Posts Tagged ‘debt problems’

Recognizing The Situations That Commonly Lead To Debt

Thursday, April 2nd, 2009

While Americans continue to struggle with a weak economy and ever increasing amounts of debt there are companies which are seeing an upswing in business helping people get their finances back in order.  Many of these organizations are offering advice, strategies or processes which can help consumers address their high levels of debt and work toward living a debt free life.  If you are working toward eliminating the debt in your life you should know that getting out of debt is just the first step; staying debt free should be your ultimate goal.  The following list of common reasons people find themselves in debt may help you avoid getting in debt in the future.  Some things on the list are beyond your control but they should be mentioned in the event you find yourself in that situation.

  • Financial Ignorance-  People who do not understand the basics of personal finance are doomed to make mistakes, in most cases costly mistakes. 
  • Divorce-  With over half of all marriages ending in divorce there is no doubt this is a leading cause of debt among Americans.
  • Lack of Money Management-  Almost everyone knows the importance of having a household budget to keep finances under control.  There are countless people who have no idea how much money is coming in and even less knowledge as to where all their money goes each month.  Until you get a handle on your income and expenses you will likely always find yourself short on cash or incurring debt to pay for expenses that should have been planned in your budget.
  • Failure to Save Money-  When you don’t have money in a savings account you have no recourse when an emergency arises but to borrow money or charge expenses.  When you finally get out of debt, don’t repeat the cycle by spending every penny- create a budget and include your contribution to your savings account or emergency fund as one of your financial obligations (to yourself).
  • Loss of Income- If you have taken all the right precautions, made all the correct choices regarding your finances and saved a percentage of you income you can still find yourself in debt if you lose your job.  It is important to create multiple streams of income to remain solvent in the event your primary source of income is disrupted.

There are dozens of other reasons why people find themselves in debt.  If you are working your way toward financial freedom you should take the time to find out how you lost control of your finances and take the steps needed to prevent it in the future (if possible).  Getting out of debt is much harder and takes far longer than getting in debt, so it makes sense to avoid going down the same path a second time.

Trisha Wagner is a freelance writer for DestroyDebt.com, a debt community featuring debt forums. Trisha writes regularly on the topics of getting out of debt and personal finance.

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Posted in Uncategorized | 2 Comments »

Advice, Tips, and Techniques to Eliminate Debt: Steps Two and Onwards

Wednesday, January 14th, 2009
Steps Two – Onwards

After getting organized and creating your basic plan, follow it up with solid execution. These additional tips can help make the progress towards paying off debt go much faster. Choose and implement any of the following:

  • Automate your debt payments, making sure that you keep your total payments at least as high as the amount needed to execute your payment plan.  Automating it makes it less likely that you reduce your payments and fail to reduce your debt.
  • Avoid eating out – it costs a ton
  • Create a budget for all of your non-debt expenses. Trim out everything but the bare minimums and turn that savings into direct payments towards your debt pay down.
  • Use free or low-cost recreational and entertainment options only. They are limitless and everywhere.
  • Build up a cash reserve for emergencies equal to three months of basic expenses: housing, food, and transportation.
  • Create a short-list of arguing points why your interest rates should be lowered. Next use the list as a script and call each of your lenders, haggling with them to have your rates lowered. If you aren’t getting anywhere with the level one representative, ask to speak to a manager, and repeat the same points.
  • Transfer your balance to a new credit card with a zero percent rate, then cut up the new zero percent card and never use it, turning the credit card into a credit tool. Shop around and find a zero percent balance transfer option that has the longest zero percent period available. Note the end date of the zero percent period and make that your deadline to have that account cleared.
  • Stop adding any new funds to investment accounts, retirement or otherwise, and apply those funds instead towards debt pay down.
  • Make a checklist of everything to review during your time paying down debt, then use the list to check your progress on the first of every month. Compare your outstanding debt amount at that point to what it was on the first of the previous month. Adjust your plans to make sure that steady progress is actually a fact.
Raj Patel writes for 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.

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Posted in Credit Card, Debt Management, Paying Down Debt, Saving | 4 Comments »

Advice, Tips, and Techniques to Eliminate Debt: Step One

Tuesday, January 13th, 2009

The idea of getting ready to reduce and eliminate debt is enough to put most of us on edge. Those nervous about the tasks involved to step out of the red often put to us the question: “What are the best tips and advice for getting out of debt?” In a two-part article, we answer it here.

