some cash in an emergency fund to help avoid using credit.</p> <h2>5. Not Tracking Progress</h2> <p>There is a reason that successful business people are so interested in looking at every financial report that comes out about their business. Feedback is essential to spot problems early and find areas for improvement to get even better results in the future.</p> <p>If you do not check your total debt on a regular basis to monitor your repayment progress, you might not be making progress at all. In fact, your debt could be growing and you wouldn't know it! You need to monitor your total debt and track how well your debt repayment plan is working.</p> <p>Once you start making progress in paying down your debt, seeing the smaller debt total every month can be a good motivator to redouble your efforts and get the debt paid off.</p> <h3>How to Fix It</h3> <p>Add up your total debt every month and monitor your debt repayment progress.</p> <h2>6. Not Everyone Is On Board</h2> <p>Many households have more than one person who makes spending decisions. For example, if you are focusing on debt reduction and your spouse is not, then you will probably not make much progress.</p> <p>I think numbers can be a good way to communicate about debt. Instead of debating purchases and problem spending areas, focus instead on agreeing on the big picture monthly budget numbers. Let each person make their own spending decisions to fit within the budget.</p> <h3>How to Fix It</h3> <p>Get all spenders committed to debt reduction goals and work together to agree on a budget plan.</p> <h2>7. Irregular Expenses</h2> <p>Getting the routine monthly bills under control can be manageable since you know what to expect, but it is easy to overlook those occasional expenses that don't follow a regular monthly billing schedule. For example, budgeting for vacations gives a lot of people trouble. When vacation time comes around, a lot of people end up getting out a credit card to cover at least some vacation expenses. In my house, vet bills are problematic since we have a lot of pets and they need expensive vaccinations and treatments at times. Many years, the vet bill has ended up going on a credit card and moving us in the wrong direction on debt reduction.</p> <h3>How to Fix It</h3> <p>Budget to set aside money ahead of time to cover irregular expenses such as vacations, pet care, and medical expenses.</p> <h2>8. Delay Starting Debt Reduction</h2> <p>For a lot of people, &quot;next month&quot; is always the best time to start debt reduction!</p> <p>Paying off debts is hard work. You have to track and control spending, and you will likely have to sacrifice buying things you want in order to pay off debts instead. It can be tempting to take another month to plan out your budget and figure out your strategy before you start seriously working on debt reduction.</p> <p>But delaying another month doesn't provide any advantage to getting your debt paid off. Your debt will hang around and maybe even keep on growing until you take action to turn things around and get it paid off. The sooner you get started, the sooner you will have your debt paid off.</p> <h3>How to Fix It</h3> <p>Start debt reduction now. Don't wait until next month.</p> <p><em>Which of these debt reduction mistakes has caused the most problems for you?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/8-debt-reduction-mistakes-even-smart-people-make">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/oops-i-maxed-out-my-credit-cards-now-what">Oops — I Maxed Out My Credit Cards. Now What?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-debt-management-questions-youre-too-embarrassed-to-ask">5 Debt Management Questions You&#039;re Too Embarrassed to Ask</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-reasons-your-debt-isnt-diminishing">12 Reasons Your Debt Isn&#039;t Diminishing</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-common-debt-reduction-roadblocks-and-how-to-beat-them">6 Common Debt Reduction Roadblocks — And How to Beat Them</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management cash flow expenses interest rates progress repayment strategies snowball method Thu, 07 Apr 2016 10:30:06 +0000 Dr Penny Pincher 1685087 at http://www.wisebread.com 6 Moves to Make in Your First Month of Debt Repayment http://www.wisebread.com/6-moves-to-make-in-your-first-month-of-debt-repayment <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-moves-to-make-in-your-first-month-of-debt-repayment" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_career_confidence_000051439618.jpg" alt="Woman making moves in the first money of debt repayment" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>So, it's time, is it? Time to get serious about paying off your debt?</p> <p>Congratulations!</p> <p>If you've made the decision to begin repaying your debt instead of generating more, that is huge! Repaying debt can feel so daunting that people avoid it, making minimum payments until their dying day. But facing your problems is always better than running away from them, and, in deciding to do that, you have taken a giant step forward.</p> <p>Still, it's easy to feel overwhelmed when you're just starting to repay debt. If you're not sure where to start, here are some thoughts for you.</p> <h2>1. Stop Overspending</h2> <p>It might seem obvious, but this is the very first step to take when you want to begin digging yourself out of a financial hole. Stop making more debt!</p> <p>Start by analyzing where you're spending. Is all of your spending necessary? Are there areas &mdash; like eating out, buying clothes, or going to happy hour &mdash; where you're spending a lot more than you thought you were? (See also: <a href="http://www.wisebread.com/start-saving-more-with-this-one-simple-tool?ref=seealso">Start Saving With This One Simple Tool</a>)</p> <p>Looking at this takes some courage, as it can be hard to actually see just how much money you're putting towards things that don't matter. However, the only way out is through, at least in this case, and once you know where you're spending too much, it's easier to make better choices.</p> <p>All of this assumes that you are not overspending simply because you don't have enough money. If that is the case, then your first step is to figure out how to make more or lower your expenses. There are always options, but they will differ depending on your situation. The point is, you won't know where to start cutting until you know where you stand with spending.</p> <h2>2. Add It Up</h2> <p>When you have a spending plan in place, add up all of your debt. List each debt source, including total amount owed, monthly minimum payment, and interest rate.