My Personal Finance Journey

Category Archives for Get Out of Debt

Unexpected Expenses That Increase The Cost Of College

The following is a post by MPFJ staff writer, Toi Williams, who is a professional personal finance blogger of Fine Tuned Finances. She has backgrounds in personal finance, sales, and real estate.

Leaving home to attend college is one of the most exciting times in a young person’s life.

Families plan for years to be able to pay for tuition, books, food, and housing for the student, often utilizing federal and public loans along with money saved in 529 college saving plans to make sure all of the costs are covered.

Unfortunately, there are a number of unexpected expenses that may arise that can significantly increase the cost of a college education. Planning ahead for these expenses and including them in your budgeting can greatly increase your financial security while attending college.

Here are some of the unexpected college expenses you may encounter and tips on how to plan for them:

 

Expenses For Replacing Supplies

While you may believe that you have purchased an adequate amount of supplies prior to attending your first classes at college, you will quickly find that you need to purchase replacement supplies on a regular basis to ensure that you have everything that you need for each class. Pens run out of ink, pencils get broken, and paper is used up for assignments faster than you may think. It is important to plan ahead and have a budget in place that takes into account additional purchases of supplies on a regular basis.

Many students make the mistake of relying on the university supply store for all of their supply needs during the time they are attending college. Since they are already at the location to pick up their textbooks, they pick up all of the other supplies they need as well. It is important to note that the prices that are found at the campus supply store may be more expensive than what you may be able to find at local office supply stores, grocery stores, or mass merchandisers. This is especially true when shopping around the beginning of the school year in late summer or early fall. To get the best price on school supplies, take the time to shop around convenient locations and take advantage of back to school sales.

 

Additional Class Expenses

For many classes taken in college, the only real expense is the textbook that you need to purchase for the class. However, some classes that are necessary to complete your degree may require the purchase additional books and supplies to complete the class effectively. These additional expenses may include supplementary books, lab equipment, software programs, or special electronics. Depending on the amount of stuff you are required to purchase, these additional class expenses can take a big bite out of your budgeted funds.

When budgeting the amount of money you will need for each semester, be sure to include an additional amount to cover any unexpected expenses that may be associated with the classes. A good rule of thumb is to budget an extra $80 for each class you are taking. If there are no additional expenses for a particular class, the budgeted money can be used for another class where the additional expenses are more than $80 or saved to be used for the next semester.

 

Health Insurance Expenses

Dormitories are breeding grounds for germs and all of the human interaction occurring regularly on campus ensures that illnesses will spread quickly. Recent changes to the health care laws allow students attending college to remain on their parent’s health insurance policies until the age of 26. However, there are many students whose parents have lost their health insurance coverage, have parents who are unwilling to continue paying for their adult children’s health insurance premiums, or are over the age where they can remain on their parents’ plans. These students will have to find an alternative to ensure that they are covered by health insurance and will be able to obtain medical care when they need it.

One option is seeing if the university you are attending offers a health plan for students. These health insurance plans give the student access to on-campus health services that can treat most minor illnesses and injuries without charge. If other treatments or services are needed, the campus health providers can refer the student to the services needed without the student incurring substantial costs. Student health plans administered by the college are typically the least expensive option for obtaining health insurance and the premiums are paid directly to the college.

If the college does not offer a student health plan, you will need to consider the different individual health insurance plans available on the open market. If you are in good health, you will be able to get a reasonably priced plan that covers preventative care and reduces the price of more comprehensive treatments. With an individual health insurance plan, you have more options for doctors and medical resources, but you need to make sure that the providers participate in the plan before receiving treatment or you may find yourself facing a hefty bill.

 

Expenses For Learning Experiences

Colleges provide many opportunities for learning experiences that can help prepare students for the world outside of college once they have graduated. These learning experiences may include clubs, organizations, special activities, and trips. Many of these experiences will have a nominal cost that the student must pay to participate. It is important to plan ahead so you can save the money you need for these experiences before the money is due. Otherwise, you may miss out on an activity that you would have really liked to experience with the new friends that you have made.

How about you all? What unexpected college expenses have you encountered? How do you budget for these items?

Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/vauvau/5799056895/

How to Utilize Gazelle Intensity When You’re Facing Years of Debt Repayment

Dave Ramsey, debt payoff, gazelle intensityThe following post is by MPFJ staff writer, Melissa Batai.  Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food.  She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.

CHEEEEEETAAAAHHH!!!!! 

