Archive for ‘Debt Assistance’

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July 27th, 2010

Bankruptcy

Does bankruptcy Make Sense Economically?

In evaluating whether or not bankruptcy makes economic sense, answer these questions:

  • Will bankruptcy discharge enough of your debts to make it worth your while?
  • Will you have to give up property you desperately want to keep?”
  • Is the cause of debt problem temporary or long lasting? Permanent disability and job loss are both     devastating.  But one will end and the other will not.
  • Creditors are human beings. They are also business people. They do not want to see bankruptcy for you. They know customer relations are their lifeline and bankruptcy is profit out of their pocket. Therefore, can they work with you to lower payments, skip a payment, change billing dates, anything?
  • Is it possible to get assistance from a  legitimate debt counselor?
  • Instead of thinking of all the debt you have or the high interest or high balance debt, think of the debt that can be paid off fastest. Is there any way to pay one debt off quickly by selling something and then use that added income to apply towards the next fastest payoff. In other words, do not try to chop down the whole rose bush. Work with cleaning off one or two unsightly limbs first and see where you are. It is far to easy to get tangled up in the thorns and not be able to envision a clean emotional environment.

Special Note: You should be aware that any cosigner automatically becomes liable for the full amount of a co-signed debt. If this is not what you intend, you should not file or you should make arrangements with the court for repayment. But even debts you do not want included (such as a loan from a friend) must be included since the court does not accept any partiality. Even if a divorce settlement divides the payment of a joint account, the second party on the account will be held liable for the debt in the case of bankruptcy.

Bankruptcy Should Be a Last Alternative

Bankruptcy should be viewed as a last alternative to managing an overburdened debt load, although for some it is the only logical alternative. Bankruptcy reduces or eliminates debt under the supervision and protection of the court.

Pre-bankruptcy credit counseling and post-filing debt education is required by law from a government-approved counseling agency.  Counseling is available by phone, Internet or person and often available in multiple languages.  But be sure it is approved by the Department of Justice, regardless.  Approved agencies are on the list at the above referenced site.

Each state has established exemptions from bankruptcy court as well as state medium income to determine eligibility of bankruptcy. Though not mandatory, a bankruptcy attorney is recommended.  If nothing else, a bankruptcy attorney should be sought for an initial consultation which quite often is free of charge.

A person or couple can declare a chapter 7  (straight litigation) which often wipes the slate clean with select exceptions. A Chapter 7 remains on a credit report for 10 years.  A Chapter 13, known as wage earners plan, debts are restructured to be repaid within 3-5 years with 10-99% of the debts being repaid. The filer gets to keep their home.  A Chapter 13 remains on a credit report for 7 years.

Keep Your Head Up!

There is one final point which should be made clear. If bankruptcy is inevitable, keep your head held high. It is not the end of the world… it just feels like it. Even bankruptcy does pass and you should never lower your head because circumstances overwhelmed you. Just learn from your experience and pass it on to others. That’s all.

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The truth is the average consumer can eliminate all debt including their mortgage with the money they currently earn in an average 7.5 years. I have been teaching people how to do this for years and you can see how it is done yourself by receiving the free Debt Freedom Mini-Course via email.

You might also want to know that that eliminating all debt is like getting a 40% Tax-free Salary Increase.  If you don’t believe me, read the blog about it.

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July 23rd, 2010

Senior Debt Problem

Chris Tapp, UK deputy director of Credit Action, said: “Retirement should be a time for some well-earned relaxation, but for all too many it is a time of financial stress… when we consider that inflation hits the over-60s hardest, pension provision is looking increasingly shaky, and we have moved away from a savings culture, we can see that the levels of debt amongst the over 60s, as well as being a serious issue now, is one which is only likely to get worse.”

Though the above was discussing senior debt issues in the United Kingdom, the same issues apply in the U.S. and the world over.