</p> <p>This step tends to stop people in their tracks. However, it's essential to know the total amount of damage before you can take steps toward eliminating it. And, sometimes, seeing exactly how much you owe, all in one place, is just what you need to feel motivated to make significant changes in your life.</p> <h2>3. Prioritize Your Debt</h2> <p>There are a lot of different ways to decide which debt to focus on first. Obviously, you need to make at least minimum payments on all of your accounts. But after that, you need to decide which debt will receive higher payments until it's paid off. Then, you can move on to a different account.</p> <p>Some people swear by Dave Ramsey's <a href="http://www.wisebread.com/snowballs-or-avalanches-which-debt-reduction-strategy-is-best-for-you">debt snowball method</a>. Others say that you should focus on the debt with the highest interest rate first, and still others think you should choose the one that causes you the most stress for your primary repayment efforts. Honestly, and especially when you're just getting started, the most important thing is that you choose a method that appeals to you and that motivates you to keep moving forward with your debt repayment.</p> <h2>4. Set Repayment Goals</h2> <p>Look realistically at your finances, at how you're planning to change your spending patterns, and decide when you think you can pay off your first debt. Set that date as a goal. Circle it in all of your calendars. Set an alarm for it on your phone. Do whatever you have to do to get that date in your head.</p> <p>Having a goal will help you feel motivated, and it will also give you some sense of progress as you move forward. For instance, if you decide it will probably take you six months to pay off your first debt, you'll know after three months that you're about halfway there. That can be satisfying in and of itself.</p> <p>Set these goals knowing that you can always change them. If your financial situation changes, you can always change your goal, too, moving it forward or backward as circumstances dictate.</p> <h2>5. Generate More Income</h2> <p>If you want to pay off your debt as quickly as possible, think about ways to generate more income. This will not only make your repayment move faster, but it will make it so the process isn't just about cutting back all the time, which can feel demotivating after a while.</p> <p>For some people, making more money is as easy as working overtime. Others have to be more creative. Think about taking on freelance projects, turning a hobby into an entrepreneurial enterprise, or selling things that you find around your house on eBay or Craigslist. Depending on your skill set and how much time you have, the possibilities are truly endless. (See also: <a href="http://www.wisebread.com/15-ways-to-make-money-outside-your-day-job?ref=seealso">15 Ways to Make Money Outside Your Day Job</a>)</p> <h2>6. Reward Yourself</h2> <p>It's important that you realize just how significant of a choice you've made to reduce debt. You can mark a time as important by celebrating it. Just do this in a way that doesn't mean spending a lot of money. Buy the special coffee, learn a new recipe, or treat yourself to an extra dessert. Sure, these things cost a little bit, but they aren't a shopping spree at the mall.</p> <p>Make sure you build rewards into your whole system. You can buy yourself a coffee every time you pay X amount off, or reward yourself with something small every month that you follow through with your budget. It's important to stay motivated and to reprogram your brain to actually enjoy this repayment process.</p> <p>Plan a big reward for the day when your debt is all paid off. Maybe that's the day you can start saving for your dream vacation, or maybe you can talk a friend into taking you out for the evening. Plan a big party at your house, spend a weekend in the mountains, or do whatever it is that feels right. Knowing this is coming will help keep up your motivation through the hard days.</p> <p><em>What is your experience of debt repayment? How did you start on that journey?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/sarah-winfrey">Sarah Winfrey</a> of <a href="http://www.wisebread.com/6-moves-to-make-in-your-first-month-of-debt-repayment">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-common-debt-reduction-roadblocks-and-how-to-beat-them">6 Common Debt Reduction Roadblocks — And How to Beat Them</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-use-peer-to-peer-lending-to-pay-down-credit-card-debt">Should You Use Peer-to-Peer Lending to Pay Down Credit Card Debt?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-seven-deadly-sins-of-consumerism-and-the-frugal-redemption">The seven deadly sins of consumerism (and the frugal redemption).</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-sobering-facts-about-student-loan-debt">5 Sobering Facts About Student Loan Debt</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/debt-free-living-is-attainable-if-you-want-it-you-can-have-it">Debt-Free Living IS Attainable: If You Want It, You Can Have It</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management goals money habits overspending repayment reward yourself Mon, 04 Apr 2016 10:00:08 +0000 Sarah Winfrey 1682375 at http://www.wisebread.com Should You Pay Down Debt First or Invest? http://www.wisebread.com/should-you-pay-down-debt-first-or-invest <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/should-you-pay-down-debt-first-or-invest" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_thinking_000045365316.jpg" alt="Woman wondering if she should pay down debt or invest" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Should you pay down your debt before you focus on investing? This is one of the most important questions in personal finance, and the decisions you make now can greatly impact your financial future.</p> <p>The sooner you start investing, the more time your investments have to grow. The effect of compound interest creates a big incentive to start investing as soon as possible. Compound interest is responsible for the &quot;snowball effect&quot; that grows your small investment into a substantial sum over time.</p> <p>But what about paying off debt? Debt grows through the same effect of compound interest that fuels investment growth. The longer you take to pay off debt, the more it costs you due to compound interest. High interest credit cards have interest rates that likely exceed the best returns you will get in the stock market. (See also: <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=seealso">Credit Cards with the Lowest Interest Rates</a>)</p> <p>So what is the best money move &mdash; pay off debt or invest?