If you’ve spent any time listening to Dave Ramsey, whether it be on his popular radio show or his Financial Peace University class, you’ve likely heard his explanation of gazelle intensity.  This explanation includes an amusing bit where he imitates the gazelle seeing the cheetah, screaming CHEEEEETAAAHHH!, and running for its life.

That’s how Ramsey advocates people paying down their debt–like a gazelle running for its life from a cheetah. 

Are you getting tired running like a gazelle?  Too bad, Ramsey’s thought process goes.  A tired gazelle gets eaten by a cheetah.

Getting out of debt is hard work, and if you want true freedom, you need to keep going strong until the debt is gone.  He even references the Bible verse Proverbs 6:4-5, “Give no sleep to your eyes, nor slumber to your eyelids.  Deliver yourself like a gazelle from the hand of the hunter, and like a bird from the hand of the fowler.”

That’s fine if you have a year or less of gazelle intensity to get completely out of debt, but for many people, paying down a large amount of debt should be more of an endurance race than a sprint.

Making Gazelle Intensity Work When You’ll Need Years to Pay Down Debt

So, if you’re facing tens of thousands, perhaps even hundreds of thousands of dollars of debt and years of hard work, how do you make gazelle intensity work for you?

  • First, understand that one component of Ramsey’s gazelle intensity is avoiding any new debt.  That means cutting up the credit cards and paying in cash.  Even if you do have years to pay down debt, this is one aspect of gazelle intensity that you should embrace. You’ve likely seen friends or even bloggers who say they are committed to paying down debt, but then they let their debt increase every few months.  After a year or two, their debt isn’t much lower than it was when they started.  Make the commitment to avoid any new debt when you decide you’ll be dedicated to a life without debt.
  • Second, consider being gazelle intense in spurts.  We started our debt repayment journey 20 months ago.  At the time, we had nearly $58,000 in student loan and credit card debt.  Even worse, our yearly salary was much less than our total debt.

We were gazelle intense for about 5 months before we got fatigued.  Then, we didn’t accrue any new debt, but we began to pay it down more slowly.  This let us take care of other expenses like car repairs and school tuition.

When our large expenses were paid, we became gazelle intense for a few more months.  Then we took another break.

If you have a great deal of debt to pay down, you may find that being gazelle intense for a few months and then taking a break works best.  We took a break for most of this winter, but now we’re on a four-month gazelle intense spurt.  If everything goes well, by the end of the summer, my last student loan will be paid off.

The Gazelle Intense Period Followed by a Rest Period Can Keep You Motivated

Being gazelle intense is a bit like going on a crash diet.  There is only so long you can maintain such strict discipline before you give up or worse yet, gorge yourself and gain the weight back.  If you’re gazelle intense for a few months and then ease up, you’ll likely find it easier when you’re working hard to get out of debt.

I’m certain if we would have tried to be gazelle intense for 20 months, we would have given up by now.  Instead, we’re energized to meet our latest goal of being free of my student loan.

How about you all? Have you tried to be gazelle intense in spurts during your journey to pay off your debt?  If so, did it work for you?

Share your experiences by commenting below! 

***Photo courtesy of http://www.flickr.com/photos/frted/5823429550/

This Summer I’m Telling My Kids to Charge It!

The following post is by MPFJ staff writer Travis.  Travis is a customer blogger for Care One Debt Relief Services, and also appears weekly at Enemy of Debt.  Travis candidly shares his personal journey to pay off $109,000 of credit card debt and the tips he’s learned along the way. As a father and husband he provides a unique perspective on balancing debt, finances, and family.

Charge it

My wife and I racked up $109K of credit card debt by misusing credit cards.  I don’t want my fourteen year old son and eleven year old daughter to follow in our footsteps, so this summer I’m going to do something a little unconventional.

I’m going to let them use credit.

I’m not suggesting I let them become credit card swiping junkies by going on a summer shopping spree. Please, allow me to explain.

For the second summer in a row, we purchased a summer membership at a full service gym. It has a ton of activities including an outdoor pool and a huge indoor play area called The Neighborhood where kids of all ages have access to basketball courts, mini-golf, batting cages and much more.  Kids my son’s age can roam the club freely and use it as a social gathering place being dropped off by their parents and picked up after an afternoon of hanging out with their friends.

While at the club, the kids commonly ask to get something to eat or drink at one of the club’s snack shops.  Customers can pay with cash, or they can choose to charge the bill to their account and have the purchase included in their next monthly bill.

