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Debt

Debt Management Mistakes

Mistakes People Make

When you’re burdened with multiple debts, it’s easy to lose track and end up not paying on time, thereby attracting late payment fees and perhaps even eventual debt recovery process. You might not only miss out on interest free periods, but also end up paying hundreds of dollars a month for late fees.

Another mistake people make is that they make only the minimum payment to cover the interest amount without thinking about ways to clear off the principal.

People try to avoid banks, especially if they are sure they won’t be able to meet a repayment schedule – that’s unfortunate because communicating with the bank might actually help you to defer payments or save you from late fee charges.

When people opt for consolidation, they may forget to close their high risk personal loans which would still attract charges even if they’ve moved it to a low interest consolidated loan.

Efficient Debt Management Solutions

One of the best ways to achieve efficient debt management is to seek the advice of professional debt management companies, but more on that later.

The first step you can take is to stop accumulating more debts on your credit cards and overdrafts. This simple step can help in reducing your minimum monthly repayment schedule.

You can get rid of all your debts on high risk personal loans by opting for consolidation method. Some lenders might be charging you up to 20 % or more by way of interest. A possible solution for this is to combine all your debts into a single debt which can clear off by taking a low interest loan. Professional debt management companies have contacts in the finance industry and can easily source such loans for you. This will help to shelve your interest liability and lower your overall debt burden.

Find Cheap Service Providers

Budgeting is another simple, effective means that even professional debt management solutions providers advise. You can easily make a note of your expenditure and income every month and see if there are any areas where you can cut costs. For example, you can always find good deals and bigger savings for services such as internet, phone, cable TV or health insurance. You can use the money saved to clear off your debts.

Reducing the Principal

Consolidation packages offered by debt management companies can help with interest rate reduction, but you also need to think of ways to pay off the principal amount or else you might end up having to deal with debt recovery hassles.

You can do it by giving priority to your debts and using any monthly savings to pay them off. Traditional savings avenues such as bank deposits hardly offer more than 6% rates of interest whereas your debts attract much higher rates; it makes sense to use part of your savings to eliminate debt completely.

Professional debt management companies offer affordable and realistic debt relief services – they can help with consolidation loans for debt, mortgage refinancing loans, debt agreements and more. Speak to a professional to have your financial matters sorted out. It’s worth the time and money to get some peace of mind.

Calculate a Debt to Income Ratio

First, you need to find your gross monthly income. This is listed on your pay stub or leave and earnings statement. If you don’t receive a pay stub, you can use the W-2 form that you receive at the end of the year from your employer.

Second, you need to know the total minimum monthly payments you make each month towards debts. The easiest way is to review your monthly bill statements to find the minimum amount due each month. Another way is to find payments listed on your credit bureau report (CBR). If you don’t have a copy of your CBR, then you can obtain a free copy of your credit report once a year from an online source, or contact your financial institution for more information. On the CBR from TransUnion, the monthly payment will be listed under TRADES>TERMS. Depending on the company (TRADES) they can report your debt as “Min97” which means Min payment is $97, or “24M204” which is 24 monthly payments (TERMS) at $204 a month. The minimum and monthly payment, and monthly term, will be different for each person depending on what is owed. You can also contact each company that you pay a monthly payment to and find out the minimum monthly payment amount. Don’t forget to ask if they report to the credit reporting bureau agency.

Finally, once you have the gross monthly income and your total minimum monthly payments of your debts, you divide your total minimum payments by your gross monthly income.

See calculation example below:

Total Minimum Monthly Payments (debt) =$1,000

Gross Monthly Income (income)=$2,000

Divide $1,000 by $2,000 =.50 or 50% debt to income (D/I) ratio

So, what does this mean for you? This means that 50% of the money you make goes to debts. How do you feel about that? Great I hope! If you have a 100% debt to income (D/I) ratio that means you have no money left for essential needs like food. Having 50% debt probably means you are living paycheck to paycheck, but able to pay all of your bills on time, go out to eat once in a while, or go on vacation. Now you know, it can be good that the D/I ratio is at 50%, but what do financial institutions think if you have a 50% D/I ratio?

Financial institutions know you need some debt in order to build a credit score. They prefer your D/I ratio to be under 50%; ideal is 30%; best is under 10% because that means you have more money to pay back your loans.

Beware! There are some financial institutions that will loan you money if you have a higher D/I ratio, but they usually charge extremely high interest rates-making it very difficult to pay back. You can always call and see if they will tell you what their requirements are to obtain their lowest rate.

