Debt Consolidation Blog

Archive for October, 2009

It’s a question that we all must answer. Even if some of us would prefer to ignore it! Because, with rare exceptions, we all have to deal with having just so much money to cover all our expenses. And, if we spend more than we take in for very long we get into trouble.

Let’s look at a “typical” spending plan. Then we’ll discuss it.

housing                  35%
food                         15
auto                         15
insurance                5
entertainment       5
clothing                   5
medical                    5
everything else    5      
Savings                 10

The first thing you’ll notice is that I didn’t include any taxes (either income or Social Security). You can choose to do that if you like (in fact, it’s a real eye opener). But for our purposes it’s easier just to deal with your ‘take home’ pay.

The second thing to notice is that this is a guideline, not a straightjacket. The truth is that very few of us will fit into this exact framework.

So if your spending doesn’t match, don’t despair! Analyze the situation before you panic!

For instance maybe your entertainment spending is closer to 10%. Is that a problem? Maybe not, if you’re young, single and sharing an apartment with 3 friends. In that case what you save on housing is going for entertainment. So overall you’re not spending more than you’re making.

Or you may be a city-dweller where housing is very expensive (think NYC). But because of public transportation you don’t own a car. So the extra you spend on housing is offset by the reduced spending on transportation.

You get the idea. Tailor your spending plan to your needs. And, adjust it as you go through life and your needs change.

One other thing to notice is that housing, food and auto make up the lion’s share of the expenses. That’s true for almost everyone.

It’s in those three areas that most families get into trouble. Most often by buying a home or vehicle that they cannot afford. But once the commitment is made it’s very hard to undo.

You might wonder where a certain expense goes. For instance, household cleaning supplies. Many people buy them at the grocery store. So are they a housing or food expense? The answer is: it doesn’t much matter. Put them whever it seems best to you. The key is always putting them in the same place, so you can compare results from month to month.

Another common question is what should I do with charitiable contributions. You can either take it off the top (like taxes) or create a separate category for it. If you believe that contributions should come before your expenses you’ll want to take it off the top. If you think that it’s part of your regular spending then include it as another expense category.

Finally, let’s look at Dee’s question about saving. There probably isn’t any single right answer. Because saving isn’t really an expense. It’s an investment for a better future.

So I prefer to think of savings in terms of priorities. Before I can put money aside for savings I need food and a reasonable shelter. Probably also need dependable transportation to get to my job.

But after those basic needs are met, it’s time to begin saving some money. Not necessarily the 10% in our guidelines, but 2, 3 or 4%. Enough so that there’s some money set aside for the so-called unexpected expenses that happen to us all (dead appliances, home and auto repairs, unexpected sickness, temporary lack of work).

One other comment about savings. Paying off debt (especially credit card debt) is a little like savings. Consider payments used to reduce the amount owed as if they were savings.

Finally, for those of you who don’t want to bother with any of this. I know what you’re thinking: I’m fine and don’t need any help monitoring my money. Just remember that most people who are in trouble today said the same thing when everything looked good to them.

______________

Gary Foreman is the editor of The Dollar Stretcher.com < http://www.stretcher.com/r/134.htm> website and various enewsletters including  Financial Independence. FI is a daily message designed to help people take control of their financial lives through achieving small daily goals. To find out more check out the Financial Independence page < http://www.stretcher.com/financialindependence/declaration.cfm >.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

Top 5 Things Your Credit Card Collector Doesn’t Want You To Know

Believe it or not, there are some rules and regulations that credit card collectors must follow. Sometimes, for the most part, they follow them, but there are always multiple instances where they don’t. However, if you happen to know these rules and regulations and inform your credit card collector as such when they call you on Sunday for the 15th time at 8pm, you can rest assured that you won’t have to worry about anymore rule breaking when it comes to your home phone number ever again.

Without further ado, let’s cue the Top 5 Things Your Credit Card Collector Doesn’t Want You to Know!

5. You Cannot Lawfully be Called More Than Once per Day by Any Single, One Credit Card Collector

Although state laws may vary, the majority of states law prohibits collectors calling you more than once per day unless you give them your express consent. If you’ve talked to a credit card collector and identified yourself, that specific credit collection company cannot lawfully call you again for the rest of the day – again, unless you gave them permission to.