We told the kids that we will purchase two things for them each week, but anything additional that they charge will come out of their own pocket.  I’m not going to force them to charge their items, however.  If they would rather bring their own cash along to the club, or just simply not exceed the two items per week maximum, more power to them.   Otherwise, when the monthly statement arrives in the mail, we’ll go through it as a family adding up the purchases from their unique membership number that exceeds the limit.

The amount owed must be paid by the due date on the bill.

I’m using our summer membership at this gym as a financial teaching opportunity for the kids.  This gives them a relatively safe environment to see how credit is used in daily life, as well as allowing them to get a taste for the temptation of charging and not having to pay anything right away.  They can also feel the consequences of giving into that temptation.

Such as realizing buying nachos every afternoon at the pool sucked away most of their allowance for the month.

Our kids are generally aware of our situation.  They don’t know the exact numbers, but they do know that we have credit card debt, and that we are digging our way out with the help of a debt management program.  They understand we got into this situation by spending too much through abusing credit cards.  But, I do not believe they have a full appreciation as to how credit cards work, or how easy it is to misuse them.

I hope that through this exercise they will gain that appreciation, and together with the experience of what our family has gone through to dig out of debt be more fully educated to prevent them from repeating our mistakes.

How about you all?  Would you let your kids charge things on credit?  Do you think it will better prepare them for handling their finances as an adult?

Share your experiences by commenting below!

***Photo courtesy of hin255 / FreeDigitalPhotos.net

Why Are We In More Debt Than Our Parents?

The following post is by MPFJ staff writer, Catherine Alford. Cat is a freelance personal finance writer who blogs at www.BudgetBlonde.com. 

It’s not really a secret that many people in their 20’s and 30’s struggle with debt. However, what I didn’t realize is that young people today have thousands of dollars more in debt than our parents and grandparents did at our age according to a recent article published by NBC news.

Why are we in more debt than our parents? What went wrong?

Here are some possible explanations:

 

Rising Tuition Costs

The average student loan debt in our country is $25,000. Mine is currently at $36,000. My husband’s is well into the six figures. This is due to pursuing graduate educations but also to the ever increasing tuition costs. They are going up so rapidly that I wonder how I will ever afford to send my kids to college.

The last thing I want is for my kids to be strapped with their own student loans. We’re supposed to make things better for them, right?

I’m not sure what can be done to combat this, since universities certainly aren’t going to lower their tuition rates. What I might do is send my kids to a community college or have them complete some online college classes while they are still in high school to hopefully shave off a year or two of their tuition costs.

 

Increase in Materialism

There are so many more things to buy than there were when our parents and our grandparents were our age. With the dramatic rise in technology, there are an unlimited amount of expensive gadgets that everyone just has to have. Regardless of whether or not they can afford one, many people have big screen TVs, smart phones, and nice cars.

Essentially, we’ve redefined what “needs” are. The line between needs and wants is much more muddled these days.

Our grandparents would have never even considered a nice meal out during the Depression. Why, when we’re in our own recession, do we have so much trouble living with less?

 

The Connectivity of Our Generation

You’ve heard it said many times before: We’re more connected than ever before. There are obvious benefits to this, such as talking to friends and family all over the world with great ease, working with businesses across continents, and staying in touch with friends from grammar school.

Yet, the connectivity has also been detrimental to our generation. It’s allowed people to see celebrities tweeting their latest travel destination and reality TV stars buying million dollar mansions. It’s made us feel “closer” to those who live extravagant lives, further perpetrating the myth that we should all live that way (or even worse, that we all deserve to live that way.)

This connectivity has also inspired a lot of comparison and competition, especially among friends. How many times have you felt down about your own marriage or your own children because of something someone else posted on Facebook? How many times have you felt jealous because someone posted about their shopping spree, showcasing their “hauls” on YouTube? All of these issues contribute to the rising need for our generation to buy more things to try to project a positive, ”richer” image to others.

We have to get better about this, and it starts with maintaining more of a level head when it comes to spending.

 

Lack of Financial Literacy

While rising tuition costs, the recession, and our connectivity all contribute to the debt issues that our generation currently faces, the real perpetrator is a lack of financial literacy. I can’t remember anyone sitting down and telling me to be careful about taking out student loans. In fact, many encouraged me to do it to make my life easier.

While I had to complete several “quizzes” online for my college loans to go through, I didn’t really understand what I was reading. All I really gathered from it was that I’d have to pay them back someday, something that was easy enough to understand.

I fully acknowledge that the information was out there for me to learn about myself, and I should have. I should have sat there and crunched the numbers to understand what I was really, truly doing. But, I didn’t. And neither did millions of other college students my age who took out large loans to go to school and graduated in the middle of a recession.