</p> <h2>The Simple Answer</h2> <p>Mathematically, the best choice is to put your money where it gets the best return on investment. For example, if you have credit card debt at 12.9% interest and your stock market investment account that grows at 8%, then you are better off putting as much money as you can toward the higher interest opportunity &mdash; paying off your credit card in this example. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seealso">How to Save Money on Credit Card Interest with a Balance Transfer</a>)</p> <p>However, there is a complication with this simple answer right off the bat. There is no way to know the rate of return from your investment accounts ahead of time! You could get huge investment returns, even higher than your credit card interest rate, or you could even lose money in the stock market and get negative returns.</p> <p>You have to make an assumption about your rate of return to decide where to put your money. The long-term historical average return from the stock market is around 8% including booms, recessions, and even the Great Depression. No one knows what is going to happen in the stock market, so a reasonable assumption is that you will get returns consistent with the long-term average over the long run.</p> <p>So if the interest rate on your debts is higher than about 8%, you are better off paying debts down first rather than investing. If you have low interest debts such as a mortgage or student loans, you are better off making minimum payments on your debts and investing as much as possible to get the maximum return on your money.</p> <p>As I said, this is the simple answer. There are a few details that make the decision of whether to pay debt or invest a little more complicated. Let's look at some of them.</p> <h2>The &ldquo;Life Isn't Simple&rdquo; Answers</h2> <p>Even with the simple assumption that the long-term historical stock market return of around 8% will continue into the future, there are other complexities to consider in the decision between paying off debts or investing.</p> <h3>Incentives to Pay Down Debt</h3> <p>There are negative consequences of carrying debt that go beyond mathematical calculations of return on investment. Carrying debt is stressful. You have payments to make every month and face immediate severe consequences if you can't make them. If your source of income is disrupted while you have a lot of debt, you can lose everything quickly. Paying off your debts can take this sort of risk off the table.</p> <p>There are other advantages to paying off debt as quickly as possible before focusing on investment. For one thing, focusing on paying off debts is a good deterrent to borrowing more money. If you have investments that are growing, you might be more likely to take on additional debt if you have debt already and are not focusing on paying it off quickly. Paying down debt can be a good way to focus on your financial health and develop sustainable spending habits.</p> <p>So the risk of carrying debt tips the decision toward paying down debt first, but as I mentioned, life isn't simple.</p> <h3>Incentives to Invest</h3> <p>If your employer offers a 401K retirement account matching funds program, the balance tips toward investing. Many companies will match employee retirement contributions with 50% matching funds. This is free money! For example, if you contribute $500 to your retirement fund and your company has a 50% matching program, the company will add $250 to your retirement account. This can tip the balance in favor of investing. If you have $500 available per month, the choice effectively becomes $500 for debt payments or $750 for retirement contributions. This makes investing hard to beat.</p> <p>Let's not forget about taxes. Another advantage of investing in a retirement account is that you can invest pre-tax dollars in an investment program such as a 401K. When you pay debt, you are paying it with post-tax dollars. The impact of pre-tax vs. post-tax dollars is that you can effectively put more money in your retirement account at the same cost to you. For example, you could invest $665 before taxes or pay down a debt with the $500 you get after taxes. This results in an advantage for investing instead of paying off debt.</p> <p>It is true that some types of debt such as mortgages and student loans have tax advantages. You can get a tax deduction for mortgage and student loan interest, but this benefit is small compared with the tax advantages offered as incentives to fund retirement accounts.</p> <p>Another variable that you may be able to change to tip the decision toward investing is the interest rate on your debt. If you can refinance your high interest debt with a debt consolidation loan or a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">balance transfer</a>, you will save money on interest &mdash; and investing before paying off your debt may make sense if your interest rate is lower than your investment returns.</p> <h2>Example Scenarios: Pay Off Debt vs. Investing</h2> <p>Let's say you have $20,000 of credit card debt at 12.9% interest. Are you better off paying off that debt first as fast as possible before investing, or should you pay the minimum balance on the debt so you can start investing as much as possible right away?</p> <p>If you wait to start investing until you have the debt paid off, you will miss out on years of growth of your investment account. However, the longer you leave the high interest debt around, the more it will cost you to pay back. What should you do in this scenario?</p> <p>Let's say you have $535 per month that you can use to pay a credit card debt <em>or</em> invest for a term of 25 years.</p> <h3>Option 1: Pay Off Debt First</h3> <p>A monthly payment of $535 per month will pay off the $20,000 credit card debt at 12.9% interest in 48 months, or four years. The total cost of paying it off is $25,700 due to compound interest.</p> <p>Now, after four years, you start investing the $535 per month. It grows at the historical average return of 8% for 21 years. You end up with $348,000 in your retirement account. That's pretty good!</p> <h3>Option 2: Make Minimum Payments On Debt, Start Investing Now</h3> <p>In this scenario, we will make a smaller payment on the credit card of $297 so we will be able to invest the rest of the $535 per month that we have available, or $238 per month.</p> <p>With our minimum credit card payment, it will take 10 years to pay off the credit card balance at a total cost of $35,800. It takes much longer to pay off the credit card by making smaller payments, but this move allows us to start investing right away.</p> <p>Our 10 years of investing $238 at the historical average 8% return gets us $43,500 in our investment account. We'll start with this balance and invest the full $535 per month for 15 more years. The final balance: $329,000.