4. If you’re deep in debt then there ARE what are known as “hardship programs” available.

Since most (see: all) credit card companies make money off of your over limit fees, late fees and money from high interests, they usually never willingly tell you about the many hardship programs that are available that will help to reduce your monthly payments, waive late fees and over limit fees and perhaps most importantly, significantly reduce your interest rates for the entire year. So feel free to ask further about these programs the next time your friendly, neighborhood credit card collector calls and they’ll probably end up not calling you for quite a while.

3. It’s a no-go for cell phones!

Unlike your home number, if your credit card collector somehow gets your cell phone number, you can ask them to take it off the list and not call you on there and they must comply. Debt collectors cannot continue to call your cell phone if you ask for them not to. It’s the law!

2. It’s not all that good in the neighborhood!

Contrary to popular belief, debt collectors CAN call your neighbors, however they can’t lawfully have them relay a message to you unless said neighbor offers to do so. In some stats, collectors can call your relatives and leave a general “important business” message with them as well.

1. Debt collectors can call you at work unless the boss man disapproves (which most likely, he will)

Instead of sweating whether or not your boss knows if debt collectors have been trying to reach you at work, tell him and he can go through the necessary channels to let the credit card collectors know they cannot call you at work any longer. They will most likely listen to him much more than they would listen to you, so use that to your advantage!

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

In the times of economic turmoil the worst affected are the Americans as they have been burdened by debts. But, there are many ways to escape the harassing situation of filing for bankruptcy. One of the most reliable and effective way is debt settlement. That is you settle your debts for a lump sum amount with your creditors. Creditors agree to this as they look out for recovery as far as possible.

There are many companies and individuals which promises debt settlement services. You must choose the right debt consolidation agency for your own good. Before you choose the company to work with, try and find all about the debt settlement company. Read the company’s profile and look out for its reviews and testimonials by the past clients. The more the experienced company the better it is. The inexperienced companies may land you in some serious troubles. Also there are many fraud debt settlement companies in the market which promise to provide you quick debt relief in return for large sum of money.

Make sure the debt settlement company with which you are dealing its staff is quite cordial and friendly. The staff must listen to you and chart out a rescue plan for you accordingly. You can check this by sending them an enquiry email and checking their turn around time and the promptness of the reply. Also, you may call them and try and judge whether the person listen to you or not. If the representative is in hurry and keeps the phone down it is time to look out for some other debt settlement company.

It is advisable never to approach the debt settlement company directly. Approach the debt settlement network to get out of debt. Their established network will help you survive this crisis. The debt settlement service provider gets listed in this network only after providing a good track record that they have successfully helped individuals settle their loans successfully. Also, to be listed the companies need to pass an ethical test. Going through the network will ensure the reliability and scalability of the debt settlement company.

There are many service providers who offer online services. You can get in touch with them and ensure a debt free life. They take in consideration your credit report and other details and negotiate with your lenders so as to help you come out of this situation quickly.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

Savings In an Uncertain Economy
The Dollar Stretcher Blog
by Gary Foreman
At a time when unemployment has jumped from 5.5% a year ago to 9.4% in May, 2009 it’s understandable that people are concerned about their jobs. <http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?request_action=wh&graph_name=LN_cpsbref3>

And their response has been predictable. The personal savings rate (personal savings as a percent of disposable personal income) was 5.7% in April, 2009. That’s a 14 year high. Bureau of Economic Analysis <http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm>

The same BEA report indicated that personal consumption expenditures (PCE) declined by 0.1%. In other words, many of us have shifted from spending money to saving money.

That’s supported by statistics from the Federal Reserve. “Consumer credit decreased at an annual rate of 7-1/2 percent in April 2009.”
<http://www.federalreserve.gov/releases/g19/Current/>

So it would appear that much of the money that’s not being spent is going to pay down credit card balances.

Under normal circumstances that would be the right thing to do. Pay down the most expensive debt first – i.e. the loan that charges the highest interest rate.

But, for many families these are not normal times. If you are concerned that your income could be cut or cut off, you might need to consider an alternative plan.

Let’s look at a situation where your income is cut and is not sufficient to meet all of your bills. And, let’s assume that you have a mortgage, one car loan and various credit card balances.

After a cut in income, the first thing you should do is to talk with anyone that you owe money to. Explain that your income has been cut and you need an adjustment to your payment schedule. Some companies will work with you. Others will not.

Next, you need to decide in what order you’ll pay your bills. You already know that your income is not high enough to pay all the bills. So someone will not get paid.

Naturally, you’d want to pay the most important bills first. That would be your mortgage. Right behind it would be groceries to feed your family. A roof over your head and food in your tummy are pretty essential.