According to a study done by the New York based research firm, Demos, “The debt increase is particularly sharp during the first years of retirement… people aged 65 to 69 saw their credit card balances grow by 217%….” And according to research by bankruptcy Project at Harvard, retirees are now the fastest-growing segment of bankrupt Americans.

So why are seniors being hit so hard?  When you consider that retirement income is usually less than a working income (and often fixed), increased inflation affects purchasing even basic commodities… and it can be staggering.  Consider the increase cost of oil.  Heating oil is bad enough.  But think about the cost of vehicle operation besides just your car.  Everything must be transported and the increased cost of transporting even basic commodities has to be made up from someplace.  The only place it can come from is the consumer’s pocket. Everything you purchase has an increased cost.  That can of peas or the new sofa costs far more than it use to along with the gasoline to go purchase it.

But there is more.  The younger generation grew up with wide-open credit but the senior did not.  Many times there is a cultural difference between someone who grew up with credit cards and someone who did not.  Many seniors are bringing credit debt into their retirement with retirement dollars straining to meet the Budget.. Add to that increased late fees, over the limit fees, even back charge fees and you have a potentially catastrophic arena.

But there is also a longer life, increased health costs, deteriorating health and a credit card industry willing to open the doors of credit to nearly anyone that’s still breathing.  When you are desperate, it is not an implausible thought that a credit card might look like the solution even for basic purchases.  Unfortunately, all a credit card does is increase the inevitable.  Like everyone else, seniors are paying for today with tomorrow’s dollars… dollars that are definitely shrinking form a fixed income.

So what can be done?  The obvious answer is to plan early… the earlier the better.  But what if early planning did not occur.  Then tragically the only solutions left are the exact same solutions for every other consumer… increase income or decrease expenses.

Ahhh but therein lies the catch.  How can you increase income when it is fixed?  Often times this can be accomplished through imagination and creativity. Perhaps the senior can develop consulting opportunities or an online business.  Perhaps something can be sold.  Hundreds of additional ideas can be gleaned form online resources, written publications, and senior advisers. The point is, plans must be developed and enacted.

If increasing income is not an option then the only recourse is decrease expenses.  Call creditors and request a decrease in interest rate.  This may sound absurd but it is done every day. There are also scores of magazines offering ways to stretch your dollar.  Similarly your favorite search engine will produce more frugal sites than you can ever read.   Each of these sites informs the reader of ideas to save money and to accomplish exactly what you are already doing but for less.

Okay.  You can’t increase your income nor stretch your dollar any further than it is already.  Now you are down to credit counseling, debt management programs or debt negotiation.  I strongly encourage you to be very careful in your selection of any of these avenues.  Tragically there are many unscrupulous agencies that take advantage of opportunities especially at the expense of seniors.  Find out what the track record of the perspective firm.  What is their completion rate?  What does the Better Business Bureau have to say about them?

If the proper option has still not appeared, there is only one other recourse… bankruptcy.

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The truth is the average consumer can eliminate all debt including their mortgage with the money they currently earn in an average 7.5 years. I have been teaching people how to do this for years and you can see how it is done yourself by receiving the free Debt Freedom Mini-Course via email.

You might also want to know that that eliminating all debt is like getting a 40% Tax-free Salary Increase.  If you don’t believe me, read the blog about it.

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July 21st, 2010

How To Curb Your Spending

The Federal Trade Commission (FTC) says, “If you or someone you know is in financial hot water, consider these options: realistic budgeting, credit counseling from a reputable organization, debt consolidation [debt negotiation], or bankruptcy. How do you know which will work best for you? It depends on your level of debt, your level of discipline, and your prospects for the future.”

The purpose of this article is to deal with a realistic Budget and offer ideas for curbing your expenses and spending.  However, I would encourage you to also look at the other options suggested by FTC.  The National Association of Certified Counselors and its Institute of Financial Counseling also endorse these same suggestions.

A Solid Spending Plan

Any hope of curbing your spending must begin with a realistic Budget or spending plan.  If you don’t know where you are going or where you have been, how can you possibly continue any journey?  Therefore mapping out how your money is spent and will be spent is a key ingredient.