</p> <p>In this scenario, the high interest rate on the credit card debt <em>still </em>outweighs the lower rate of return from the investment account. With high interest debt, the best move is to pay it off before starting to invest.</p> <h3>Consider 401K Match, Pre-Tax Investment Dollars</h3> <p>The result above does not include the 401K company match or the use of pre-tax funds. Considering these investment incentives, the balance at the end of 25 years improves, but the choice between investing vs. paying off debt first does not change.</p> <p>Pay Off Debt First: $650,000<br /> Minimum Debt Payment, Start Investing: $630,000</p> <h3>Without the Debt, You Would Almost Be a Millionaire!</h3> <p>So what is the effect of having $20,000 of debt to pay off early in your investment cycle? If you didn't have debt and started investing right away, you would have $951,000 at the end of 25 years!</p> <h2>Final Answer: Should You Pay Off Debt or Invest?</h2> <p>The basic principle of putting your money into the option that gives the best rate of return leads to the best financial results. If your investments yield a higher return than the interest on your debts, then you'll be better off investing right away and making minimum payments on your debts.</p> <p>However, if the interest rate on your debt is higher than the rate of return from your investments, then you should pay off your debt first before investing. The example calculations showed results for a scenario where it would definitely be better to pay off high interest debt before starting to fund an investment account.</p> <p>One big conclusion from this analysis is how much debt impacts your investment growth. In our 25 year investment example, you could have about $300K more in your retirement account if you didn't start with $20K credit card debt. If you have high interest debt, look for opportunities to consolidate the debt or get a balance transfer and end up with a much lower interest rate.</p> <p>Ultimately the choice of whether to pay off debts before starting to invest depends on your tolerance for risk and your assessment of potential rate of return from investments in comparison with the interest rates on your debt.</p> <p><em>Are you investing or paying off debt? </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/should-you-pay-down-debt-first-or-invest">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-occasions-when-you-should-definitely-hire-a-financial-advisor">7 Occasions When You Should Definitely Hire a Financial Advisor</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-10-biggest-myths-about-investing">The 10 Biggest Myths About Investing</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-investment-accounts-all-30-somethings-should-have">7 Investment Accounts All 30-Somethings Should Have</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-its-time-to-destroy-debt-start-with-a-goal">When It&#039;s Time to Destroy Debt, Start With a Goal</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Investment 401k comparisons compound interest money decisions Paying Off Debt retirement Thu, 24 Mar 2016 09:30:23 +0000 Dr Penny Pincher 1678010 at http://www.wisebread.com The Simple Way to Decide Which Credit Card to Pay Off First http://www.wisebread.com/the-simple-way-to-decide-which-credit-card-to-pay-off-first <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-simple-way-to-decide-which-credit-card-to-pay-off-first" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_credit_card_000085027895.jpg" alt="Couple learning simple way to decide which credit card to pay off" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Owe thousands of dollars in credit card debt? You're not alone. As of late 2015, U.S. households with credit card debt owed an average of $15,355 on their plastic, according to a study by NerdWallet.</p> <p>Unfortunately, credit card debt is the worst kind of debt to hold because it comes with such high interest rates. CreditCards.com reported as of early March that the average credit card in the United States came with an interest rate of 15.16%. Such a high rate means that credit card debt grows quickly, especially when that debt is large.</p> <p>Dealing with credit card debt can be overwhelming. But there are strategies you can take to whittle that debt down to manageable levels. The key is to start paying off your credit cards in full one at a time.</p> <p>That leads to the big question: Which credit card should you pay off first? There are two approaches you can take to answer this question.</p> <h2>Snowball Method</h2> <p>In what is known as the <a href="http://www.wisebread.com/a-comprehensive-guide-to-the-debt-snowball-method-0">snowball method</a> of paying off your debt, each month you pay the minimum required monthly payment on all of your credit cards except one &mdash; the card with the lowest balance. You use the majority of your available money each month to pay off as much of this card's balance as possible.</p> <p>Then, when you pay off the debt on that card, you repeat the process: You pick the card with the next-lowest balance and use all of your extra money each month to pay that balance down, making just the minimum required monthly payment on the rest of your cards.</p> <p>You repeat this process until you've paid off all of your credit card debt.</p> <p>Fans of this approach like the feeling of accomplishment it brings. It's a good feeling to pay off that first, second, and third credit card. And by targeting cards with the lowest balances first, you reach that good feeling faster, meaning that you'll be less likely to get discouraged and give up your efforts at reducing your debt.</p> <h2>Avalanche Method</h2> <p>The avalanche method is similar to the snowball approach, but with one key difference. Again, you make the minimum payments each month on all of your cards except for one. But in this method, you devote all of your extra funds to paying off the balance of your credit card with the highest interest rate first. (See also: <a href="http://www.wisebread.com/snowballs-or-avalanches-which-debt-reduction-strategy-is-best-for-you?ref=seealso">Snowballs or Avalanches: Which Debt Reduction Strategy Is Best?</a>)</p> <p>After you pay off that card, you move on to the card with the next highest interest rate, working your way down your credit cards until you've paid them all off.</p> <p>Supporters of this method say that it makes the most financial sense. You'll end up paying less if you eliminate your debts with the highest interest rates first.</p> <p>On the downside, though, your card with the highest interest rate might also be the card that you owe the most on. This means that it will take longer for you to enjoy the satisfaction of paying off a card completely.</p> <p>Either method, though, will work, if you stick to it. So choose the approach that works best for you.