Reuters mentioned DebtGoal very prominently today in an article on debt reduction.
Be Systematic About Cutting Your Debt
-Linda Stern is a freelance writer. Any opinions in the column are solely those of Ms. Stern. You can e-mail her at lindastern@aol.com. -
By Linda Stern
WASHINGTON (Reuters) – Many consumers have decided to make 2009 the year they whittle down their debts. In fact, according to a survey by Franklin Covey, the self-help planner company, it’s the No. 1 New Year’s resolution.
That’s good, because most people can help themselves to lower debts without calling in outside help, says Scott Crawford, head of a new debt-reduction website called DebtGoal.com.
“Only the bottom five percent are distressed enough to call in credit counseling or expensive debt settlement companies,” he says. “The vast majority can just take a DIY (do it yourself) approach. They just need structure and advice.”
Crawford was inspired to start the website by his sister, a dermatologist who, along with her nurse husband, ran up over $150,000 in consumer credit card debt.
“They had 16 different credit cards, all active with balances, a couple of car loans and three or four school loans.” They can afford to pay it back, Crawford says, but they had no idea how.
Like most do-it-yourself projects, debt restructuring does require tools and operating instructions.
Here’s how to attack that pile of bills:
– Get a clear picture. Make a list of all that you owe. Include the name of the lender, the interest rate, the total owed, the minimum monthly payment. Include credit cards, cars, home equity lines, school loans, personal loans and mortgages. Don’t lie to yourself; you can’t fix it if you can’t admit it.
– Crunch your budget to determine how much you can afford to pay every month. It’s best if this amount is more than the sum of your required minimum payments. If it isn’t, hunt for additional income to jump-start the debt payoff. This could come from a one-time activity, like a yard sale, to a second job or side gig, such as baby-sitting one day a week or driving for an elderly person. There’s always some way to make a bit of extra money if it’s really necessary.
– Use a web-based calculator to get recommendations on how to go about it. There are dozens of online debt reduction calculators. In addition to DebtGoal.com, check the snowball calculator featured here The DebtGoal site is rather full-featured and will direct you, month by month, on how much to pay toward each bill. The snowball calculator is faster and more of a one-time plan that you’ll then have to carry out yourself.
– If you don’t want to get a web-based plan, simply make your own. Arrange to pay minimums on all of your bills except for the one that has the highest interest rate. Pay extra — as much as you can afford — on that bill. As soon as you pay off the balance on one debt in full, take the amount you’ve been paying on that bill, and start adding it to the amount you already pay on the high-rate loan. Continue doing that until you are debt free.
– Don’t fall for the lowest-balance-first trick. Some advisors tell consumers to send extra cash to their lowest-balance debt, instead of their highest-interest-rate debt. They say this will give you a psychological boost when you see the balance disappear. Maybe, but it will cost you money over the long term.
– Keep hunting for lower-cost places to transfer your debts. Check indexcreditcards.com for updated lists of zero-interest and low-interest credit cards so you can transfer balances from higher-rate cards. If you’re extremely disciplined and confident about your future ability to pay bills, consider moving credit card debt onto your home-equity line, which should have a much lower interest rate now. Only do that if you know you’ll be able to make payments; there’s no point in jeopardizing your home for your unsecured credit card bills.
– Refinance, if it makes sense for you. If you’re sitting on a high-interest mortgage, consider getting a new long-term, low-rate loan. You can get a 30-year mortgage for around 5 percent now. That will keep your monthly mortgage payments down, and you can use extra cash to pay off the car, the cards and anything else that’s weighing you down. Once that’s done, you can focus on making extra mortgage payments.
– Chart your progress. Do it on paper, through a money management website, or through a full-blown financial program like Quicken or Microsoft Money. Every month, as you see the debts getting smaller, you’ll start feeling better.
Scott Crawford is CEO of DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