  1. Begin by going to your last 12 months of check registers and categorizing all entries.
  2. Insure you have ALL your expenditures. If you always carry spare money in your wallet or purse, you need to record every dollar spent for a few weeks. I have yet to see someone do this exercise without a significant impact on his or her spending plan. This may be the most important step to getting to the facts. All non-cash purchases should be easier to track through checkbook registers or credit/debit receipts but be sure to use proper annotation. Just writing “miscellaneous” or “verseteller $20″ does little to gain facts.
  3. List your fixed expenses: Rent/mortgage, Utilities, Child care, Transportation, Insurance, Loan repayments, Allowances, Alimony or other legal issues, Savings, Other.
  4. List your variable expenses:  Food, Entertainment, Grooming, Babysitting, etc.
  5. Estimate your periodic expenses? List last years car repair, trips, medical, taxes, maintenance, gifts, etc. Now determine if this estimate is what you can expect in the future. Divide each item by 12 to have a monthly figure.

Once you are certain you have all annotations including non recurring expenses, start to adjust how much you will spend in each area to fit your particular needs. If you do not have enough to cover it all, you must either reduce expenses or find ways to increase income… it is that simple. The tough part is doing it.

Cutting Costs

Here are a number of ideas to curb your spending.

  1. There are so many resources on the Internet and in magazines for cost cutting tips, that it is impossible not to find an untold number that fit your needs.    On the Internet, use your favorite search engine and enter words such as “frugal”, “frugality”, “saving money” or similar key words.  You will be amazed at the resources available. There are always different ways to do the exact same thing and save money at the exact same time.  You simply have to locate and implement them.
  2. Call each of your creditors and ask for a reduction in interest rate.  Do not tell them your life history, but do offer a concise statement as to why it would be in their best interest to do so.
  3. Regardless of what type of debt (mortgage, car, credit card, etc.) view your monthly statement and look specifically at how much of your payment is going to interest and how much to principle.  This is a real eye opening experiences and motivates the individual to get that debt under control.
  4. Make it a habit to throw away credit offers before even opening the envelope.  Take existing credit cards and hide them or better yet, destroy them.
  5. Determine what are the “needs” in your life and separate these needs from “wants”.  Suspend ALL “wants” until debt is at least under control.
  6. Get assistance from such groups as Debtors Anonymous.  If there is a gambling or drinking problem, seek help from support groups.

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The truth is the average consumer can eliminate all debt including their mortgage with the money they currently earn in an average 7.5 years. I have been teaching people how to do this for years and you can see how it is done yourself by receiving the free Debt Freedom Mini-Course via email.

You might also want to know that that eliminating all debt is like getting a 40% Tax-free Salary Increase.  If you don’t believe me, read the blog about it.

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Posted in Debt Assistance | 2 Comments »

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June 4th, 2010

Money Strategies – Life Insurance

Life Insurance… how much and what kind?

This may not be the most cherished article by the insurance industry, but it is what I see and what I believe. It is also a way to avoid being talked into something that perhaps you just plain don’t need.

First off forget about leaving the kids and grand kids a life of ease.  That is not what insurance is about. The real purpose of insurance is about you - finding what is best for your situation. But to do so you must look at insurance from a very cold and matter of fact position.

You must view insurance as replacing the individual as a money machine. That is pretty cold… but it is honest. You must also view what other situations exist now or probably will exist when the insurance is needed. The difficult part is constantly reviewing these other situations because as they change your insurance needs may change. For example:

  • Are there other assets that can be tapped such as multiple incomes, savings, IRA, property income, etc.?
  • How many dependents are in need and for how long? Is it possible a spouse will remarry? How old are the children?
  • What is the current style of life and is it necessary or desired?
  • Are you debt free or plan to be or are you over your head in debt and cannot control spending?

These are exceptionally difficult questions which must first be dealt with before you can progress.