</p> <h2>Pay Less Interest With a Balance Transfer</h2> <p>Once you have determined your course of action and have a good idea of the time frame you are working with, you can save money and buy some interest free time by doing a balance transfer to a credit card that offers a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">0% APR on balance transfers</a>. Make sure that you can pay off that balance in full within the promotional period, or else you'll just get hit with interest fees again.</p> <p>For example, if you know you can pay off $5,000 in a year, instead of paying interest on that amount while you are paying it off, transfer $5,000 to a new credit card with a balance transfer offer. Make payments towards the new card instead of the card you were going to put it on. If your current card has a 15% APR, you'd save hundreds in interest charges for that year.</p> <p>Keep in mind that most cards that offer a promotional balance transfer period will charge a 3%-5% fee on the balance transferred. Most of the time this would still be cheaper than paying the interest on your current cards. There is one card though that offers a 0% intro APR for 15 months AND has no intro balance transfer fee if you make the transfer within 60 days of opening your account &mdash;&nbsp;<a href="http://www.wisebread.com/chase-slate-visa-review">Chase Slate Card</a>. It's the best card for balance transfers. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seeaIso">When Should You Pay Off Credit Card Debt With a Balance Transfer?</a>)</p> <h2>When It's Paid, Don't Close It!</h2> <p>And here's one more tip: Once you do pay off a credit card, don't close that account. Doing so will hurt your FICO credit score. If you use less of your available credit, your score will be higher. But if you close a credit card account, you'll immediately raise what is known as your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">debt-utilization ratio</a> &mdash; the amount of your debt you are actually using. This will cause your credit score to fall.</p> <p>So keep those paid-off credit cards open. But resist the temptation to run up the debt on them again.</p> <p><em>Have you paid-off credit card debt? What method did you use?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/the-simple-way-to-decide-which-credit-card-to-pay-off-first">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-reasons-your-debt-isnt-diminishing">12 Reasons Your Debt Isn&#039;t Diminishing</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-manage-your-debt-in-10-minutes-a-week">How to Manage Your Debt in 10 Minutes a Week</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/oops-i-maxed-out-my-credit-cards-now-what">Oops — I Maxed Out My Credit Cards. Now What?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-debt-management-questions-youre-too-embarrassed-to-ask">5 Debt Management Questions You&#039;re Too Embarrassed to Ask</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-common-debt-reduction-roadblocks-and-how-to-beat-them">6 Common Debt Reduction Roadblocks — And How to Beat Them</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Debt Management avalanche method closing cards debt repayment snowball method strategies Tue, 22 Mar 2016 10:00:12 +0000 Dan Rafter 1677117 at http://www.wisebread.com Is a Balance Transfer Offer a Good Deal? http://www.wisebread.com/is-a-balance-transfer-offer-a-good-deal <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-a-balance-transfer-offer-a-good-deal" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_credit_card_000030704826.jpg" alt="Woman learning if balance transfer is a good deal" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>A credit card balance transfer is a practical way to consolidate debt, save money, and ditch a high-rate credit card. This involves transferring the balance from a higher-interest credit card to another, <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards">lower-interest credit card</a>.</p> <p>There are various balance transfer offers, but unfortunately, not every offer is financially rewarding. To know whether you're getting a solid deal, you have to consider the costs associated with a particular offer.</p> <h2>Balance Transfer Fee</h2> <p>In a perfect world, there wouldn't be any fees to transfer a balance &mdash; or at the very least we would pay a low, flat fee &mdash; but this is rarely the case. The typical fee is $10 or 3% of the transferred balance, whichever is higher. Some balance transfer credit cards charge a 5% fee.</p> <p>Balance transfer fees are charged directly to the card balance and reduce the actual savings of switching to a low-rate card. For example, if transferring your balance to a low-rate card saves $900 in interest, but you paid a $200 balance transfer fee, you actually only saved $700.</p> <p>Since nearly all cards have no cap on how much you pay, the bigger your transfer, the bigger the fee &mdash; hence the importance of comparing different balance transfer offers to make sure you're getting a deal. Shopping around can be the difference between paying $300 and $500 for a $10,000 balance transfer.</p> <p>There are, however, a few cards that don't charge a balance transfer fee. These can include cards offered by smaller banks and credit unions, as well as bigger financial institutions. Here are two cards from major issuers that do not charge a balance transfer fee:</p> <ul> <li><a href="http://www.wisebread.com/chase-slate-visa-review">Chase Slate</a>&nbsp;doesn't charge a balance transfer fee, but only if you transfer balances within the first 60 days of opening an account. Transfers made after that introductory period are charged 3% or $5.<br /> &nbsp;</li> <li><a href="http://www.wisebread.com/the-best-cash-back-card-for-average-credit-capital-one-quicksilverone-cash-rewards-credit-card">Capital One QuicksilverOne Cash Rewards credit card</a>&nbsp;also doesn't charge a balance transfer fee, but there is a $39 annual fee. That amount is pretty much the equivalent of paying a fee if you're transferring a balance of $1,000 or less (so it's still a better deal than most cards if you're transferring more than $1,000).</li> </ul> <h2>Longest 0% APR vs Low Standard APR</h2> <p>For a balance transfer offer to make sense, the interest savings should be significantly greater than any fees paid to transfer your balance. To win your business, many cards offer an introductory 0% interest for a set period.</p> <p>There are currently <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">offers of 0% APR up to 21 months</a>. This teaser rate eventually disappears, but if you pay off your credit card balance before the regular interest rate kicks in, you don't pay a penny of interest.