OK, now for the challenging part. The money that’s left isn’t enough to cover the car and credit card payments. What should you do?

What would happen if you fail to pay? If you don’t pay your auto loan after a few months they’ll repossess your ride. That could make job hunting more difficult. Not a pleasant thought.

On the other hand, if you don’t pay your credit card bills you can apply for credit counseling. Typically they’ll reduce your interest rate and lower your minimum monthly payment. The bad news is that your credit score will be negatively affected and you’ll be expected to quit using the cards.

Not being able to use credit cards will be inconvenient. You’ll need to use cash to buy groceries and other essential items. But, that can be done.

So logic tells us that it’s wisest to pay your auto loan before your credit card bills. But, what does that have to do with today’s extra savings at a time when you are able to meet all your obligations?

It may not be best to use that extra income to pay off the most expensive (i.e. credit card) debt today. The reason is simple. In a crisis you’d much rather have that extra money tucked in a savings account or CD so that it could be used to make mortgage and car payments later. The more money you have in savings the longer you can hang on with a reduced income.

There’s a cost to this strategy. Instead of retiring 14% credit card debt, you’ll be earning 1 or 2% on the savings. So it’s fairly expensive insurance.

But, if you think that there’s a good chance that you could see a significant cut in pay or lose your job, it might be something to consider until the danger passes. Remember that if you lose your job you won’t get a ‘do over’. Having some money in savings could be essential to your family’s survival.

They say that extraordinary times call for extraordinary measures. This might be one of those times.
Keep on Stretching those Dollars!
Gary
_______________

Gary Foreman is the editor of The Dollar Stretcher.com
<www.stretcher.com/r/134.htm> and newsletters <http://www.stretcher.com/subscribe/subscribeDS.cfm>. Not only does the site host thousands of articles on various ways to save money, but you’ll also find a vibrant forum <http://community.stretcher.com/forums/>where people share their dollar stretching ideas. You can comment on this entry here
<http://community.stretcher.com/blogs/stretcher/archive/2009/06/09/savings-in-an-uncertain-economy.aspx> or follow Gary on Twitter <http://www.twitter/Gary_Foreman>

(end Dollar Stretcher Blog)

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

Almost every individual takes loan for one or the other reason in the life time. The loans are generally not taken from the same lender. This leads to the confusion as most people forget to pay the interests on time and this affects the credit report adversely. One payment dishonored is reflected for seven long years in the credit report. To avoid the confusion one of the most reliable and effective way out is debt consolidation. Debt consolidation means combining all your loans with different creditors with a debt consolidation company. This reduces the number of creditors from your credit report and helps you gain good credit score.

In present situation where it is important to save every penny possible, many people are taking to debt management. There are many agencies that, undertake the multiple debt elimination task for you. The agencies negotiate it with your present creditor and pay them off your loans. Then all the amount of the loan is consolidated as one whole and now, you just need to honor one payment every month. This saves you from problems of remembering the due dates of making the repayments per month.

Debt consolidation can happen only for once. Thus, you need to be very careful. Choose the agency very carefully. Your one wrong decision can affect your credit standing adversely. Here are simple tips to go about your debt consolidation process:

• Know the exact situation or the status of all your debts.
• It is better if you get your debt consolidated from one of your existing lenders. This is advisable only in case you have good history and has honored all your past payments. As then you may be offered discounted rates.
• If the agencies ask for the consignees or credit check refuse it straight away. All these information are not required for debt consolidation.

Loan consolidation has many advantages and some of them are listed here below:

• The monthly installments can be reduced by almost 50%.
• The rate of interest is fixed thus the risk of hike in the rate of interest can be evaded.
• Instead of multiple loans only single loan entry in the credit report. Thus, the credit score improves considerably.
• The chances of forgetting the payment of the monthly installment is mitigated as now it is only one date you need to keep in consideration.

In case you want to enjoy the debt free life or benefits of the good credit score, think of debt consolidation now!

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

In the time of economic recession many individuals are being burdened with more of debts and every now and then bankruptcy is being reported. To help them stand back on their feet there is credit counseling. You definitely need the credit counseling if:

• When you find that you can’t even pay the minimum credit card charges.
• In case you are paying late for your utility bills.
• In case you are being constantly hounded by various collecting agencies and creditors.
• In case you fail to crack a negotiated deal with your creditor.