Debts Are Down in Phoenix

A Leap in the Right Direction

People are making finances, and paying off debts, a priority again and that’s a great shift. Writing off uncollectible debts is also on the rise, and that’s contributing to these lower numbers. When considering the 25 areas surveyed, only four reported a debt increase, and none were in Arizona. Phoenix folks have something to be proud of, and this is a great trend that will hopefully continue to grow.

Overall, Phoenix residents aren’t leaping on opportunities to take on more debt. They’re doing better at managing their credit cards, they’re not financing vehicles they don’t need and the mortgages that are getting approved are manageable for most. Basically, people in Phoenix are treating their credit seriously, just like they should. Gone are the free-for-all years when McMansions were standard and everyone drove a luxury car.

Avoiding a Fallback

Even though Phoenix residents are spending more carefully, there’s always the risk of slipping back into bad habits. Just one faux pas or an emergency can reverse these efforts. For example, a medical emergency or layoff can quickly undo a year or more worth of work. It’s crucial to pay off debts, but every budget should allow for an emergency fund. Ideally, a person or family should have a year’s worth of emergency funds in place, but any amount is better than none.

It’s also crucial to save for retirement and/or contribute to a 401(k) as well as actually designing and sticking to a budget that works. This means there are options for entertainment and no surprise bills down the road. Paying off debts is just one aspect of financial savviness, but it seems like these Arizona residents have that part down. It’s a tough climb out of debt, but with the right tools in place, it can be done-and the Valley residents are proof of that.

Federal Debt

Not any more though. In recent years this has certainly not been the case. Less money coming in every year with more going out has put us in a position where the United States debt is so high there are some who wonder if we will ever come out of it. This has also resulted in some of the worst infighting in recent memory among members of both political parties in Washington. According to them, it is the other party’s fault for the growing federal debt.

And if you listen to the “experts” there are as many different viewpoints as there are people in the know. Some think that there are ways out of our national debt mess, even though it may take a number of years. While some think that the United States’ role as the leader of the world may be coming to an end. For the most part though, most of the financial gurus fall somewhere in the middle when analyzing and forecasting the federal debt situation.

One thing is for sure. In order to straighten out this serious mess that is the federal debt or we can say Government debt, it is going to require cooperation between both political parties. They are going to have to come together for the good of the American people, as well as the financial stability of our nation and find solutions that are going to work and whittle down this quickly growing USA debt. If they don’t then the nation can just expect more of the same old same old.

If there is one place where there is a general consensus, it is in the area of defense spending. The long drawn out wars in Afghanistan and Iraq along with massive military and defense expenditures has really put a strain on the nation’s coffers. There is now way a solution will be found for the federal debt crisis without decreasing the massive amounts of money going toward defense.

Check Your Debt Using Your Smartphone

From an entertainment point of view, the Smartphone, in comparison to its predecessor — the third generation mobile phone, offers a lot more value in that the battery power is much better, the device is more fun to operate, it has a bigger screen, it has greater processing power and it very closely resembles what could be a full-featured personal computer.

People watch movies on their Smartphones, they store their entire music collections on their smart phones and even shoot amateur videos themselves, amongst a long list of other things.

For all its entertainment value though, the power packed in the Smartphone can be used for more constructive operations, such as how to check your debt.

The amazing world of Smartphone applications (apps) has opened up a whole new world of possibilities, simply because most apps stores are filled with apps that were developed by an open community of developers.

This model of opening up the door to third-party developers is single handedly responsible for the millions and millions of apps available to consumers all over the world, as community, third-party developers usually develop apps to fill a specific need, one which they might have had themselves, so you can almost be sure of their effectiveness.

Obviously some apps are more useful than others, but if you look under the “personal organization”, “business” or “finance” categories, you can find some of the most useful Smartphone apps, including tools with which you can check your debt easily.

Because of the design environments’ architectural make up, almost all the apps you find in dedicated apps stores are tweaked and suited for peak performance on your Smartphone, offering secure data transfer protocols, so you can be sure that your user experience is a good one.

Generally though, third-party developers’ apps, even those which you can use to check your debt with, are developed with a general idea in mind and can only function as general tools.

If you want something a bit more specific, you should go for Smartphone apps that are developed by the financial institutions themselves, as this will allow easy access to your official debt records.

If you have credit with your specific bank, for example, rather use a debt-checking app developed by that bank, instead of one developed for general debt checking use, that way you can be sure of the security of your information and you will never get frustrated with features that don’t quite do what you want them to do.