</p> <p>However, some people make the mistake of only looking at the introductory rate when selecting a card, and they forget to consider the ongoing or regular APR once the promotional period ends.</p> <p>When you don't compare rates, you could unknowingly apply for a card with a regular APR that's higher than what you're currently paying. Which isn't that awful if you pay off the card during the introductory rate period. But if you don't pay off the entire balance before the end of the 0% APR period, the new interest charges might cancel out some of the potential savings.</p> <p>Let's say you have a credit card with a $2,000 balance and a 20% interest rate. If you transfer the balance to a card with 0% interest for 12 months and a balance transfer fee of 3%. You'll save about $340 over the introductory rate period.</p> <p>If the card had a 16% regular APR, you'd save about $7 per month after the intro 12 months. But if you qualify for a card with a regular interest rate of 10%, you would save $17 per month.</p> <p>Ideally, you want to find a card that has both a long intro 0% APR period <em>and</em> a low regular APR afterwards. Here's are two good choices:</p> <ul> <li><a href="http://www.wisebread.com/bankamericard-credit-card-review">BankAmericard Credit Card</a>&nbsp;gets you 18 billing cycles of 0% APR on balance transfers made within the first 60 days. Afterwards, the regular APR is 11.24%-21.24%.<br /> &nbsp;</li> <li><a href="http://www.wisebread.com/the-discover-it-card-attractive-cash-back-awards-for-shoppers">Discover it</a>&nbsp;also offers 18 months of 0% APR on balance transfers (6 months for purchases), followed by a regular APR of 11.24%-23.24%.</li> </ul> <h2>The Low Rate May Not Apply to New Purchases</h2> <p>The rules regarding interest and balance transfers vary, so it's important to read the fine print and understand an offer before you apply &mdash; or else you could end up paying interest unexpectedly.</p> <p>Some credit cards have 0% introductory rates that apply to both new purchases and balance transfers, whereas other cards only apply the teaser rate to balance transfers. So if you transfer a balance to a card, and you also use this card for new purchases, you'll have dual interest rates and you'll pay regular interest on all new purchases.</p> <p>To keep it simple, choose a card that offers a promotional rate on both purchases and balance transfers.</p> <h2>Protect Your Credit When Transferring a Balance</h2> <p>Applying for a new credit card and transferring your balance can potentially harm your credit score &mdash; but only if you do it the wrong way.</p> <p>A new card triggers an inquiry on your credit report, and each inquiry can drop your credit score by a few points. This isn't the best news, but at the end of the day, it isn't a big deal as long as you don't apply for too many new accounts in a short span of time.</p> <p>As mentioned, a balance transfer is one way to simplify your finances. You can transfer all your balances to a new card and only worry about one monthly payment. The problem, however, is that a balance transfer could throw off your credit utilization ratio if you cancel the old card that no longer has a balance on it.</p> <p>Credit utilization is your percentage of outstanding balances compared to your total credit limit. This ratio should never exceed 30%, and if your ratio is higher than this percentage, your credit score suffers.</p> <p>The way you approach a balance transfer can either help or hurt your credit score. To illustrate, imagine you have two credit cards:</p> <ul> <li>Credit card #1: $1,000 balance with a $2,000 credit limit<br /> &nbsp;</li> <li>Credit card #2: $4,000 balance with a $5,000 credit limit</li> </ul> <p>In this example, you owe a total balance of $5,000 with a total credit limit of $7,000, resulting in a total credit utilization ratio of 71%, which is more than doubled the recommended max percentage of 30%.</p> <p>Let's say you then get a new credit card with a credit limit of $10,000 and transfer both balances to this card, this new card increases your total available credit to $17,000, which drops your credit utilization ratio to 29% &mdash; but only if you keep the old paid-off accounts open!</p> <p>If you're going to open a new account and transfer balances, don't immediately start closing accounts. Run the numbers first, and only close accounts if your credit usage is no more than 30%.</p> <p><em>Have you transferred a balance? How did you make out? Let's discuss in the comments below.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/is-a-balance-transfer-offer-a-good-deal">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-questions-to-ask-before-accepting-a-credit-card-offer">10 Questions to Ask Before Accepting a Credit Card Offer</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-important-things-you-should-know-about-balance-transfer-cards">7 Important Things You Should Know About Balance Transfer Cards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-dirty-secrets-of-credit-cards">The Dirty Secrets of Credit Cards</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/now-is-the-best-time-in-years-to-do-a-credit-card-balance-transfer">Now Is the Best Time in Years to Do a Credit Card Balance Transfer</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Debt Management APR balance transfers credit utilization ratios debt reduction fees interest rates Wed, 09 Mar 2016 11:30:05 +0000 Mikey Rox 1669479 at http://www.wisebread.com 8 Signs You've Crossed From "Healthy" Debt to "Problem" Debt http://www.wisebread.com/8-signs-youve-crossed-from-healthy-debt-to-problem-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-signs-youve-crossed-from-healthy-debt-to-problem-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_tied_up_000012430983.jpg" alt="Learning signs you&#039;ve crossed from healthy debt to problem debt" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We here at Wise Bread generally preach that all debt is bad &mdash; but there is such a thing as a healthy level of debt. Most people can get by with a modest amount of debt, especially if it's for constructive things like college or a mortgage, which can help you build wealth long term. Debt becomes a problem, however, when it reaches a certain magnitude or is wrapped up in credit cards or other unnecessary, high-interest loans.</p> <p>Here are some signs your debt level has crossed from healthy to problematic.</p> <h2>1. Your Debt-to-Equity Ratio Is Holding You Back</h2> <p>Lenders, especially those offering mortgage loans, will often evaluate loan candidates based on a measure of debt versus income. People with a higher ratio of debt to equity are often denied the ability to borrow more. It's very difficult to get a mortgage loan if your debt-to-equity ratio is above 40%, and many lenders shy away from anything above 30%. People with high ratios are considered less likely to have the ability to repay money they owe. If you find that banks and other lenders are turning you down, it's time to reduce your debt load.