Debt Education Alliance

Surely there are better places to stash your extra cash other than under the mattresses and in your shoes! You can do all this without tying the cash down with relatively illiquid investments as you may need them for an emergency.

One option would be opening a plain savings account with a local bank. They may offer low returns, but it’s better than 0 percent rate you will earn by stashing the cash in a piggy bank.  Local credit unions and community banks are great options as they have low entry requirements than more established banks. You can access this money through an ATM anytime. But be careful about the minimum balance requirements as non compliance may lead to penalties.

High-yield online accounts are the latest expansion within the banking industry. Many of these accounts have low entry fee requirements and their rates are higher than offline banking counterparts. One opens an account and links it with an offline checking account, allowing you to transfer money to the newly opened account. One thing to keep in mind with these accounts is that the transfer of money to and from the account may take up to 3 business days and help is only though call centers.

If you find yourself in a “debt mess” there are many offers of help and if you find the right debt consolidation program it can be a real solution to the stresses of phone calls from creditors and just the general feeling of “no hope” when dealing with it all.

You need to really dig deep in looking for a reputable debt consolidation program. If you don’t your problems could get even worse. One way to find out is checking with the BBB (Better Business Bureau.)

Debt Consolidation Programs that offer things that seem “too good to be true” are probably one of the many providers out there that you need to be very cautious about. For instance, the interest rates on their loans may be so high that you would end up paying much more than you originally owed.

These “too good to be true” programs also stick fees on their monthly payments for unspecified reasons that cost you much more in the long run.

One more problem with these kinds of “nightmare” debt consolidation programs is that they are known to make the payments to your creditors late or even miss payments!

So, again, be careful to choose a reputable debt consolidation program. There are solid, reputable providers out there and if you are at the point in your life that you need help they are there for you.

Debt consolidation is often a much better route to take versus bankruptcy and gives you back more control of your finances..

One payment per month compared to ten is only one of the many answers debt consolidation offers. And it usually is a considerable amount less than you had been paying out monthly. Another plus to debt consolidation is that their staff members deal with your debt collectors to accept a significant amount less than your original debt with them. Also, another plus is that debt consolidation pays off the debt much sooner.

Many offer counseling to help you with planning your future finance budgeting to help keep you from getting into any future debt-messes.

Of course, there are two sides to your financial situation – you do not just spend money, but you probably have money coming in, too.  Obviously, the way we get into debt is by spending more money than we make, so in addition to evaluating your spending, you need to evaluate your income and compare how much money you earn with how much money you are spending.  You can take control of how much money is going out by creating a spending plan, not necessarily a strict budget, but a directing idea that can help you to avoid more debt and shrink the debt you already have.

In order to reduce debt, looking at the debt aspect, obviously, is very important, but looking at the income aspect is important, too.  Perhaps you got into debt not because of reckless spending or in hefty school loans, but because of unexpected expenses or lower than expected paychecks.  Regardless of how the debt accumulated, a higher income can help you to reduce the amount more quickly than paying off the debt at the same income level you have now.

Consider getting a second job or working overtime as a way to get more money to pay off your debt more quickly.  These methods of increased income are not practical for everybody – family responsibilities may not leave enough of your time available for more work, but they need to be seriously considered when making your plan to get out of debt.

There are other ways to increase your income.  For some people, approaching your boss for a raise will be an appropriate way to bring in more money for debt payment.  Another avenue is to sell things.  Garage sales are a common way to get rid of junk, but they can also bring in a few dollars to help during especially tight times.  Online selling venues have made selling an even more profitable venture as collectors and dealers alike are more easily accessed today.

The temptations of these options, though, are to treat second jobs and additional incomes as spending paychecks and your primary job as the paycheck that pays the bills.  The point of a second job when trying to get out of debt should be to accelerate the payoff process as much as possible to shorten the length of the debt and to help prevent interest buildup.
Be creative when trying to find new sources of revenue, but be sure to avoid large start-up costs since the point of more income for you is to reduce, not accumulate, debt.  If you have a lawn mower, you can hire out to your neighbors for lawn maintenance.  Finding a service-oriented job is usually an option for people with their evenings and weekends free.  Sometimes just utilizing personal skills, such as the ability to set up a wireless network or paint and power wash houses, can be an excellent way to bring in several hundred dollars at a time with just the minimal cost of putting an ad in the newspaper and encouraging word of mouth to get your name passed around.