In my very humble opinion, financial literacy is what we need to tackle first in order to make some much needed changes around here. Essentially, if we don’t teach our kids the hard financial lessons we’ve learned, this debt situation could get much, much worse when it’s their turn.

How about you all? Why do you think that we have more debt than our parents? Is it for the reasons listed above, a combination of them, or something else entirely?

Share your experiences by commenting below!

***Photo courtesy of http://advocacyinternational.co.uk/wp-content/uploads/2010/07/Debt-Cartoon_banner3.jpg

Think You’re Sacrificing to Pay Down Debt? Think Again

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free $50.53 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is April 30th, 2013.

The following post is by MPFJ staff writer, Melissa Batai. Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food.  She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.


“We learned early on to amuse ourselves and not to have many wants. It’s the wants, not the needs, that do people in. Having less wants creates contentment and one is satisfied with the simple pleasures in life”–Leona M. Osrin, survivor of the Great Depression (Ohio.gov).


Gazelle intensity.  You’ve probably heard of it even if you aren’t a Dave Ramsey fan.  Basically, it means cut your expenses as much as you can so you can pay down your debt as quickly as possible and become debt free in the shortest amount of time.
Many people say they can’t be gazelle intense because it’s too hard to do without for a longer period of time.  They still want to live while paying down debt. That’s okay, too, because to each their own.

Feel Like You’ve Given Up Everything to Be Gazelle Intense?

However, if you’re in gazelle intensity mode and you’re feeling like you have nothing–no enjoyment, no luxuries, I understand. 
We’ve been paying down debt for 17 months, sometimes gazelle intense, sometimes not, depending on what expenses creep up on us.  However, we try to avoid lifestyle inflation and keep our expenses low by doing without.  While my husband and I do each have cell phones, they’re cheap Trac Fones which we rarely use; we only pay for the minutes as we need them.  When my son will need summer uniform shorts in a few weeks, I’ll simply cut his high-water uniform pants he’s getting too tall for and turn them into shorts.  We buy most of our clothes at Goodwill and garage sales.  We go out to eat less than 5 times a year.  We’re living very simply until the debt is paid off.
If you’re gazelle intense, this all might sound very familiar to you.  Sometimes, you may feel sorry for yourself or embarrassed by your situation when you see others getting ready for exciting summer vacations or enjoying busy weekends with their kids going out to eat and to expensive museums and amusement parks.

One thing that has helped me when I feel this way is to look at others who sacrifice far more than we are.
 

This Is True Sacrifice

I recently came across The Ohio Department of Aging and found fascinating stories from those in their 80s and 90s who lived through the Great Depression.  Suddenly, my own life seems luxurious.  Consider this story about shoes:
“I think my mother was the inventor of open-toed shoes. When I outgrew my Sunday black patent leather shoes, my mother cut the toes out. I can still remember the wet feet from the dew on the grass or the rain. A good supply of newspapers or lightweight cardboard cut to fit inside my shoes and a pair of dry socks took care of the problems. If the stitching came loose on the sole, a rubber band took care of the problem – we put it around the toe, stopping it from flapping as I walked” (Ohio.gov).


Seriously, I’m guessing none of us or our children, gazelle intense or not, have had to walk around in shoes like this girl did.  America is such a throwaway society that even on a tight budget, there are shoes to be found at second hand and thrift stores for a very reasonable price.


For another story, think back on your own Christmas last year.  Even if you’re aggressively paying down debt, you likely had a fairly nice Christmas with plenty of gifts.  Contrast that to this girl’s Christmas during the midst of the Great Depression:


“For Christmas, we always had a small tree with homemade paper streamers and popcorn; of course, no Christmas lights. To save on electric, we used candles. Our present was one doll, which we girls took turns playing with. Our biggest surprise on Christmas was that we would have chicken on the table and plenty of fruit” (Ohio.gov).

Final Thoughts

When you’re doing without to apply a lot of your money to pay debts from the past, you might be depressed sometimes or discouraged.  You may feel that you’ve done all you can to curb your expenses, but have you really? 


If you want to be out of debt as quickly as possible, there are always more ways to cut.  Living a simple life in our modern times without a smart phone, video games for the kids, and the latest electronics, may seem impossible, but the stories from the Great Depression show not only that it is possible, but that your life satisfaction may increase as you learn to separate your wants from needs.  Certainly reading these stories has helped me recognize that even with gazelle intensity, my family still has a great deal to be thankful.

How about you all? Do you ever feel like you’re making too many sacrifices to pay down your debt and wonder if it is actually worth it?