But once you have solid answers with all responsible parties, the rest is much less difficult because you now know where you are going and the rest is simply understanding the industry.

Types of Life Insurance

Though there are insurances labeled endowments and annuities (which are very good investments), the two basic types of insurance are whole life and term.

Whole Life – The appeal is that it builds cash value while offering insurance protection. But no other savings program I know of takes your money, puts it into an account for you, but does not allow you to see a dime for 2-3 years.

No other program has a negative cash value for years to come. And in future years, since this cash value is supposedly your money and you borrow it, how come you have to pay it back with interest?

The argument is, you have life protection while building cash value. OK. Why not spend a lot less and have term insurance and use the extra money in a better investment? Even a very safe mutual fund will yield a far greater return. Or perhaps even pay off debt with what you will save.

Is there a good side to whole life? Sure there is. First of all, if you take out a whole life as a youth, rates are very low. Whole life can also protect your future insurability. Rates will not change as you get older. A solid small amount of whole life to cover last expenses could be peaceful to the mind. Whole life is better able to stay up with inflation. But overall, I cannot in good conscience recommend it in most circumstances.

Term Insurance – Term insurance has limitations as suggested above. It builds no cash value but it is the least expensive form of insurance available. There are two types of term insurance: straight term and decreasing term.

Straight Term – as its name implies, straight term exists as is and for the full amount as long as you make payments. It does not increase or decrease the amount of coverage.

Decreasing Term – again as its name implies, decreasing term decreases as the length of time goes on. This type of insurance is most often used in association of a mortgage or car loan. But here is a major caution. You must insure the decrease does not exceed the payoff. For example. Decreasing term insurance for a 30 year mortgage will not keep pace with the mortgage itself. If the decreasing term insurance decreases over 30 years it is a straight line decrease. A mortgage, however, is not straight line because the majority of the interest is in the beginning. Possibly 75% of the mortgage will still be owed when 2/3 of the decreasing term insurance has passed.

There is one other caution I would suggest. Do not buy insurance from a commissioned retailer, car dealer, mortgagor, etc. Buy the insurance from someone who knows his trade – a licensed insurance agent. Additionally do not make insurance part of the retail sale unless you want to pay interest on top of the insurance.

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The truth is the average consumer can eliminate all debt including their mortgage with the money they currently earn in an average 7.5 years. I have been teaching people how to do this for years and you can see how it is done yourself by receiving the free Debt Freedom Mini-Course via email.

You might also want to know that that eliminating all debt is like getting a 40% Tax-free Salary Increase.  If you don’t believe me, read the blog about it.

___________________

Posted in Debt Assistance | 2 Comments »

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May 31st, 2010

Money Strategies – Car Insurance

Here are 9 ways to save on car insurance right now!

Want to save  BIG on car insurance immediately?

You may not realize it, but the insurance rates you pay for your car can vary dramatically depending on the insurance company, agent or broker you choose, the auto coverage you request and the kind of car you drive. Thanks to some public information from our friends at Pueblo, other public domain sites, as well as my own articles, here are a number of things you can do right now to lower your car insurance costs.

  • Comparison Shop – Rates for the same car insurance can vary by hundreds of dollars, so it pays to shop around. Ask your friends, check the yellow pages or call your state insurance department. You can also check consumer guides, insurance agents or insurance companies.But don’t shop price alone. The insurer you select should offer both fair prices and excellent service. Quality personal service may cost a bit more, but provides added conveniences, so talk to a number of insurers to get a feeling for the quality of their service. Ask them what they would do to lower your costs. Check the financial ratings of the companies too. Then, when you’ve narrowed the field to three insurers, get price quotes.

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  • Ask for a higher deductible – Car insurance deductibles represent the amount of money you pay before you make a claim. By requesting higher deductibles on collision and comprehensive (fire and theft) coverage, you can lower your costs substantially. For example, increasing your deductible from $200 to $500 could reduce your collision cost by 15% to 30%.  I would not recommend this if you are accident prone.