Bankruptcy is a legal declaration stating that you cannot pay your debts.  This declaration is designed to be a starting point for a new, clean and clear financial situation for the filer.

Filing for bankruptcy gives you the opportunity to delete the financial burden of most, if not all, of your debts. Bankruptcy allows you to pay off the debts that remain under the protection of bankruptcy’s rules and regulations. Any repayments that your bankruptcy settlement requires you to continue to pay will be within your means and without the harassment of creditors, relieving you of the stress and pressure of trying to meet the demands of bills and payments that are beyond your ability to pay.

Although the goals and advantages of filing bankruptcy are very appealing to anyone struggling with debt, there are consequences and repercussions for filing bankruptcy that can be difficult for many people to face. Because of these consequences and long- and short-term effects of filing bankruptcy, any credit counselor, lawyer, financial advisor, or self-help book is going to tell you rightly to make sure that bankruptcy is your last resort when trying to get yourself out of debt.

In addition to the debt relief, the most obvious consequence of resorting to bankruptcy to get out of debt is bankruptcy’s impact on your credit score. When you file for bankruptcy, expect that filing to stay on your financial records for between seven and ten years, leaving a large, negative effect on your credit.

The poor credit rating caused by bankruptcy can make getting a mortgage or a loan a very difficult task because you are perceived as a risk. If you have failed to pay debts in the past, creditors see you as a risk for not paying your potential creditors in the future. In order to get a home loan, for example, you can expect to have to wait at least two years after your bankruptcy was finalized before a lender will be willing to consider providing you with a loan. Until you rebuild some of your credit, convincing creditors that you are not a risk will be a difficult task.

Directly after your bankruptcy, you will not have any credit and, when you do regain credit, you will most likely have higher interest rates than before you filed or than you would have if you had not gone through a bankruptcy. Interest rates are determined by a number of factors, but one of those influential factors is how much of a risk you pose to the creditor. If the creditor is concerned about whether or not you will pay back the total amount you are borrowing, based on your financial history, you will have a much higher interest rate than someone who has excellent, consistent financial records.

Of course, one of the most dramatic consequences of bankruptcy is that you will likely lose some of your possessions and assets. Your assets - the property you own that is not exempt under the relevant bankruptcy laws - will be sold and distributed to your creditors to pay as much of your debts as the courts deem possible. If you are at risk of foreclosure or repossession, this consequence may not seem as dramatic as watching your property being removed without feeling the relief that bankruptcy offers. However, reconciling yourself with the possibility of losing property is an important step when choosing to file bankruptcy.

These negative effects, however, are not the end of the world as your finances know it, nor are the effects permanent. As long as you make your payments on time and stay on top of your efforts to improve your debt-to-income ratio, you can start improving your credit as soon as you have found your way to the other side of your bankruptcy. With dedication and a little time, you can rebuild your credit, improve your standing with potential creditors, and live a life relatively free of the burdens of a past bankruptcy.

Many individuals and businesses have found themselves in a position in which bankruptcy is their best choice. Most of these people and organizations recover from bankruptcy and manage to move on with their lives and their finances without the permanent hindrances they fear.

Obviously, there are very significant pros and cons to filing for bankruptcy, so making the decision about whether or not to file can be a very difficult choice. Once the decision is made, you still have to deal with the consequences of that choice, so there is a trying process involved either way. Take your time and really consider the potential offered by each choice.

The way I feel about bankruptcy is that if you are in such dire need to reduce your debt, filing for bankruptcy might be a better choice than signing up with one of those debt consolidation programs or taking out a bad credit loan.