What steps do you take to keep yourself on tracking psychologically?

 Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/31333486@N00/2173328648/sizes/z/in/photostream/

Guide to Student Loans That Everyone Should Know

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free $50.53 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is April 30th, 2013.

The following is a guest post by Kevin Watts, the creator of the blog, Graduating from Debt. Enjoy!

I was like millions of recent college graduates in heavy debt with very little hope. With the right attitude and discipline, I took control of my financial picture, and now I can say proudly that I am debt free. 

Here below are some practical tips that helped me pay off my student loans:

 If you have just graduated from college, or you are in the process of repaying student loans, then these practical tips can help you maintain your loan debts under control. By being aware of your financial obligations, you will avoid incurring massive interest costs and extra fees for late payments. Moreover, it will be easier for you to keep all debt payments affordable while securing a good credit rating.

 Forget about stressing out on your loan payments, and check out these 5 relevant tips that will help you manage your debts while ensuring your financial stability:

1. Keep track of your loans.

It is important to be completely aware of your lenders, loan balance, and current repayment status for your loans. These relevant pieces of information will give you an idea about your existing options when it comes to loan forgiveness and repayment. If you are uncertain about these details, then the best thing to do is to inquire from your lender.

By doing so, you will learn more about the status of your federal loans. Additionally, you may want to review your most current billing statement, as well as the original documents that you have signed. In case you are unable to locate these documents, you may consult your school for a backup of these records.

2. Determine your loan’s grace period.

You should understand that each loan has its own grace period, which pertains to the waiting time before you can make your initial payment. For Stafford federal loans, the grace period is typically six months, while it is zero months for Perkins federal loans. If you have an existing PLUS loan (federal), then the grace period depends on the date when the loan was issued.

Regardless of the grace period for your student loans, make it a point to pay on time to avoid late charges. Moreover, you should never fail to inform your lender when you have changed your mailing address or contact details since all mails about your loans may be sent to an incorrect address, and this can cause you a huge problem. In fact, ignoring all bills can lead to a default, which can lead to severe and long-term consequences on your financial situation.

3. Choose your preferred loan repayment option.

When you have a federal loan that is already due, the payment will be based on the 10-year standard loan repayment scheme. For some people, the standard plan is barely reasonable, so they consider other repayment options that will be more practical for them. Furthermore, you may want to change the plan entirely when necessary.

While extending the repayment period to up to 10 years may result to more affordable monthly fees, you are likely to pay more interest costs throughout the duration of your loan. Hence, you may choose another option, such as an income-based plan, that will cap the monthly payments at a percentage of your annual income. This repayment program will also forgive any debts that are remaining after the 25 years of loan payments.

However, loan forgiveness may only be available when you have incurred at least 10 years of loan payments, as long as you are employed in a non-profit or public sector. It is also worth mentioning that private loans for students do not qualify for other deferments, forgiveness, forbearance programs, and payment plans available for federal loans.

Nevertheless, private lenders may offer their clients a type of forbearance that comes with a fee. With this in mind, it is best to inquire from your lender, so you can learn more about your repayment options.

4. Reduce your principal.

If you decide to make a payment for your federal student loan, the amount covers any incurred late fees, interest costs, and the principal. When you have the means of paying more than the required monthly fee, you can massively reduce your principal while minimizing the interest costs of your loan.

You may prepare a written request or notification to your lender, so you can make sure that the additional amount is applied immediately to your loan principal.Then, keep all paperwork for your records, and review them to ensure that the overpayment has reflected on your account.

5. Pay off all loans that have the highest amount.

In case you wish to pay off your loans before the due date, then you should consider settling the fees for the one with the most expensive interest rate. You should also begin paying off your private loans followed by your federal loans, since the former have higher rates and do not come with a flexible repayment scheme.

 With these practical tips, you can keep your debts in control while making sure that no loan remains unpaid during the designated repayment schedule.

How about you all? What about student loans do you wish that you knew back when you were a student that you have learned “the hard way?”

Did you take advantage of any of the tips mentioned above in this post during your student loan payoff?

 Share your experiences by commenting below!

***Photo courtesy of http://upload.wikimedia.org/wikipedia/commons/4/43/Cambrian_Student.jpg

Getting Out Of Debt – Debt Consolidation vs Debt Management – Which is Better?

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free $50.53 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is April 30th, 2013.

The following is a guest post by Jon Emge. Enjoy!
 
