Posts tagged ‘financial debt’

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”.

Posted in Debt Assistance | 5 Comments »

Tags: ,
April 26th, 2010

How To Budget Money In Emergencies Part1

It is done by managing financial debt?

What do you do when all of a sudden the month is just beginning and the $$$’s are gone? You put the emotion away and get crackin’ with determining financial debt priorities. That is how to Budget money in emergencies.  You use some cold hard facts about your financial debt… and maybe even the priorities in your life.  Believe it or not, some financial debt is definitely more important than others.  Don’t forget, this is a financial debt emergency and you are trying to determine how to Budget money in an emergency!

Rent/Mortgage

You aren’t getting very far without a roof over your head. If you’re looking at long term financial distress you may have to consider selling or relocating, but clearly, housing is an essential debt.

Utilities

Housing also means utilities. Especially if there are youngsters, don’t even think of eliminating gas or electric. Reduce usage as much as you can but insure you pay gas, electric, and water. The phone s a different story along with cable. The former is optional in moderation and the latter is “Get rid of it NOW!” until better times.

Child Support

Unless jail is an option, child support is not. Plan to pay it.

Car Payment

If you need the car for a job, it is an essential. If there is an alternate transportation, the car and insurance may have to be a non-survivor.

Secured Debts

Secured debts are those assigned to a collateral (house, car, furniture, etc.). Creditors can often live with a late or missing payment or even two. Contact the creditor and explain the circumstance, but definitely do not just ignore your creditor. Yes, your credit may be hurt, but we are dealing with an emergency and wounds will occur. If the disaster is long term you may have to consider surrendering the property.

Unpaid Taxes

Negotiate payments but don’t ignore this one. Consider it child support to your government.

Food

Just because food is a priority, it doesn’t mean filet mignon. Common sense rules in this area.

Unsecured Debt

Unsecured debt are those loans without property attached: credit cards, department store loans, gas cards, medical bills, loans from friends. (Note: Student loans should be considered as a required debt.) Failing to pay these will eventually be very painful with your credit and good name but are probably the least devastating for the short term.

In Between Items

Medical insurance, children’s “needs”, and other debts unique to your circumstance will require a value judgment. How long is the emergency.. what can you live without… how bad is the situation… can the debts be delayed?

To learn the How-to-process for incorporating payment see the follow up article in How To Budget Money Part II.

Posted in Debt Assistance | 3 Comments »

Tags: ,
April 20th, 2010

Financial Debt Alternative Site

I have been fortunate enough to have interviewed Lynnette Khalfani-Cox on a few occasions and thought this was definitely a woman and a financial debt website many of my readers would really like to know about. Lynnette heads up the financial debt assistance site called Ask The Money Coach.

Recently I was able to join up with her and ask about her financial debt advice site and this was a part of our discussion.

Mike: If you had to describe your website, what would it be?

Lynnette: “Ask The Money Coach is a free financial advice blog. It allows people to pose questions about all kinds of money matters – from credit and debt to paying for college or buying a house – and receive an answer at no charge, usually within 3 business days. All answers and advice come directly from me, or a qualified financial expert on the subject, which gives people confidence in knowing they’re not just getting random advice from someone anonymous over the Internet.

Mike: What would you most like readers to know about your self or web site?

Lynnette:  My favorite topics to teach include budgeting, credit and debt management. I’m passionate about these areas because I’ve struggled with them personally. After I got out of college, I had horrible credit and when I was in my early 30s, I was $100,000 in credit card debt. After I paid off the debt in three years – without ever missing a single payment – I wrote a book about it to teach others how they could do the same thing. The book, called Zero Debt: The Ultimate Guide to Financial Freedom, became a New York Times bestseller. I figured if I could get out of debt in just three years, other people deep in debt could too.

Mike: Is there anything you would like to add?

Lynnette:  Zero Debt deals mainly with credit card debt. I later wrote a sequel to that deals with college debt. That book was called Zero Debt for College Grads: From Student Loans to Financial Freedom. My latest book is called Perfect Credit: 7 Steps to a Great Credit Rating. I believe that managing credit and debt wisely is one of the key strategies people must learn in order to master their personal finances. And increasingly, as the credit crunch continues, a person’s credit rating is more important than ever.