You can lower your interest rates and stop any plans for big purchases or vacations, but if you are really determined to get out of debt, you are going to have to make more changes in your life than just those. Take a serious look at where your money goes and determine what you can go without and what you can get away with less of. You may feel that you are not extravagant with your money, but many of us spend a little here and a little there without realizing how quickly that little bit adds up to too much spending.

Even if you feel that you do not waste money, closely evaluate your spending habits. Start your evaluation by writing down everything you can think of that you buy in a month. This is going to take time, but is immeasurably helpful in figuring out your expenses and changing your habits. While you are making your list, which may require you to look through your checkbook, credit card bills, and saved receipts, write how much you spent on each item for the month. Do not leave out your rent, utilities, car insurance, groceries, entertainment, and afternoon coffee – include everything that takes money out of your pocket.

Once you have determined exactly how much money you spend each month, you can identify what things and activities siphon off your funds without you thinking about the spending. Typical expenses along these lines include snack breaks, pricey coffee drinks, daily lunches out, and impulse buying. When making these purchases, the costs do not seem very expensive, but this type of thoughtless spending piles up over time to make up a lot of money.

If you eat lunch out every day, spending an average of $7 a day, 5 days a week, by the end of the year, you will have spent $1,820 dollars on lunches out. Even if you manage to just spend $5 a day, 5 days a week, this still adds up to $1,200 a year. Remember what a difference a $150 a month payment toward a high-interest debt made in comparison to a $100 a month payment toward the same credit card. Even if $5 a day or $1,200 a year does not seem like a lot of money to you, think about, in addition to how much money you are spending, how much money you are accumulating in debt because you are not paying off your creditors as quickly as you can.

Remember every penny counts and I know from experience it is very difficult to give up items that you are accustomed to and that fit in your quality of life.  It is necessary to cut back on expenses if you one day want to return to you quality of life.

In order to tackle your debt you will need some extra money to pay the bills you owe. If this means getting a second job then those are the sacrifices needed. Also a simpler approach that will help free up some extra cash is to cut back on some luxuries. Here are 10 simple tips:

1. Brown Bag it to work
2. Don’t drive with you air conditioning on unless it really hot.  It cuts your mileage by 20 percent
3. If you have a 30-year fixed mortgage, making a payment every three weeks instead of every month can reduce the amount of interest paid significantly.
4. Learn to love leftovers.  If you want to trim your food budget in half then you will need to stretch each meal into two.
5. Save on postage by paying bills online.  Also this will reduce the risk of paying late and absorbing those pesky late fees.
6. What’s wrong with catching a matinee instead of going to the movies at night.  Matinees provide with with the same movie at a discount
7. Bundle your media services.  Cable, Internet & Phone all on one bill.  Most companies are more price effective using this method.
8. Use your debit card for purchases instead of your credit card to avoid credit card interest and fees.
9. You will spend less n food if you shop with a list and stick to it.
10. Shop out of season

Once you have you debt calculated and broken down by what you owe to each creditor you need to determine which payments should take priority over the others. Credit card debt, for example, is a very easy way to string out and grow your debt over years because credit cards typically have very high interest rates. If you have $5,000 dollars in credit card debt and pay the minimum payment each month, which is usually around 2 percent (so we can figure that you pay $100 a month), have you considered how long and how large this debt will become by the end of your payments? By paying the minimum payment every month, if your interest rate is 18 percent, you will take 7 years and 10 months to pay off your credit card and will have added an extra $4,311 to your original $5,000 debt. Minimum payments are how credit card companies make money and how you keep yourself bogged down in debt.

By paying just an extra $50 each month towards this bill, you can pay off your credit card debt in 3 years and 11 months, paying $1,983 extra from interest rates, which is still a lot of money, but a great deal less than if you only pay the minimum amount.

Focus your efforts on the balances that charge the highest interest rates first. For the balances that have high interest rates, you want to prioritize paying these over all the other balances, so while making the minimum payments on the other balances, you want to direct as much money to getting rid of these high-interest balances as you can.

For some people there is a particular debt that is heavy on their minds or that causes a lot of trouble for them due to either family or creditor-related issues. Although this debt may not be the one costing you the most interest, you may want to consider making this debt your highest priority to get the stress of this debt off of your mind. Still other people find that starting with the smallest debt is a helpful way to bring down the number of creditors they have, which can bring a feeling of relief to some people.