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  • Drop collision and/or comprehension coverage on older cars – It may not be cost-effective to have collision or comprehensive auto coverage’s on cars worth less than $1000 because any claim you make would not substantially exceed annual cost and deductible amounts. Auto dealers and banks can tell you the worth of cars.

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  • Eliminate duplicate medical coverages – If you have adequate health insurance, you may be paying for duplicate medical coverage in your auto policy. In some states, eliminating this coverage could lower your personal injury protection (PIP) cost by up to 40%.

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  • Buy a “low profile” car- Before you buy a new or used car, check into insurance costs. Cars that are expensive to repair, or that are favorite targets for thieves, have much higher insurance costs. Write to the Insurance Institute for Highway Safety, 1005 North Glebe Road, Arlington, VA 22201 and ask for the Highway Loss Data Chart.

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  • Consider area insurance cost if you are making a move – Costs tend to be lowest in rural communities and highest in center cities where there is more traffic congestion.

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  • Take advantage of low mileage discounts – Some companies offer discounts to motorists who drive fewer than a predetermined number of miles a year.

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  • Find out about automatic seat belts or air bag discounts – You may be able to take advantage of discounts on some coverage’s if you have automatic seat belts and/or air bags.

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  • Inquire about other discounts – Some insurers offer discounts for more than one car, no accidents in three years, drivers over 50 years of age, driver training courses, anti-theft devices, anti-lock brakes and good grades for students.

SPECIAL NOTE: For more information and tips on auto insurance and all other types of insurance, call the National Insurance Consumer Helpline (NICH) at 1-800-942-4242

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The truth is the average consumer can eliminate all debt including their mortgage with the money they currently earn in an average 7.5 years. I have been teaching people how to do this for years and you can see how it is done yourself by receiving the free Debt Freedom Mini-Course via email.

You might also want to know that that eliminating all debt is like getting a 40% Tax-free Salary Increase.  If you don’t believe me, read the blog about it.

 

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Posted in Debt Assistance | 2 Comments »

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May 21st, 2010

Money Talk

Money Talk or “Debt Us Do Part”  is  about financial questions for a couple’s positive “state of the union”.

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Whether you are thinking of getting married, you are a newly wed, or you are a seasoned couple of marital bliss, you must have a joint money talk that includes debt and credit. Money talk is simply not an option. This debt and money talk article can open doors of communication and enhance the success of your marriage. In the case of pre marital situations, money talk may allow you to realize “problems” before they even start.

I firmly believe monet talk offers each couple a superior chance of surviving separation and/or divorce because of financial stress.  It opens the doors of financial communication.

I strongly suggest 4 areas of communication for any couple regardless of how long they have been together:

Hidden Debt and Personalities

  • Openly and without prejudice or pre-judgment share each other’s credit report and ask questions about past performances. For example: Why are there late pays? Why is there no credit history? Explain the bankruptcy. What is this judgment about?
  • Determine and discuss each person’s ability to be a spender or a saver. Do you have a tendency to live paycheck to paycheck or do you have a consuming desire to put at least something away for a rainy day? Do you track every dime or is anything under $10 unimportant to track?
  • Discuss any debts not listed in the credit report.
  • Determine who has what credit lines and what is each person’s feelings on separate credit lines, joint lines, becoming an authorized user and/or co-signing any loans. Similarly discuss checking and savings accounts.
  • Discuss who has what assets and should they be kept separated or joined. (Should there be a pre-nuptial agreement?)

Goal Setting

  • Where are you going and how will you know when you get there?
    Set specific goals together for the next year, 5 years, and 20 years.
  • Read and discuss How to Budget Money and  5  Steps To Change Any Habit (as well as other motivation articles under Best Motivation blog category.)
  • Commit a plan of action to paper stating how you will be accomplishing your goals.
  • List contingency plans when the inevitable “never expected emergency” pops up.