</p> <h2>2. Your Debt Is Not in Student Loans or a Mortgage</h2> <p>It's debatable whether there is such a thing as &quot;good&quot; debt, but at the very least, student loans and mortgages can play a role in building wealth over the long term. Credit cards, however, are often what you use to buy &quot;stuff&quot; &mdash; clothes, gadgets, and other items that accumulate in your life and don't build any real value. If you have a <a href="http://www.wisebread.com/5-tricks-to-consolidating-your-debt-and-saving-money">mountain of debt</a>, and most of it is the result of consumer spending, it's time to recognize that you have a problem.</p> <h2>3. Your Credit Score Is Sinking</h2> <p>Having <em>some </em>amount of debt isn't going to kill your credit score. In fact, it can help it, as long as you've consistently shown you can pay in full. But there's a point at which debt can be too high for credit bureaus to view positively. Order a copy of your credit report &mdash; you can get a copy from each bureau for free once a year &mdash; and check your score. A score above 700 means you're doing well. But lower scores could negatively impact the interest rate if you borrow for a home, a car, or other need. A score that's too low could make it impossible for you to borrow at all. (See also:&nbsp;<a href="http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score?ref=seealso">10 Surprising Ways to Negatively Affect Your Credit Score</a>)</p> <h2>4. You're Maxing Out Those Credit Cards</h2> <p>When you are finding yourself increasingly in the hole due to credit card borrowing, that's a bad sign. Interest rates on credit cards are often very high, so if you can't pay off the balance in full each month, your debt problem only grows. Credit cards have borrowing limits, and you should rarely come close to hitting them. If you're hitting those limits &mdash; or even worse, opening new credit cards to allow for more spending &mdash; that's a sign that your debt problem is severe.</p> <h2>5. You're Not Paying on Time</h2> <p>You can have debt and maintain a solid credit score, as long as you pay your bills when they are due. People see their credit scores decline when they begin paying bills late. <a href="http://www.tkqlhce.com/click-2822544-10809829-1284618439000?sid=lemke-1658760">Credit Karma</a> reports that for people with with fair to excellent credit scores (600 or above), the on-time payment rate was more than 95%. But that dipped to 75% for those with scores between 500 and 599, and 60% for those with scores under 500.</p> <h2>6. You've Considered Ignoring Important Bills</h2> <p>I once had a friend who was struggling with debt to the point that he would consider pushing back or even blowing off payment of his rent, utilities, and other key bills. His feeling was that as long as he wasn't evicted and the lights stayed on, he'd be able to manage. But this is living on the edge and a sign your debt level is absolutely unhealthy.</p> <h2>7. You Have No Emergency Fund</h2> <p>If debt has you stretched so thin that you can't save anything for a rainy day, that's a problem. You may feel like you're getting by okay, but all it takes is one dead heat pump, one surprise medical emergency, or a blown car engine for you to face true financial hardship.</p> <h2>8. It's Hurting Your Relationships</h2> <p>Couples argue about money frequently, even when they're financially stable and have money in the bank. But the carriage of heavy debt can lead to serious strain between your loved ones. If you're constantly arguing about the level of debt that you have, it's not healthy and bears paying down.</p> <p><em>Do you recognize yourself in any of these signs of unhealthy debt?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-signs-youve-crossed-from-healthy-debt-to-problem-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-times-when-its-okay-to-take-a-loan">6 Times When It&#039;s Okay to Take a Loan</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-is-that-loan-too-big-for-your-wallet">Stop! Is That Loan Too Big For Your Wallet?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-ever-okay-to-cosign-a-loan">Is It Ever Okay to Cosign a Loan?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-paying-off-student-loans-early-can-boost-your-finances">7 Ways Paying Off Student Loans Early Can Boost Your Finances</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-loan-options-for-those-with-good-credit">5 Loan Options for Those With Good Credit</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management borrowing credit scores emergency funds equity loans overspending Fri, 19 Feb 2016 10:30:30 +0000 Tim Lemke 1658760 at http://www.wisebread.com How to Manage Your Debt in 10 Minutes a Week http://www.wisebread.com/how-to-manage-your-debt-in-10-minutes-a-week <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-manage-your-debt-in-10-minutes-a-week" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_debt_management_000022976723.jpg" alt="Woman managing her debt in 10 minutes a week" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Juggling multiple debts can feel like playing whack-a-mole. As soon as you pay one bill, another pops up, and you spend each month scrambling to stay afloat.</p> <p>You know that you need to get organized if you ever want to <a href="http://www.wisebread.com/5-tricks-to-consolidating-your-debt-and-saving-money">get ahead of your debt</a>, but you are <em>not</em> the kind of person who enjoys organizing your bills.</p> <p>Thankfully, the work necessary to manage your debt &mdash; and get it paid off once and for all &mdash; is not nearly as overwhelming as you might assume. In fact, with just a little initial effort, you can organize and manage your debt in as little as 10 minutes per week. Here's how.