While I can understand the reasoning behind these two methods of payment that are different from prioritizing debts by their interest rates and I cannot speak against taking this route, the fact of the matter is that, whether your debt with the highest interest rate is causing you the highest amount of stress or not, this debt is causing you the quickest deepening of your debt. If you prioritize your debts according to their interest rates, you will pay off your debts more quickly than any other prioritization system and will save yourself the most money by preventing the highest interest rates from accumulating more debt than if you pay them off first. Perhaps this method will cause you to get to your most annoying debt third or fourth, but this method will also save you the most money and bring about the quickest, most effective outcome.

I know when I was living my life in debt I found it really hard to come to the conclusion that I was really in trouble.  I understood the debt was increasing but I had no idea to what amount and what extent.  The toughest thing to do is sit down with that exact dollar amount of what is owed to your creditors.  It can feel like a ton of bricks  coming down on you but knowing how much you owe is critical in starting your debt relief program.  I calculated my total credit card debt to be around $20,000.  All I have to say is that I felt depressed and frustrated. How could this have happened and where do I start on working on this debt.

The very first step in making a plan to get yourself out of debt is to determine the amount you really owe. Most Americans are in debt, but we tend to not want to think about how much debt we have and just how much staying in debt is costing us. Unfortunately, in this matter, ignorance is not bliss. We need to be aware of our debt and of its harm to our well-being in order to really understand the importance of paying off that debt as quickly as possible.

Either with old-fashioned paper and pen or a financial software program if you prefer the high-tech route, make a straightforward table listing who you owe, how much you owe, the minimum payment for each amount owed, and the interest rate for each creditor. Once you have the information organized in front of you, there are debt-reduction calculators online that can help you to determine the length of time and the interest payments each balance will require according to how much you pay towards them each month.

Knowing how long a debt can be drawn out and how much extra you have to pay for drawing out the payments this way can help to motivate you to pay off your debt as quickly as possible and prevent the doubling or tripling of your debt from interest rates. Figuring out how long minimum payments will take to pay off your debt and how much money you will pay in interest will help you to realize the urgency of getting out of debt before you have wasted thousands of dollars on interest payments and countless years on debt-management.

When resolving to get out of debt, good intentions are an important, but not sufficiently effective first step.  What you need is a plan and the initiative to follow through with this plan.  You have to break away from your old habits that got you into debt and you have to lay down your new lifestyle securely in the place of the old habits to turn your finacial life around.

As I am sure you have realized, having debt is an expensive situation to be in; each month that you have debt, you accumulate more debt through interest.  If your credit card rate is 20 percent, each time you buy something on that credit card and do not pay off the amount of the item right away, you are actually paying 20 percent more than the price of the item.  For example, charging a $200 jacket without paying the full cost on your next credit card bill means you just paid $240 for a $200 jacket.  If you cannot afford to pay more than the minimum payment for the item that month, then you probably cannot afford to buy the item in the first place.

This is an important point to keep in mind when you are tempted to charge purchases because of a deal that is too good to pass by.  Any financial benefit that a sale or clearance may have is going to be canceled out by interest payments on your credit card if you cannot afford to pay off the entire amount of you purchase immediately.  What often happens is a purchase that started as a good deal, such as buy one DVD get one half off, was a $60 purchase for $80 worth of merchandise.  When you do not pay off the $60 on your credit card with a 25 percent interest rate, though, after one month those two DVDs just cost you $75, on ly $5 under the listed price.  If you go another month without paying them off, you have now accumulated $93,75 woth of debt for $80 woth of DVDs.

When you are making your plan and finding the motivation ot follow through with your plan to get out of debt, you absolutely have to recognize the cost of getting yourself further into debt or putting off paying off your debt.  Obviously, you have limits to your finances and monetary abilities, but in order to prevent paying two, three, or four times as much as your original purchases were worth, you need to pay off as much of your debt as quickly as you can.