Budgeting and CEO

  • Who will carry the ball?   Who will have responsibility for paying the bills and balancing the checkbook?
  • How will you deal with existing bills? Especially for newlyweds? Will each continue to pay individually or will you join incomes to meet expenses?
  • Together plan out your Budget.
  • Frankly discuss “what if’s”.  No one plans on bankruptcy but what if the bottom falls out? Will you both declare so the one spouse does not have to absorb the other’s debt? What if divorce does happen? What if one spouse dies or becomes disabled? “What if…” and fill in the rest.
  • Will one person be assigned to listen to the partner but ultimately make the final financial decision or will both have an equal voice?

Estate Planning

  • Discuss the existing life, health, and disability needs of each partner. Does it meet current and future needs?
  • Talk to a reputable health and disability representative and determine your needs.
  • Based upon your future goals, what investment strategies do you intend on initiating and when?
  • Who will do your taxes and do you need tax strategies to offset tax payment?
  • How will you develop an emergency savings and how much will it be?
  • Are there education needs expected?

Now for the ultimate marriage counseling tip. Reschedule this exact same discussion for next year and the year after and the year after that. Just call it your “Annual State of the Union Discussion”.

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Special Note:  The average consumer can eliminate all debt including their mortgage with the money they currently earn in an average 7.5 years. I have been teaching people how to do this for years and you can see how it is done yourself by receiving the free Debt Freedom Mini-Course via email.

You might also want to know that that eliminating all debt is like getting a 40% Tax-free Salary Increase.  If you don’t believe me, read the blog about it.

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May 10th, 2010

How Much is a Ton of Debt Interest?

Everyone knows that when you have  mortgage you will pay a ton of debt interest.  So exactly how much is “a ton of debt interest”.  If we stretch out our mortgage to its contracted length, we will have paid about 3 times the value of the mortgage in debt interest in just that one debt.

For example, to purchase a modest $100,000 home we will have to earn enough to cover taxes.  So we will need about $400,000 gross to have $300,000 net, to pay $200,000 in bottom line profit (debt interest), so that we can live in our modest $100,000 home.  What’s wrong with this picture?

That means we have to work like a slave for decades, just to fatten someone else’s pockets because the $200,000 in debt interest is theirs and not yours.   Debt interest is siphoning your wealth away.  This is money that you could be investing to develop additional wealth for our family.

Admittedly, a mortgage is the only way that most of us can buy a home. But we certainly do not have to drag it out any longer than necessary. In fact, in other articles you can learn how to pay off your mortgage in the shortest possible time. (See 40% Tax-free Salary Increase.) But for now, let’s just recognize the cost involved if you don’t pay it off in advance.

A 30-year mortgage for a $175,000 home at 8% has a monthly payment of $1500.  With 25 years to go, the monthly interest on this loan is about $1390.  That means your “friendly” financial institution just charged you $1390 in debt interest for the use of their $110 that month… and its legal!

If you think I’m kidding, look at your payment or ask the bank how much is going to debt  interest and how much to principle;  or check out the following examples.

  • 30 year 08% mortgage after 15 years, the monthly interest is 77%
  • 25 year 07% mortgage after 05 years, the monthly interest is 91%
  • 20 year 10% mortgage after 10 years, the monthly interest is 73%
  • 30 year 09% mortgage after 20 years, the monthly interest is 63%

If you have not already concluded that a mortgage is a bad thing, look up the term “mortgage” in the dictionary.  It is a derivative of two Latin words: mortuus means “Death” and gage meaning “Grip”.  It is a “Death Grip”.

Clearly I am not saying do not buy a house.  What I am saying is get that mortgage paid off and stop paying all that debt interest! Even if you just add a little extra against the principle each month, the results can be staggering.

The truth is the average consumer can eliminate all debt including their mortgage with the money they currently earn in an average 7.5 years. I have been teaching people how to do this for years and you can see how it is done yourself by receiving the free Debt Freedom Mini-Course via email.

You might also want to know that that eliminating all debt is like getting a 40% Tax-free Salary Increase.  If you don’t believe me, read the blog about it.