When people are struggling with their debts, they can get bombarded with different solutions from different people and companies all with the same goal in mind, paying off the accounts and getting out of debt.  But, choosing the best option is an individual thing, and what works for one person may not work for another.
While there are numerous ways to pay off your debts (and not pay them off such as in bankruptcy), two of the most popular ways of dealing with debt and getting out of debt are debt consolidation and debt management.

Debt consolidation is really not getting out of debt, just transforming the debt from one form to another.

In essence, debt consolidation is taking out a new loan to pay off the other loan(s) or credit cards you may have balances on.  You are still in debt, and still to the same level or amount, but by just having one (1) monthly payment for many people, it is easier to manage; and in most instances, that monthly payment is less then the sum of all the accounts included in the consolidation loan. 
The reason why the monthly payment is less can be due to a lower interest rate, as credit cards have a high rate of interest, and also due to the term or time period of the payments.  The longer the repayment term, such as 48 months or 60 months, the lower the monthly payment.

 

What are the downsides or negatives of a consolidation loan? 

It may be difficult to qualify for the consolidation loan.  If you have a lot of debt, your credit score may not be in the highest range which means you may not be granted the consolidation loan.
You are still in debt; you have just transformed the debt from many accounts to one single account.
Unless you have stemmed the tide or reason why you have the credit card debt or accounts in the first place, just consolidating them doesn’t change the fact you could end up using the cards or credit lines again and finding yourself in more of a financial pickle barrel.
If you happen to consolidate your debts with a home equity or HELOC loan or some other form of secured loan, then you enter into a different realm of debt.  You may have consolidated your unsecured loans and unsecured credit cards, but they are now secured debt, secured by your home.  Should you struggle to meet these repayments, your property and home could be at risk.

 

So what about debt management? 

There are many forms of debt management, some you can do on your own or DIY (do it yourself), and some with the help of professional advisors and outside organizations.
Which type of debt management is best for you can depend on the level of your debt and if you are past due or in arrears with the accounts. If you are in arrears and seriously struggling, then seeking professional help may be the best course of action. The other end of that situation is you can meet the monthly repayments, but want to be done with the debt(s), just wanting out of debt.
The first step is to stop debting!  Stop using the credit cards or lines of credit.
Review or set-up a new household spending plan and see what money you have each month to work with that you can use to pay towards the debts/accounts.  Then, obviously paying that amount to the accounts choosing an account to concentrate on to pay it off at a quicker rate then just paying the minimum monthly payment.
Think of your debts as a snow covered hill, and the money you pay as a snowball rolling down that hill. You pay a set amount each month towards the debts, then once one account is paid in full, you continue to pay that set amount using the extra form the paid off account towards another account.  Then as that account is paid off, you continue paying that set amount towards the remaining debts.
Just like a snowball rolling down a hill that picks up speed and more snow, so well that set monthly payment and the accounts as they get paid in full.

 

So which account should you concentrate on the pay off first?

There are a variety of thoughts on this.  One being to choose the account with the highest interest rate, or to choose the account with the lowest rate as more of your extra payment will go to the principal balance.
My advice has been just choose one.  It may even be the account with the lowest balance as then you can achieve some level of success early on which can lift your spirits and drive you onward.

How about you all? What strategies have you used to pay off debt? Did you try debt consolidation or debt management programs, or did you simply bite the bullet and buckle down to pay off the debt?

Share your experiences by commenting below!

Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.

  • In my experience, I have found that people looking to more aggressively pay off their debt often view debt management or debt consolidation programs as some “magic” cure or solution that will make it completely easier to get out of debt.
  • The truth is that if you can fix your spending behavior and can have some success getting your interest rates reduced, you can accomplish many of the things that these programs offer without the cost.
  • However, these solutions are always good to think about as a fall-back.

***Photo courtesy of http://upload.wikimedia.org/wikipedia/commons/1/1e/Women_in_Economic_Decision-making_Christine_Lagarde_(8414041294).jpg

Take Control of Your Finances by Settling Your Debt

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The following is a guest post. Enjoy! 
Getting out of an overwhelming amount of payday loan debt can be difficult to do without assistance. Thousands of people have gotten stuck in the cycle of borrowing payday loans that go unpaid because of more urgent financial obligations.



How Payday Loan Debt Spirals Out of Control

One significant problem with payday loans is that they are targeted to people who have credit issues and are struggling to pay their bills. While these loans may seem like a good idea in the short term, people who borrow this way often overlook other financial obligations that will come due prior to their next payday.
Once a payday loan is overdue, additional fees or penalties may be added to the balance. These fees are typically added every month, so the balance of a relatively small payday loan could quickly grow.