Consumers also have to realize that credit and debt are completely intertwined. The credit scoring system essentially tries to assess how likely you are to repay – or default on – a debt. Also, having too much “bad” debt always has a negative impact on your credit standing. So understanding the do’s and don’ts of managing credit and debt is vitally important.
Mike: Thank you so much Lynnette for your time on this site.
Lynnette: “Hope this information helps your readers and subscribers. Good luck, Mike!”

Posted in Debt Assistance | 2 Comments »

Tags:
April 16th, 2010

40% Tax-Free Pay Raise

If you’re an employee, you can get a 40% pay raise without ever asking the boss. And it’s all tax-free… and you will clear debt completely.   Similarly, if you are an employer, you can show each of your employees how they can earn a 40% pay raise and clear debt… and it won’t cost the employer a thing. Before writing me off as being a pair short of a full deck, read on! [If you absolutely must know now, see Clear Debt Now!]

The following financial debt information is based upon figures gathered from U.S. Census Bureau, National Association of Realtors, Chicago Title and Trust, Bankcard Holders of America, and Ram Research. Though the financial debt figures will vary year to year, the net affect is the same since as income rises, debt rises proportionately and therefore debt load remains the same.

Debt Load Average (% total debt to income) = 31.3%

Therefore the average family’s present lifestyle could be maintained with 31.3% less per month without financial debt. Another way of looking at the same information is that if the average family were free of financial debt, their current annual income (average $50,233 average household total) would be comparable to a family income of $65,955 annually with a 31.3% debt load.

But I said in the beginning “40%”", didn’t I?  What was I thinking of?  How could I have made such an error?  It’s only a 31.3% pay hike. By the way, since you gain this increase by paying off financial debt, is this taxable?   I don’t think so! Therefore, we need to compensate for a post-tax versus pre-tax pay raise.

You can conservatively add at least a 10% tax relief since this is a post-tax raise in pay.  Our pay raise goal now easily exceeds 40%. Give yourself a real pay raise… Clear Debt Now!

What’s Wrong With a Traditional Pay Raise?

What’s wrong with tax cuts and a pay raise? Not a thing as long as it leads to increased wealth. Unfortunately, it rarely does. It usually just leads to increased income. So, what’s the difference?

Realizing that I am swimming upstream while most others are swimming down, I cannot help but be disillusioned. When was the last time a national pay hike or tax cut kept pace with the overall inflation and shrinking dollar? How come with all this extra money we keep coming up with, we are no better off then we were? Throughout my military career, I was always amazed that about 2-3 months prior to a federal pay raise, local prices near military bases went up. By the time the money actually arrived, inflation had already destroyed the increase. To make matters worse, not only do prices increase just before a pay raise, but we usually turn around and commit the raise to some new monthly payment purchase. “Oh yeah, now I can afford that new High Definition everyone is talking about.” When will we learn that more money does not necessarily increase wealth?

Become “Un-vulnerable”

I use to know a homeless fellow by the name of Pete.  Pete use to be well off but fell onto bad times. Today, however, he is considered local color because of his spectacular wardrobe- straight out of Daniel Boone, Jedediah Smith, or Snowshoe Thompson. Pete is so colorful, tourists have their picture taken with him.

But Pete lives on the street.  Yet, he is less vulnerable than most of us. Why? His income versus output is more positive than for most of us. He doesn’t owe anything to anybody. No one can take anything from him. He is completely independent. He is financially “un-vulnerable”

You can be “un-vulnerable” also and you don’t have to become homeless.  You simply need to give yourself a real pay raise… Get out of debt

Wealth Has Nothing To Do With How Much You Earn

It’s been said that the best way to help out the poor, is not to become one. I can relate to that! So, I am not suggesting that we all become miniature Petes as suggested above. But we can learn a lot from him as well as an even more authoritative source- the bible. “…And the borrower is the lender’s slave.” (Proverbs 22:7) When you owe someone, they own you!

Now here is the point. Wealth has nothing to do with how much money you earn. Wealth is rather that sense of being financially independent, financially un-vulnerable. And unless you are completely out of debt, you are a slave to whomever you owe money. On the other hand, if you are debt free including your home, who can touch you? You then have the option of investing the money you use to waste paying bills. You can buy items cash and get the leverage cash can bring to the bargaining table and still remain out of debt. You even have the option of reducing the need to bring in a paycheck by living on less with a simpler life or a life more to your choosing.

Give yourself a real pay raise. Clear Debt Now!

Posted in Debt Assistance | 5 Comments »

Tags: , , ,