Posted in Debt Assistance | No Comments »

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May 5th, 2010

Is Compound Debt Interest Killing You?

Why do you have month left after the money? Perhaps it is because you are up to your eyeballs in debt interest. Perhaps it is because you are dealing with the fallacy that monthly payment is the only way to do business. Of course your debt interest just happens to follow right along. So is a monthly payment your only option? I have news for you. It isn’t. The monthly payment is nothing more than the propaganda developed by advertising and which the IRS has aptly named “Gotta have it now” syndrome and its costing you a fortune in compound debt interest.

When on a car lot, have you noticed that after a little small talk the question eventually comes up, “What are you expecting your monthly payment to be?” The ploy is very simple. That shiny new car you just have to have does not cost $20,000. It only costs $400. Of course “monthly payment” is rarely mentioned above a whisper… and have you ever heard “debt interest” at a time like this? . I Know. I use to be a retail manager and this is how we trained our employees. “Anything in the store that you want is yours for less than $42.” (“But don’t mention what the debt interest will be unless asked.”)

Have you ever notice the large bold price of the monthly payment. If it weren’t for the Truth In Lending Law, the total price might not even appear. But the total price usually does appear in some small out of the way place in hopes you will never see it. And that is the point. You must reshape your thinking to think in terms of total cost and not monthly payment if you are to beat the debt trap you find yourself drowning in.

Albert Einstein was once asked what was the most powerful thing he had ever witnessed. His simple genius was quick to answer, “compound debt interest”. The following examples illustrate compound debt interest.

Finance a $2000 item at 19.8 %. By making minimum monthly payment it will take 31 years to pay it off and more than $10,000 in compound debt interest.

On the other hand, if you were to invest $300 per month at 10% (i.e. mutual fund) for 20 years the compound interest would accumulate your investment to $227,810.65. That amount would generate $1,898.41 per month for the rest of your life.

Ask yourself the question, “Do you want compound debt interest working against you or for you?” The choice is yours. But until we shut down the wealth sucking valves that are drowning us in debt interest, we will never get ahead. We need to live by the creed, “If I can’t afford to pay for it in cash, I can’t afford it.”

Is it essential to do so? To answer that ask yourself how your financial future is looking. Do you like juggling monthly payments and never quite having enough left over? Do you like paying 4-6 times more for an item than its value? If so, continue on the way you have been going.

But if you are tired of it, get out of the monthly payment rut.  The truth is the average consumer can eliminate all debt including their mortgage with the money they currently earn in an average 7.5 years. I have been teaching people how to do this for years and you can see how it is done yourself by receiving the free Debt Freedom Mini-Course via email.

You might also want to know that that eliminating all debt is like getting a 40% Tax-free Salary Increase.  If you don’t believe me, read the blog about it.

Posted in Debt Assistance | 7 Comments »

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May 3rd, 2010

How To Budget Money

What defines good personal budgets? What expenses should you include in the financial worksheet? What can you do about variable expenses in your financial worksheet? How can you personalize a financial worksheet?  To answer these questions you must start with a question that may seem has nothing to do with how to Budget money.  But the truth is, it is the beginning and the end of developing good personal budgets.

Where are you going?

The key to a good personal budgets or a financial worksheet plan is knowing where you have been and where you want to go.  Knowing where you have been is done by insuring you have written down where all you money has been going. You can find this information by categorizing and reviewing your last 6 months of check registers or other accounting methods you have been employing. If you have no such method in place, you have just uncovered your main budgeting problem, which is the first item to be corrected.

If on the other hand you use a check register or other means but have numerous general entries such as “cash” or “miscellaneous” or other unidentifiable labels, this too must be corrected. You MUST know where your money is going before you can divert it. I recommend carrying a small spiral notebook for at least 2 weeks (longer is far better) and recording every cash transaction. I have never had a client or student do this who has not come back to me amazed by what they had learned from this experience.