Third-party apps, developed more with a general view in mind, are usually great for the synchronization of your debt checking environment.

One third-party app would be great to collect all the data from all the other debt-checking apps, developed by the financial institutions of your official creditors, and put them all in one place, with added features such as tallying everything up and reports displaying in the form of charts and the like.

It’s easy to check your debt using your Smartphone — just get the right apps.

Managing Money Through Debt Negotiation

Debt Negotiation

Many creditors and lenders are willing to work with their debt holders individually in order to get debt paid off, even if it means giving the debtor a break and not requiring the full sum. Good faith can take a debtor long way when it comes to dealing with debt collectors. Many debt collectors are not accustomed to getting paid in full. And, because they routinely deal with people who have poor money management skills, if a debtor shows good faith and comes up with a plan through reasonable debt negotiation skills, the creditor will often be willing to work with the debtor.

Debt negotiation happens on all debt playing fields. Whether the debt involves the IRS or a neighborhood community bank, most lenders and debt collectors are going to be happy to take something when they are used to getting nothing. Using good debt negotiation skills to determine how much you are going to pay as well as agreeing on a fixed timeline for repayment can take a debtor a long way. This money management skill is essential for a debtor to start practicing immediately.

How Can I Learn More?

There are many books, classes, and services willing to help debtors develop debt negotiation skills that they can use to get out of debt faster than they would have thought possible. Check the money management section of your library, or do a search online to find a reputable class near you!

Debt negotiation is an excellent money management skill to learn sooner rather than later. Not only will you find it helpful in handling your debt, but the skills you learn in this area of money management are transferable to other areas of life that require a little bargaining and deal-making!

Tips for Paying Down Debt

  • Try to pay more than the minimum monthly amount required by your card issuer. Keep in mind that paying just the minimum amount required by your card issuer can cause your interest charges to balloon out. So, if you are serious about your desire to pay down what you owe, in the soonest possible time, then try to consider how you can allocate more funds to pay off your monthly credit card bills.
  • Come up with strategies that you can use to gradually pay down your credit accounts. To do this, you may decide to concentrate first on paying the debt that imposes the highest rate of interest. After all, this strategy is proven to help consumers save a great deal of money on interest charges. You may also decide to settle either the oldest or lowest credit transactions, whichever you find easier to pay off first.
  • Alter your spending habits. It would be counterproductive for you to continuously use your credit card to finance your purchases as well as your monthly bills, especially when you have started working on your plan to get rid of your credit card debt. This means that you have to limit the use of your card account until you are able to fully retire your credit obligations. So, you may need to change your spending habits and activities, for the time being. For example, you should resolve to use cash to pay for all your transactions. And you may need to lay low on the use of the extra facilities of your card account, such as cash advance.
  • Seek for professional assistance. You may also decide to seek professional help, especially if you do not have any prior experience in paying off huge credit card debt. Look for blogs and articles written by finance experts on how you can get rid of your debt, fast. You may also decide to sign up for credit counseling services. After all, a certified financial adviser can provide you with helpful tips that you can use not only to completely retire your financial obligations, but also to fully-rehabilitate your credit history.

Easy Debt Elimination Methods

Debts can always have very bad effect on your life especially if you want to borrow loans from the banks. This is because debts usually have very huge effects on your credit score. It would therefore be very important that you find a way of eliminating debts. This calls for a lot of financial discipline when it comes to using credit facilities like the credit cards. To help you eliminate debts easily, there are always a number of steps that you may take.

These steps include avoiding impulse buying as much as possible. Impulse buying can always lead to exhaustion of your resources way too far before your next pay day. This may force you to borrow more funds from friends or lending institution. This will in turn lead to increase of your debts. It is therefore important to eliminate impulse buying as an easy way of debt elimination.

Stop Spending What You Can’t Afford In order to eliminate debt, it is important that you stop spending what you can’t afford. If you can’t afford it, then don’t buy it. Many people today are living above their means, putting themselves further and further in debt. If you want to pay off debt, stop spending. If you don’t take this step, you will never be able to fully get out of debt.

Another easy way of debt elimination is using common sense when you go shopping. This may seem very obvious but is very efficient and effective. This will help you getting into much debts that would prove very difficult to repay. To easily achieve this, it is always advisable that you pay for everything you buy in cash and only utilize your credit cards during emergencies.

You may also research on money saving opportunities like the low interest rates and credit card offers. This can help you save a lot of money on interest rates you pay. Credit card offers will also allow you shop at reduced prices and this may help reduce that amount of debts that you take.