Many people who find that their debts have grown out of control decide that they will ignore the debt due to an inability to pay and a feeling of embarrassment about the situation. Unfortunately, ignoring debts often results in accounts going into collections. Having accounts that are so overdue that have been handed over to collections negatively impacts personal credit score, so people who have had credit problems and are borrowing payday loans for this reason may not be able to repair their credit.


Debt Management Solutions

Anyone who finds that they are unable to fulfill their financial obligations related to payday loans should immediately contact their lender to discuss payment options. While this is the first step in eliminating overwhelming debt, there are other tasks that must be done to ensure that the problem is taken care of permanently.


Getting help with debt is a matter of contacting a debt management provider that can use their expertise to help individuals get their finances under control.


The role of a debt management company is to contact payday loan or other lenders to explain the situation of the borrower in order to keep penalties from piling up on original balances. Once the lender has been informed about the borrower’s inability to pay, a negotiated payment amount that is manageable for the borrower will be established. This gives borrowers the chance to pay off their debts.


A debt help professional is able to assist borrowers with making the small changes in their lifestyle that have a big impact on their long time financial security. Even after advisors have helped borrowers get out of debt, they can help their clients with tips on how to stay out of debt in the future.


Not every borrower needs a debt management plan to help them pay off their outstanding debts, but many borrowers find that the overwhelming total of outstanding balances and fees that they are facing necessitates this service. A debt solution company can help borrowers figure out if they need someone else to step in and negotiate payments down to a manageable monthly amount.

 

How about you all? Have you ever used or looked in to using a debt management/settlement company to help you with your debt payoff?

 Share your experiences by commenting below!

Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.

  • As mentioned in the article above, a debt management plan is not necessarily the best answer for everyone. 
  • In fact, you can actually accomplish quite a bit yourself by simply calling your creditor and explaining your situation. I don’t have personal experience doing this with payday loans, but I have experienced first hand that it can work well for credit card debt.
  • One thing that a debt management plan can help with though is to provide extra incentive/motivation for you to change your behavior of spending, if that is a challenge you are facing. Our staff writer, Travis, explained this very well in his post about his personal experience with his debt management provider.
  • If you are considering a debt management plan, it is very important to carefully review your options to make sure you are not being taken advantage of/paying too much for something of no value.
    • The National Foundation for Credit Counseling is a great place to start to find an honest debt management company.

***Photo courtesy of http://upload.wikimedia.org/wikipedia/commons/c/c3/Chess_board_opening_staunton.jpg

Urgency in Sports and Debt Repayment

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The following is a post by MPFJ staff writer, Jeff. Jeff writes about Sustainable living and finances at his website, Sustainable Life Blog. Jeff really enjoys traveling with his wife as much as he can, to wherever he can.

About a week ago, my favorite team unexpectedly dropped a game to a team that they probably shouldn’t have lost to.  During the game, they were down at one point by 22.  With about 8 minutes left to go in the game, they finally started to play and slowly started to close the gap.  Eventually, they had gotten to within 1 point, but couldn’t quite close the deal.  After the game, the coach said that they were not “playing with a sense of urgency”.  It was true, but when he said that, I was thinking about my own finances and what that meant for me.


For the last 2 years, I haven’t really been diverting much money to debt repayment.  Surely, I’ve upped my savings rate and bought a house and all of that, but in all honesty I should have been free of all of my debt by now – student loans, car loans, you name it and it should have been repaid.  When I was so focused on my debt, I was working 2 jobs and didn’t really have time to spend money.  I had that sense of urgency because I needed it.  I was living paycheck to paycheck, and if I didn’t get a cash infusion when I expected, my debt was going to go unpaid.


Slowly but surely, I started to back away from the cliff.  I paid off 1 credit card, then another, and another.  Once those were gone it was on to paying off some student loans.  I had three student loans, and once the credit cards were done, I focused on those.  I paid off the smaller of the student loans, then moved on to the bigger one.  I was still afraid of not being able to make the payments on my debt, so I was still very focused on debt repayment and very into it.  After all, if I missed one payment on my debt, it could easily spiral into oblivion.  I’d need to start playing catch up, and fighting from behind is never easy.  I could miss credit payments, utility bills or worse – something like my car that I needed to get to work and earn income – making my situation exponentially worse in that instance.  It felt like I was standing on the edge of a cliff and one false move by me or a big gust of wind (in the form of an unexpected problem) could be the end of me (financially) for a long time.