Financial Worksheet Labels

Once you have a record of all your expenses for a decent period of time, the remainder of the financial worksheet is relatively easy. The following labels can be used to guide you in listing what debts and expenses go where in organizing your finances. Nothing from the list below is written in concrete. So adjust the labels to suit your particular needs. Where an entry is variable, enter a monthly average based upon past history and expected futures.

Suggested labels for financial worksheet

  • Income:   Your Income, Spouse’s Income, Other Income
  • Expenses:
    1. Fixed Expense: Rent (not mortgage), Other Housing (maintenance, association fees etc., Child Care, Child Support, Alimony, House insurance, Car Insurance, Medical/Dental Insurance, Life Insurance, Other Insurance.
    2. Variable Expenses:  Utilities, Phone, Cell Phone, Cable, Internet, Other Utility, Transportation (gas, maintenance, taxi), Food, Clothing, Medical Expense, Personal, Entertainment, Savings, Other Variable Expenses.
  • Secured Debt – Those bills/debts which have a tangible asset (Mortgage, Auto, etc)
  • Un-secured Debt – Those debts which offer nothing tangible that can be taken from you for non-payment (credit cards, medical bills, etc.)

Federal Guidelines For Household Budgets

The following are recommended percentages for household expenses. They are offered by the federal government in bankruptcy counseling nationwide. They should be used only as guidelines.

Housing 25%

Transportation 15%

Utilities 10%

Food 10%

Clothing 5%

Medical 10%

Personal 5%

Other 5%

Savings 10%

See also How To Budget in and Emergency

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April 29th, 2010

How To Budget Money In Emergencies Part2

The process for how to Budget your money in an emergency financial debt situation

In How to Budget Your Money in Emergencies Part1, you learned the hierarchy of financial debt.  In this article we will assign the financial debt to a process.

  1. List all your bills and their expected amounts.
  2. Sequence them according to their priority to be paid 1, 2, 3, etc. beginning with your mortgage as #1. At one of the priority numbers you will determine where “Must Pay” ends and “Should Pay” probably starts. Draw a horizontal line here and continue down the list. You might now reach a point of ending “Should Pay” items and find you are in an area of “Would Like To Pay”. Draw another horizontal line.
  3. Start paying priorities 1, 2, 3, … until you’re out of money or finished with “Must Pay”. Determine your deficit to “Must pay” items. If you still have money, continue with “Should Pay”. If you run out of money, place their amounts on your deficit list. If there is still money left, go onto “Would Like To Pay” until you run out. If there is no money or you run out, ignore the remaining list since they can be taken care of in better times.
  4. Using your deficit list, contact your creditors. Many will be willing to work with you to skip a payment, lower interest, pay interest only for a month or two, or offer a number of other options. Maybe they won’t, but it won’t hurt to ask. (Used judiciously, “accidentally” mentioning the possibility of bankruptcy, sometimes yields major power.) Adjust your deficit list accordingly.
  5. Optionally talk to a debt counselor but not a debt consolidator. At the very least, try to share your list with someone you trust. Often times another set of eyes can see something more objectively or have ideas you never considered.
  6. Determine how to make up the difference on your deficit list with some of the following ideas:
    • Reduce expenses by applying many of the frugal concepts at this and other sites. Take on a second job for the short term.
    • Have a garage sale. Sell an asset. Rent something out.
    • Consider funds from savings, 401(k), insurance, and even friends. (Note: DO NOT cash in a 401(k).)
    • If you rent, see if labor might substitute for part or all of the amount.
    • Consider a reverse mortgage, equity loan on your home or car, or signature loan from a credit union. Please do not consider this unless bankruptcy is the only other option since in the long run an additional loan will just make matters worse.
    • As an absolutely final resort, consider bankruptcy but not before seeking formal financial counseling.
    • Research other means of reducing your Budget such as articles and books at My Self Help Book Store or utilizing any search engine and using the words “Frugal Living” or any play on the word “Frugal”.

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