Step One: Get Organized and Make a Simple Plan                                                                          
Getting organized and coming up with a simple strategy is the first and most important step. In it, you don’t just bring together all of the various bank statements, payment stubs, and notices of changes to debt terms lying around the house; you’re actually writing down concrete and straightforward things that need to get some debt control. Only with a written plan can you effectively measure your progress towards debt elimination. Still confused and not sure where to begin?                                                                                                                                                                                
Here’s the broken-down steps to “Step One”:                                                                                                                                                                     
1. Collect all documentation you can find regarding your debt. Don’t pour over it yet; just pile it all into one place.                                                                                                                                                         
2. Take the pile and organize it in groups, according to type of debt (i.e., auto, credit card, housing/mortgage, etc.)                                                                                                                                               
3. Read through it to get a basic understanding of what is owed and to whom. On a separate notepad, jot down important things such as: the principle, the current debt balances, interest rates, whether the rate is variable or fixed, mandatory timelines for payment, minimum payment amounts to avoid additional fees, and any debt prepayment penalties. Also jot down the phone number(s) of the contact(s) for the account. Don’t worry about finding all of information; do your best and don’t be afraid to call the contact phone numbers for each of your lenders to fill in the blanks.                                                                                                                                                                                                               
4. Snowball Method: Within the mandatory guidelines for repayment you can choose between one of two basic strategies: pay off the smaller balances first, or pay off the balances with the higher interest rates first. Paying off the balances with the highest interest rates makes the most financial sense to pay less interest in the interim, but motivation-wise you might feel increasingly confident as you wipe out credit cards to zero balances. In this second case, the snowball method will be optimal:  it entails paying the minimum monthly payment on each of your debts, except the one with the lowest balance, where you apply all of the remaining funds you can dedicate towards debt reduction.                                                                                                                                                                                                           
5. Check your progress every month. Tell a friend, family member, or loved one about your plan and monthly targets so that they can keep you on track, like a coach. Be explicit and clear as to what is owed. Providing your coach something in writing will add to the sense of commitment.                                                      
Tomorrow we discuss step two: various quick and simple options to speed up the debt pay down process.                                                                                                                                                                                
Raj Patel writes for 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.

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Posted in Credit Card, Debt Management, Paying Down Debt | 23 Comments »

Debt and Sex

Monday, January 12th, 2009

Do debt and sex have anything to do with one another?

The short answer is yes, but probably not for the reasons you might expect….

  • According to the British tabloid The Sun, one in four people who contacted a debt helpline admitted that some of their financial problems were caused by spending money on sex.
  • In another entertaining twist on the subject, Tom Elsvin reports that debt now seems more important to people than sex.  He comes to this conclusion by analyzing the spam he gets sent every day, and has seen a sustained increase in the number of unwanted emails about debt issues lately.
  • Credit card debt ranked highest on taboo topics, according to a poll by GfK Roper Public Affairs and Media for CreditCards.com. People would rather talk about their age, weight, religious views, even health problems before openly discussing their credit card debts. Even some of those who don’t carry a balance on their cards said they wouldn’t want to broach that topic with someone they just met.

Over here at DebtGoal.com we’re still trying to decipher what all this means … but we welcome your insights on the topic.

Steve Richmond is a co-founder 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.

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Posted in Credit Card, Debt Management | 1 Comment »

Wrap-up: 9 Steps for Successful New Year Debt Resolution

Friday, January 9th, 2009

This is the last post in our series of 9 steps for setting a New Year Resolution to pay off debt.

Again this year, Reducing Debt is the top New Year’s goal, with up to 56% of Americans estimated to set a goal to get out of debt in 2009.  Wow.  That speaks loads about the economy and our mindset.  So remember that you’re not alone this year if you’ve committed to working down debt.

In our series of posts on setting a New Year Resolution to reduce debt, we’ve covered basic steps you can take to get out of debt.  We’ve discussed how you can set goals, come up with a plan, and enlist the support of others in paying off debt.

Ultimately, successful debt reduction depends on a lot more than just coming up with payment schedule.  You have to put all the pieces in place to have success.  Without support of your friends, for instance, you will have a hard time changing your habits.  Without getting everyone in your family aligned behind the goal, moving the needle will feel like herding cats.  And without a good tracking system, you’ll never get the feedback to know if you’re succeeding.

Surrounding yourself with good things, brings good results almost by definition.  Here are our top 9 steps for building out a successful New Year’s Resolution to pay off debt:

  1. Stop using your cards
  2. Get organized
  3. Set family priorities
  4. Get SMART.  Set SMART goals for debt reduction
  5. Make a plan
  6. Simplify for success
  7. Tell your goal to others
  8. Ask for support
  9. Track your progress

In closing, remember that 65% of people who profess to have a goal to reduce debt never put a plan into place.  Just by creating a plan to deal with your debt and starting to track your success, you’ll be significantly more likely to achieve lasting results on your goal.  We are proud to have created DebtGoal.com which incorporates all of these elements.

Hope you have a great 2009 and have success in your goal to reduce debt.

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.

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Posted in Debt Management | 6 Comments »