Helping You Avoid Life's Financial Mistakes

How To Get Out Of Debt When You Owe More Than You Make

Not Everyone Can Get Out Of Debt By Themselves

About three years ago when I was still in financial services I was asked by a new recruit of mine to see if I could help someone who has a lot of debt issues.  I agreed but didn’t make any guarantees that I could do anything.

When I arrived at the appointment and began rummaging through all of the statements, I realized that they had over 20 different credit cards with almost all of them maxed out to the limit.  This totaled almost $200,000 in debt, not counting their $250,000 mortgage debt.

These people were obviously in some serious trouble, but that’s not even the worst part.  If they would pay even just the minimum payments to all the cards they still would even break even at the end of the month.

These people defiantly needed some professional help.  What made the situation worse is that she was not willing to try anything I said.  She made plans to file for bankruptcy and was convinced that it was the only way to solve her problem.

debt-crunch

In this post I hope to give a little more direction on what you should do when you fall into a situation like this.

What You Should Do If You Can’t Pay Off Your Debt

Minimize Your Payments. By cutting down your payments to the minimum amount owed you will be able to at least keep afloat.  However, there are other things you can do besides just paying the minimum amount on your credit cards.

Look into cutting down your interest rates as well.  You can do this by calling the credit card company and negotiating a deal with them. You can also try non-profit credit counseling if you would like to learn more about this option.

However,  this doesn’t mean you should just pay the minimum amount on your debt at all times. The point of cutting down to the minimum is being able to focus more money towards one debt then just paying a little towards all of them.  If you want to learn more about how to set up this kind of debt plan click here.

Increase Your Cash flow. Next you need to look for ways to increase your cash flow.  There are all kinds of ways to do this.  First off, you could find a part time job, in order to bring home a little extra money until you get a few more debts paid off.

Second, you could start a part time business.  This isn’t the quickest way to generate extra cash but over time it is the most effective.  In fact you may need a little extra cash to get started with a part time business so this may not be a viable option right now.

Third, you could sell things from around your house. This is an easy way to generate extra cash quickly.  Check out this article to learn more.

Bring In Professional Help. If you still can’t get a grip on the situation you have several options to think about.  I will run all them briefly here but I will also give you a link to some more info that will help you better understand each option.

First, you can look into a debt counselor.  This is a way to work out your debt issues with someone one on one.  In most cases you will have to pay back most of your debt here but with this method you have someone who will guide you through the process.

If you are interested in this option click here.

Second, look into debt negotiation.  Debt negotiation is kind of like going through a mini bankruptcy.  This kind of company will negotiate a deal with your creditors and lump all of your payments into one single payment.  This payment is usually all you need to pay because it will also include your fee for the debt negotiation company.

If you would like to learn more about this option click here. I also recommend this option over bankruptcy because the effects are not as bad a bankruptcy.  So here is a company I recommend you check out.

Third, make bankruptcy your last option.  I don’t recommend this option unless all other options have been exhausted.  That being said to even qualify for this option you have to pass a means test.

This means you will have to sit down with a debt counselor and they will decide if it is right for you.  If you  pass that you can begin filing for a chapter 13 bankruptcy.  Which means you will have to pay back a certain amount of your debt.

What happens is you will be required to pay back maybe 30 cents on the dollar for one debt, 50 cents on another, 100 cents to another, and even 10 cents to others.  The point is you will not get away without paying at least paying some of the debt back.

If you would like to learn more about this option click here. Also check out this link as well if you would like learn about other debt relief options.

Chris

The post was recently featured on the Carnival Of Personal Finance by Money Under 30.

5 Things You Can Do Right To Get Debt Free Part 1

financial-freedomGet Out Of Debt Now!

If you are looking to get out of debt fast and don’t want to waste time, this article is for you.  However, the big issue I am finding with people is that they feel they don’t have time right now or they are procrastinating and decide to hold off a week.  Then one week turns into two, then three and so on.  

In this post, I am going to throw out 5 things you can do right now to get started on your journey to being debt free.   These tasks are very easy to do and won’t take you long to get started.  Also, there are many great ideas here but only pick one to three ideas from the following list and implement them immediately. 

I will be giving you a few tools to help you out.  This way you can get started right away.  I have also cut this post into two parts for a couple of reasons; first, to keep the post from being too long and second, in this post I will be giving you some of the basic things you can do. I will be exploring more advanced options in the second post.

Put A Debt Plan Together

This is probably the first thing I would do if I wanted to get out of debt.  A debt plan gives you a bird’s eye view of how to get out of debt.  In fact, the best thing about putting a debt plan together is that once you have all of your info in the report, it will spit out how long it will take you to get out of debt.

Once you see how quickly you can get out of debt, you will almost instantly start to feel that relief that you are on track to get out of debt.  So definitely give this option a try.  To start your own debt plan click here.

Start A Budget

This is yet another quick and easy task you can do to get on the road to debt freedom.  You might be wondering how a budget helps you get out of debt.  A budget is nothing more than an overview of your financial situation.  The power behind this is huge.

With a budget you will be able to see where all of your money is going.  When I did my first budget it was big eye opener for me.  I couldn’t believe how much money I had slipping through the cracks every single month.  The money you could save just by fixing a few of these leaks could be enough to put towards your debt plan.

If you are interested in setting up a budget then check out these great tools here.