All you need to take care of is, choose the right credit counseling agency or the individual. Few years back, National Foundation for Credit Counseling dominated the scene. It was the non-profit organization which worked with the ultimate aim of negotiating the lower interest rates or the payment plans and helped individuals avoid bankruptcy.

There are hundreds of agencies which are competing with each other. Some of them provide excellent services and negotiate well the repayment plans. But, there are many service providers which are fraud and charge exorbitant fees. While choosing the credit counseling service provider, make it sure you keep in mind that the cost of credit counseling should not exceed the benefits of credit counseling.

When you are looking out for credit counseling service provider you must watch out for:

• Large Upfront cost: Consumer Credit Counseling Services charges a nominal fee of $10 set-up charges. In case you are being asked more than this to pay. It is a warning bell for you. Many-a-times it has been reported that many companies after the upfront payment vanish in the thin air leaving people all the more in the disgusted situation.
• No official recognition: credit counseling firms which have the certification from Association of Independent Consumer Credit Counseling Agencies or National Foundation for Credit Counseling are the legitimate ones. Other should be ruled out from the list. Thus, ask for the certificate proof. As it concerns your financial security.
• Missing payments: keep a check as to how much is being passed on to the creditors and what is charged by the company as any missed or delayed payment can hamper your credit report adversely.
• Unrealistic promises: if the credit counseling agency makes tall promises don’t be lured. If someone promises you to settle your debts for little money don’t give in easily. No creditor is crazy to settle for much less than what he lawfully deserves.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

When you have bought your dream home, foreclosure would have been the last thing in your mind. Foreclosure may be the outcome of various situations like:

• Unexpected unemployment or job cut
• Medical crisis or sudden illness
• Sudden demise in the family
• Divorce
• Debt obligations
• Downsizing
• Sudden increase in the rate of interests

But, still there are many ways to stop foreclosure. The best and easiest way is to avert the lender from filling in the Notice of Default. Many-a-times the lender file the notice just to create a pressure on the borrower. If you know it is tough for you to make the payment right on time, communicate this message amicably to the lender. The other ways are listed below for you:

• Try and negotiate the repayment plan: get in touch with the lender and try and chart out a convenient loan repayment plan. While charting out the plan keep the hardships, situations and your needs in consideration.
• Adjust the missed payment: in case you have missed a payment you, can ask the lender to divide it equally over the next few months. So that you are not over burdened.
• Try and modify the terms of the loan: try and get your rate of interest modified as per your convenience. If you feel it is considerably high try and negotiate it with the lender. But, this can work out if and only if you have good credit score in the past. As that is a strong indicator of your commitment level.
• Partial claim: in case of government loans you can always take an escape in the name of partial claim. That is, in case you meet out certain conditions you are granted additional loan to pay off your missed installment.
• Sell of your home: ask some of the real estate agents about the market value and DOM. You can hire either the discount broker or the full-service broker. All you need to do is, compare their offers and deals well.
• Short sell your home: in case the value of your home is less in comparison to the amount owed you can look forward to short selling. All you need to check whether your lender approves of the short selling or not.

You can even take assistance from some expert as to how to stop foreclosure and escape this situation.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

At present the burning question on internet is how to manage the debts or how to manage the credit card debt. The answer to both the questions is simple, yet trivial as it involves a certain level of discipline and personal finance control. In the times of economic doldrums it is really necessary to manage your debts very carefully to avoid the situation of bankruptcy. Credit cards are extremely addictive. Once you start using the credit cards you, start think yourself to be the king or queen on this earth. You not only want to have what you want but what you desire too.

These days it is common that people have four to five credit cards and all are used simultaneously. This leads to nothing except the accumulation of the amount of debt. If you seriously want to go in for credit card debt elimination you need to accept it first that you are in the mess. Here are some of the ways to help you in credit card debt consolidation:

• Be strict with yourself: tell yourself repeatedly that you will not use the credit cards from now on. Even in case you need to use it you, will use only one of the all. This will surely get out of this menace easily.
• Save every penny: it is advisable to save every single penny possible. Remember, every drop counts. Try and at least pay the minimum dues to avoid any unpleasant situation. The credit card companies take no action against those who pay the minimum amount well in time.
• Debt consolidation: it is really important to go in for debt consolidation in case you feel it is practically impossible to serve all your credit card debt dues. Consolidation can help you convert your multiple dues into one wholesome due. This will surely result in reduced installments.
• Take assistance from a credit card debt settlement company: you can ask for assistance from some credit card debt settlement organization. They know how to deal with the situation or negotiate with the credit card companies. You can search for the reputable companies online. Before you take their services you, must research about them all. Read the reviews and testimonials by the past clients to know about its authenticity. Make sure the staff is well qualified and professional to tackle this responsible job as it concerns your financial life. Not only this, the staff needs to be cordial and must understand the present situation of the client and provide assistance accordingly.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