</p> <h2>1. List Your Debts</h2> <p>The first step is to track down the specific information about each and every one of your debts. Look up who you owe, the remaining balance, the rate of interest on each debt, and each debt's minimum payment. For instance, your list might look like this:</p> <table> <tbody> <tr> <td> <p><strong>Creditor</strong></p> </td> <td> <p><strong>Balance</strong></p> </td> <td> <p><strong>APR</strong></p> </td> <td> <p><strong>Minimum Payment</strong></p> </td> </tr> <tr> <td> <p>Store Credit Card</p> </td> <td> <p>$2,600</p> </td> <td> <p>23.99%</p> </td> <td> <p>$104</p> </td> </tr> <tr> <td> <p>MasterCard</p> </td> <td> <p>$1,200</p> </td> <td> <p>18.99%</p> </td> <td> <p>$48</p> </td> </tr> <tr> <td> <p>Visa Card</p> </td> <td> <p>$5,750</p> </td> <td> <p>15.99%</p> </td> <td> <p>$232</p> </td> </tr> <tr> <td> <p>Federal Student Loan</p> </td> <td> <p>$25,800</p> </td> <td> <p>6.80%</p> </td> <td> <p>$295</p> </td> </tr> <tr> <td> <p>Private Student Loan</p> </td> <td> <p>$6,700</p> </td> <td> <p>5.50%</p> </td> <td> <p>$73</p> </td> </tr> <tr> <td> <p><strong>Total:</strong></p> </td> <td> <p><strong>$42,500</strong></p> </td> <td> <p><strong>$752</strong></p> </td> </tr> </tbody> </table> <p>Depending on your tech comfort level, you might choose to use a simple paper-and-pencil list, create your own Excel spreadsheet, or use a pre-made program, such as <a href="http://www.mdmproofing.com/iym/products/debt-tracker.php">DebtTracker</a> from It's Your Money. The important thing about creating your debt management list is that you should use a format that you are likely to stick with.</p> <p>Once you know exactly what you owe, it's time to look for some extra money in your budget to send to your debts. Whether you give up your daily Starbucks habit, or officially quit the gym you haven't actually been to since New Year's, you are sure to find fat you can cut from your budget to send to your debts. (And of course, make sure you are not adding any new debts.)</p> <h2>2. Debt Avalanche vs. Debt Snowball</h2> <p>Once you have your list, decide what order you plan to pay off your loans. There are two schools of thought on this: debt avalanche and debt snowball. (See also: <a href="http://www.wisebread.com/snowballs-or-avalanches-which-debt-reduction-strategy-is-best-for-you?ref=seealso">Snowballs or Avalanches: Which Debt Reduction Strategy Is Best for You?</a>)</p> <h3>The Debt Avalanche</h3> <p>According to this method, you start your debt payoff with whatever has the highest interest rate. You send extra money to that debt until it is paid off, and then begin sending the same amount to the debt with the next highest interest rate.</p> <p>For instance, if our example budgeter had a total of $1,000 to send toward her debts each month, that would give her an additional $248 per month to pay toward her Store credit card, which has the highest APR, making her monthly payment $352. At that rate, she will have her Store card paid off in nine months.</p> <p>From there, she will begin to send $400 per month to her MasterCard (the $48 minimum plus the $352 she had been sending to her Store credit card), paying that off within three months. At that point, she can begin to send $632 to her Visa.</p> <h3>The Debt Snowball</h3> <p>This method recommends you begin with your lowest balance because you can pay it off quickly and feel motivated by your results.</p> <p>In our example budgeter's case, she would begin by sending $296 to her Visa card (her $48 minimum payment plus the additional $248 she can spend on her debts), paying it off in five months. She would then work on her Store card balance, sending $400 per month to it.</p> <p>Generally, you will spend less money over time if you employ the debt avalanche method. However, depending on how you are wired and motivated, the debt snowball may be easier for you to maintain.</p> <h2>3. Automate</h2> <p>Automation is the center of the 10 minutes per week debt management plan. Setting up automatic payments for each of your debts will eliminate the &quot;Oh, crud, I forgot to pay my Visa bill!&quot; realization that is the worst part of being disorganized.</p> <p>The key to having automation work is ensuring that you have enough money in your account to cover your debts on your due dates. There are two ways to do this without keeping track of every penny:</p> <h3>Schedule Payments With Your Paycheck</h3> <p>Many credit cards and lenders are willing to let you change your due date to one of your choosing, or will allow you to make payments anytime. Schedule your payments to come out automatically on the same day you receive a paycheck.</p> <h3>Open a Debt Payment Checking Account</h3> <p>You'll automatically transfer the full amount you need to pay all of your debts each month into this account. For instance, our example budgeter might transfer $500 from each of her bi-weekly paychecks into her debt payment checking account. On her bills' due dates, her payments will be automatically transferred. The benefit of a dedicated account like this is the fact that the money will be out of sight, making it less tempting to spend on anything other than debt payoff.</p> <h2>4. Spend 10 Minutes Per Week on Maintenance</h2> <p>Once you have developed your debt payoff plan and set up your automation, all you have to do is spend 10 minutes each week (or less) maintaining the plan. There are three items on your maintenance list:</p> <h3>Don't Overdraw</h3> <p>Check how much money is in the account you use to pay your debts. With automation, this should be a quick process with no surprises &mdash; but it's always a good idea to check in weekly to make sure you are on track. Otherwise, it's very easy to accidentally overdraw your account.</p> <h3>Revise Your Balances</h3> <p>Do this at least once a month. As you are working to pay off your debts, revising your balances for each debt can help to keep your motivation high.</p> <h3>Adjust Your Payments as Necessary</h3> <p>Change your payment amount with each debt that is paid off. You can also use this time to add any one-time payments you might make from windfalls or other unexpected money.</p> <h2>&quot;When eating an elephant, take one bite at a time.&quot;</h2> <p>As with consuming a pachyderm, the trick to debt payoff is working slowly and steadily. While each small chunk of debt does not seem significant, it all adds up to a monumental accomplishment.</p> <p><em>How are you maintaining your debt repayment program?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/how-to-manage-your-debt-in-10-minutes-a-week">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-reasons-your-debt-isnt-diminishing">12 Reasons Your Debt Isn&#039;t Diminishing</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-simple-way-to-decide-which-credit-card-to-pay-off-first">The Simple Way to Decide Which Credit Card to Pay Off First</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-debt-management-questions-youre-too-embarrassed-to-ask">5 Debt Management Questions You&#039;re Too Embarrassed to Ask</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-common-debt-reduction-roadblocks-and-how-to-beat-them">6 Common Debt Reduction Roadblocks — And How to Beat Them</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-debt-reduction-mistakes-even-smart-people-make">8 Debt Reduction Mistakes Even Smart People Make</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management avalanche method bill pay checking accounts organization snowball method Thu, 18 Feb 2016 10:30:22 +0000 Emily Guy Birken 1658696 at http://www.wisebread.com