Only Use Cash Let’s face it; it’s far too easy to pull out a credit card whenever we see something we really want, and for someone struggling to clear his or her debt, this can spell disaster. Additionally, it’s incredibly more difficult to keep control of your spending when using credit cards. On the other hand, when you pay for everything with cash rather than with plastic, you tend to be far more careful with regards to your spending.

You can also eliminate your debts by repaying for you in good time. This will eliminate the fines that you pay late may be charged. This in a way will also help in debt elimination.

There is no doubt that if you have a serious debt problem it can really cripple you in so many ways that it takes over your entire life. If this is the case then you should really try to get some help with your situation and for this you can consult a number of debt relief companies no matter where you live.

Going Debt Free

Interest on auto loans is known to vary as much as 10 percent. Finance companies often charge much higher rates than banks and credit unions. Credit cards and department store accounts can be insidious ways of incurring additional debt. That is, unless you use them properly.

In regards to challenging your every belief, it is a fact of the modern financial system that loans generally incur higher interest rates. For example, let’s say Ford Motor Company goes to your bank. The company pays interest that is a fraction over the prime rate, which is the lowest rate banks charge their favorite customers. You, for sure, are paying several points over the prime.

You may not be able to change the fact the bank gives Ford a better interest rate than it gives you. But you can control, to some degree, the interest rate you pay based on the amount of money you borrow.

Look at the interest schedules on your credit card bills. You will see information that tells you something like this: On the balance up to $2,000, the finance charge is 18 percent annually, while on the balance over $2,000, you pay 12 percent. Remember, these numbers are generalized.

You may owe $2,000 or more in credit card bills, but if that debt is spread over several cards with low but lingering balances, you are paying the 18 percent on every penny. And if you pay the minimum amount due to each creditor every month, you will carry 18 percent until all balances go to zero.

Mastering a debt free plan can be achieved by strategically refinancing your debt. In fact, you can renegotiate and finance smaller loans as well as larger ones. However, be careful. Make sure you can benefit from the refinancing before you renegotiate.

Suppose you have an auto loan at 10 percent, and your bank is willing to lend you the money to pay it off at 7 percent. Sounds like a good deal, right? Well, maybe. If a big part of the loan has been paid off, refinancing may not be worthwhile because the new debt is usually paid off over a longer period of time and will ultimately cost more.

Direct Payday Loan Lenders

What can you do to make your life more successful despite money problems? First off, the last thing you want to do is ignore your debt. It is very important to at least make the minimum payments so you keep that part of your credit score on target. Find a way to reach a balance in your budget. Harmonize what you think say and do for your finances. Once you create goals and objectives to correct problems, it is important to focus your money management around them. You’ll see the balance come in small increments.

It takes courage to make hard decisions. Some folks find that the only way to balance the budget is to downsize their home or vehicle. Change is hard enough, but these are big ones. You have to take the challenge head on no matter how uncomfortable it makes your present life. Minimizing income output is your goal so do what it takes to make it happen.

During financial hardships of any size, relationships often get the brunt of frustrations and discouragement. If you are struggling to break bad spending habits or to get out of a reliance on direct payday lender help it’s best to work with your partner and/or family and make it a group effort. Everyone can help to encourage good changes while supporting each other during difficult moments. Be generous to your family at the end of the month in order to celebrate positive changes in your finances. It doesn’t have to cost money and frankly, according to your finances it shouldn’t. Time and love are priceless rewards. From a game night or a hike in the woods, your family will get the rewards they deserve.

Learn from your mistakes. The wisdom you get from correcting your wrongs will last a life time. Be open to hear your inner voice when you second guess a purchase, think twice about online payday lender applications or get disgruntled about the pile of debt you own. There is an inner voice letting you know it is time to wake up and make a change.

Keep all your financial documents organized and easily obtainable. The better you document expense sheets and track spending the easier it is to target an area that needs improvement. All your efforts to make changes and bring balance to your finances will show clearly on monthly budget reports. Pay attention to the ebb and flow of your money in order to predict potential problems. Make sure that one of your major goals is to save your own emergency fund so you are less apt to accrue additional credit card or fast payday loan debt. This money will be at your disposal free of charge. Money emergencies will no longer create stress or financial burdens. You got rid of that problem, learned from your mistake and no longer have to suffer.

When you get your finances back on track, it is a beautiful thing. You will be able to concentrate on saving money for your child’s education and your own retirement. Take one day at a time, but make it in the right direction. Your future finances depend on it.