What You Should Do Now
The Dollar Stretcher Blog
by Gary Foreman
“Never make predictions, especially about the future.” – Casey Stengel

For years Casey Stengel managed in baseball’s big leagues. Some of his quotes are legendary. But, given our current economy, I’d have to take exception to his advice. At least as it applies to our personal finances.

Let’s look at some current information. Unemployment is at 9.8%. Nearly double what it was at the beginning of 2009. Hiring remains anemic.

The Congressional Budget Office (CBO) estimates that the fiscal year 2009 U.S. deficit will be $1.4 trillion. That’s just under 10% of gross domestic product. Or to put it into perspective, during the last year the government borrowed the equivalent of 10% of every good and service the whole country produced.

There were over 1 million bankruptcies through September, 2009 according to U.S. Bankrtupcy Court. At that pace we’ll see 1.4 million this year.

Forecasts for the economic future vary widely. Despite old Casey’s advice you can find reputable economists who are willing to predict both recovery and a more serious recession.

So, while there is much uncertainty, there are still some things that you can reasonably predict about your personal finances.

First, you can expect some inflation. Over the long term there’s only two things that can be done with the deficit. Congress can adjust future budgets to repay it quickly. Or they can devalue the dollar to pay it back with cheaper dollars later. Based on past experience, I’d say that they won’t vote to repay it soon. So we better be prepared for some inflation (i.e. devaluation of the dollar).

What will that inflation mean to you? It will mean that it will take more dollars to buy things. Bread that cost $2 today will cost $3 tomorrow. If your income does not keep pace with inflation you’ll suffer. Those on fixed incomes will be hit hardest.

Inflation can also devalue your savings. Whatever amount you planned for an emergency fund, college savings or your retirement won’t be enough. You’ll need to adjust your savings goals upward.

You’ll also want to change the way you invest your savings. Reduce the amount that you have in CD’s and money funds. Look to increase the portion in assets with prices that can increase. For instance natural resources (oil, gold, etc.) and housing.

Look for ways to increase your income. That may mean creating a second income source. It will be hard for many employers to raise your wages to keep up with inflation. Your pay could lag behind increasing prices.

Expect interest rates to increase. The government is borrowing more than ever before. You’ll be competing with them for loans.

That means that you should pay off any debt where rates change with the market. A homeowner’s line of credit is a great example. As rates go up, so will the cost of your HELOC.

Expect credit card rates to rise. First, because of generally higher interest rates.

Secondly, because the credit card reform bill of 2009 is forcing issuers to try to make more money from people who pay their bills on time. So instead of clobbering those who fall behind, card issuers will expect everyone to pay a little higher interest.

They’ll also increase fees and reduce rewards. Much of that has already started. A good response is to slowly cancel cards you don’t use. Especially recently opened accounts. Do this cautiously. Closing too many accounts too quicky could reduce your credit score.

If you have any other variable short-term debt pay it off as quickly as possible. If the rates are adjustable be prepared for them to go up.

Now might be a good time to consider refinancing your house. Locking in lower rates today is a good idea. Especially if you plan on being in your home for more than a couple of years. Bankrate.com has a good tool for comparing mortgage rates <www.bankrate.com/dls/rate/mtg_home.asp>

Think about what you would do if you lost your job. You may be fortunate and have a job that’s secure. But most of us need to be prepared for either a pay cut, unpaid days off or even a layoff.

For instance, training for additional skills while you’re still employed could be helpful. You’ll find a whole list of things to do if your job is uncertain here <www.stretcher.com/layoffs/index.cfm>.

Old Casey was right when he said it was hard to predict the future. No one knows for sure how long or rough this economic storm will be. But don’t let that keep you from taking the appropriate steps now.

______________

Gary Foreman is the editor of The Dollar Stretcher.com <http://www.stretcher.com/r/134.htm> website and various enewsletters including  Financial Independence. FI is a daily message designed to help people take control of their financial lives through achieving small daily goals. To find out more check out the Financial Independence page <http://www.stretcher.com/financialindependence/declaration.cfm>.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.