Call A Debt Counselor

If you are beyond setting up your own debt plan and budget to get out of debt then I suggest this as your first action.  I once knew a lady who had over $250,000 in credit card debt and even if she paid all of the minimums on her credit cards she still wouldn’t break even.

In this situation it was obvious that she couldn’t handle the debt load.  By talking to a debt counselor you can map out a plan together to get out of debt.  If you would like to learn more about talking to a debt counselor click here.

Check Your Credit Score

Checking your credit score has a lot of power.  First, it lets you know where you are going wrong in your finances.  For example, maybe you have a lot of missed payments on your credit cards and as a result it is affecting your score.  This can also be a little depressing on the other hand as well.  If you have a terrible credit score this may not make you so happy. 

Second, by knowing what you are doing wrong with your credit you can take steps towards fixing these issues.  If you would like to learn more on how you could obtain your free credit score and report click here.

Set Up An Emergency Fund

Why set up an emergency fund?  Simply put, setting up an emergency fund is an important step in preventing yourself from falling back into debt. 

Without prevention, the threat of falling back into debt is always there.  In fact this is an easy step to do because if set up right, it can be automated to do everything on its own.  This is called an ETF. (Electronic Transfer of Funds) This is a basic simple system which automatically moves your money for you. 

The other great thing about emergency funds is that it doesn’t take much money to start one.  In fact you can start one with as little as $25 a month.  If you are interested in setting up your own emergency fund and want to know more on how to do this click here.

Chris

This post was recently featured on the Money Hacks Carnival by Passive Family Income.

How Pain And Pleasure Effects You Getting Debt Free

In life their are two things that control what we do for any reason.  The first is PAIN, the things we don’t want to do and the second is PLEASURE the things we do want to do. 

Recently I was reading a great book about this subject by Anthony Robbins, “Awaken the Giant Within.”  He talks in greater length about this in his book but that entire section made me realize how much pain and pleasure have everything to do with getting you out of debt or being in debt for the rest of your life.

Today’s post is about facing your pain of being in debt to achieve pleasure by becoming debt free.

How Pain And Pleasure Control You And Your Debt

Pain and Pleasure all happen because of one reason, a decision, and that decision either leads you down a road of pleasure or pain.  However here is the problem.

We as human beings are geared towards pleasure.  Everything we do is to stay away from pain.  However is it always the right way to do things?

Although, we are looking for the easy way out especially when it comes to getting out of debt and in the short term things may look good but in the long term we may face some even bigger challenges.  Getting debt free is all about associating pain and pleasure the right way. 

Here’s a simple example about what I mean.

Lets say you don’t like to brush you teeth because in the morning your to tired or at night before you go to bed you just want to go to bed.  Now in the short term you have gained pleasure because your to tired to brush your teeth but in the long term you may cause some even bigger challenges for yourself by not brushing say tooth decay, a root canal, or worse dentures. 

So just cause you take the short term pleasure doesn’t mean their will be some long term consequences.  Now let me give you an example of how this might happen if your trying to get out of debt.

Lets say you want to put a debt plan together so you can finally get on the right track, but this month you have some unplanned bills coming through and you decide to wait until next month.  You literally talk yourself out of it for that month and decide I’ll do it later and then another month goes by and another month till finally you have so much debt that you have to get into a debt counseling program, or a debt negotiation program, or worse file for bankruptcy.

Again you pushed off getting a debt plan together something you could have done on your own and now you need to take more drastic measures.  All because you decided in favor of the short term reward and not the long term pleasure. 

Does this sound like you? 

How To Use Pain And Pleasure To Get Debt Free.

The simplest way to get debt free is changing the way you associate pain and pleasure.  For example if associate just trying to forget about your debt problems that mean you are associating pleasure for not setting up your debt plan.

However if you would associate thoughts of, ”if I don’t setup my own debt plan now I will have to go into a debt negotiation plan or worse bankruptcy,” you would associate pain with not setting up the debt plan and do it immediately.  Then every time you think it’s a pain to get out of debt you can think of the long term pain it would cause you.

Though this may come at a great cost to you.  Sometimes before most people take action is when it’s to late.  It’s finally come to the point that you must do something or their will be a big price to pay, say foreclosure or bankruptcy.  The pain has dramatically increased and now you need to do something or else. The pleasure of putting it off is not their anymore.  This is when most people decide to act however you don’t have to wait till it comes to this. 

So you might be asking how get started? 

Their are plenty of ways to do so but finding an inspiring and moving way would be the best.  For example if you know someone or people who’s in bankruptcy or even better homeless visit them and think about how life would be if you didn’t get your act together.  Seeing someone going though this kind of pain can have a huge effect.

I once heard of a guy who didn’t want his kids to do drugs and wanted them to learn why they shouldn’t take drugs and the effects they can have on you.  So he knew of a place where they rehabilitated drug attics and decided take his kids on a tour of the place.  The sites were unspeakable.  Though terrible it worked.  The children’s fear was permanently ingrained in their thoughts and every time someone tried to offer them drugs the images of those people going through rehabilitation came to mind.

The mind is a powerful force.  In the end setting up a debt plan may cause you to endure a little pain but it’s minimal to the pain you could potentially face down the road by just giving up a little pleasure now. 

Want to save yourself form financial pain sign up for my RSS and get back on track today.

This post was featured in the Money Hacks Carnival by Cash Money Life.