My first instinct was to spend all the money allocated to getting out of debt on lottery tickets, and once I hit the jackpot I’d be fine.  Just kidding.  The first step that I took was to chip away at my debt every day, every week, and every month.  I got down on ‘defense’ and didn’t add any new spending to the cards.  Once I was done with that, I slowly started to chip away and paid them off, one by one.  I took out the credit cards first, then the smaller student loans – and once that was done, I felt like I was no longer standing on the edge of a cliff where one false move could sink me.  


Of course, with the backing away from the cliff, I lost my sense of urgency and motivation to continue paying down debt.  I increased my savings percentage, but I also increased the amount of money that I was spending every month.  I kept telling myself that these were ‘weird’ months, and I’d get back on my debt repayment next month.   Well, 24 “next months” later, I’ve decided to renew my focus and make sure that I finish off my debt once and for all!


I’ll let you guys know how it goes, but the first month went well, I doubled down on my truck payment, and have set a goal to finish off the payments by the end of June.  


How about you all? Did you guys fall off the debt repayment cliff?  What did you do to get back on?

Share your experiences by commenting below!

Jacob’s Thoughts – Great post! I think that having the sense of urgency if much needed, especially at first when a person has large amounts of high interest credit card debt because even if they are sticking to the payment schedule, the reality is that it still is costing them a large amount of money each year in interest. After getting the high interest debt paid off, it might actually be wise to step back to think about investing some money at least.

I’m curious – what is the interest rate on your student loans that you haven’t yet paid off? Do you think it might be better to invest at the same time as you are paying those off? 

    ***Photo courtesy of http://www.flickr.com/photos/birddogger/4930697767/

    Trust Deeds: Are They Right for You?

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    Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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    Click here to enter my free $51.95 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is January 31st, 2013.

    The following is a guest post. Enjoy!

    If you’ve ever been in financial difficulty and carried out some research into Scottish debt solutions, no doubt you will have heard of a Scottish Trust Deed. What with the huge number of adverts on the radio and television, it’s nearly impossible to not have heard of them at least! A lot of the adverts claim to ‘wipe out your debt’ and ‘cancel up to 90% of your debt’, which sounds like a dream come true!

    However, can these companies come good on their promises, and is a Trust Deed right for everyone?

    The facts

    A trust deed is a formal insolvency solution that has existed since at least the 1800’s. Sometimes, it’s called a Scottish Trust Deed, but this is only because a Trust Deed is only available to Scottish residents. The way a Trust Deed works is that if your finances get out of control and you find yourself owing large amounts of money to various sources that you cannot afford to pay back, you effectively place your estate in the hands of a Trustee (a licensed insolvency practitioner), who is responsible for creating a plan that sets out an agreeable solution for both you and the people that you owe money to. This means that you agree to pay what you can afford each month towards your debts, while your creditors agree to give you some debt relief (meaning you don’t have to pay back the full amount that you owe all of your creditors).

    Why is it useful?

    A Trust Deed is a useful solution for individuals who have substantial debts because it allows them to contribute to their debts by paying an affordable amount each month. When I say ‘affordable,’ I mean that you contribute what you can after paying for essentials, like food, rent and bills etc. Your Trustee is the person who would help decide what’s essential, as he is the person who creates the plan for paying back your debts. A Trust Deed is also good for creditors because it means that they get to see some of the debt their owed repaid, rather than having to pursue someone through debt collectors and the courts etc.

    The myths!

    A trust deed can be a great solution for individuals with substantial debts. However, it’s not as simple as just ‘writing off you debts’. For instance, you have to be employed or have a regular income, as you are expected to contribute something towards your debts. Another fact is that your Trustee has to act in the best interests of both you AND your creditors! For example, if you own a house that has equity in it, unless you or a friend can cover that cost, you may have to realize the equity in your home to benefit your creditors. That means potentially selling and moving into a new house. There are ways to avoid this, but only a licensed insolvency practitioner can advise you on that. These are just a couple of examples of how Trust Deeds are not as simple as some companies would like to make them seem.

    What can I do?

    If you’re considering entering into a Trust Deed, then your first port of call should be to look online. There is an abundance of websites out there that will explain a lot of the ins and outs of Trust Deeds. Better yet, speak to a debt expert. A licensed insolvency practitioner will know best about whether a Trust Deed is right for you or whether another debt solution is best.

    How about you all? Have you ever heard or or used a trust deed? If so, what are your thoughts about them?

    Share your experiences by commenting below!

    ***Photo courtesy of http://www.flickr.com/photos/7259240@N03/5531511558/sizes/l/in/photostream/

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