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Hello,
This week's issue is about Debt Reduction. I have personally struggled with debt reduction for most of my life, only getting it under control in the last 10 years. That doesn't mean I have everything paid off yet, but I have everything going in the right direction. If you have debt and are having a hard time paying it off, I hope these tips and articles will be useful to you. If you have any questions about debt reduction, don't hesitate to post them at the link below.
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Susan
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Tips
Every Penny Counts
By Scott Bilker
It sure does-especially when you're paying back debt.
How many times have you walked out into the parking lot of a supermarket and spotted a penny on the ground? Plenty of times no doubt. You might bend over to pick one up if you see Lincoln staring at you, but for the most part you just keep walking by.
Read More: Click Here
Using 0% Credit Cards To Pay Off Other Loans
Q: Has anyone tried this? I am thinking of using one of my credit card offers of 0% for 15 months (though I plan on paying it off in 12 months) in order to put $15,000 down toward a HELOC loan currently at almost 7% interest.
I would continue to pay the same monthly payment on my HELOC loan minus the amount I will be paying on my $15,000 15-month interest free loan.
Any advice would be appreciated.
Runningshoes from Oakland, CA
A: This is very tricky to do. It can be done if you are a serious miser. First thing - know when the payments are due and send in a payment before the due date -- the interest rate will skyrocket and nullify your 0% rate if you are late. Second thing -- make sure you plan out a budget that puts this in a higher priority than any other fixed bills. You can not afford to gamble, so be sure to budget in some wiggle room for emergencies - like auto accident deductables, emergency room co-pays, etc.. If you budget down to the penny, something will always come up to wreck your plan. Not to scare you - I have done this 0% before and I was able to make it work, I have also done it when it didn't work for me, that was a lesson learned.
Good luck!
Mccroryl
Editor's Note: Also beware of balance transfer fees which could eliminate much of your savings if you transferring smaller debts.
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The Simple $10 Debt Elimination Solution
By James Dimmitt
Ask a friend what money resolutions they made at the beginning of the year and your bound to hear them reply "Pay off my credit cards." Ask them how they planned on reaching that goal and most of them won't have an answer.
Read More: Click Here
Contentment Robbers
By Deborah Taylor-Hough
Someone recently told me that they were tired of being in debt and were ready to get their spending under control. But they were concerned about the fact that they still enjoyed spending money to pamper themselves. They were looking for inexpensive "luxury" ideas. I didn't necessarily have specific luxury ideas to suggest, but what I've found over the past several years is that my idea of what constitutes a luxury has changed greatly.
When we started on a drastic debt-repayment plan, we had no extra money for anything but the absolute barest necessities for almost five years. I couldn't even shop at thrift stores for clothes -- that would've been too expensive for our severely limited budget. We learned to make things ourselves, accept hand-me-downs from friends and family, make do with what we had, or do without. It was either live like that or be forced into Bankruptcy by our impatient and increasingly nasty creditors.
Read More: Click Here
Q: I am looking for ideas to get out of debt.
Thanks,
Lana Fehrle from Houston, Texas
A: I ran across a little plan to get out of debt that really works if you just stick to it. Here it is:
As with anything, this takes time, and as a result, takes patience.
I would also add that you must begin to live more frugally, learn to tell a want from a need, and enjoy the contentment that can come from being in control of your finances instead of them controlling you.
fab4mom
Read more ideas below and post your own.
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Inspiring Yourself To Pay Off Debt
Ideas and tips to help you stay motivated and inspired to pay off debt.
A: If you want to "get inspired" to pay down your mortgage or car loan just tape an amortization chart on your fridge so you are constantly reminded how much your "paying" for the luxury of a loan.
By Reta
A: A simple home made graph - the bigger the better - is very motivating. Decide when you want to pay off your debt. Divide the amount by the number of months to get a monthly figure. Draw a graph with the amount on the left hand vertical axis, divided into monthly amounts. On the bottom horizontal axis write the months. So if your debt is $2000 and you aim to have it paid off in a year you will have to pay minimum of $167 a month + interest. When you start put a black dot on the first month at $2000 and aim to save $167 + interest. If you make it put another dot on the next month on your goal amount line. If you don't make it put the dot in red and try harder the next month. When you join the dots you should see a continuous downward trend, even if you don't make the full payment the line should still go down. You don't even have to nominate a set amount each month as long as the debt is falling. And you can set up your graph for fortnightly or weekly amounts. I find this method very motivating - even if I have a bad month I don't feel I want to give up as I know I am heading in the right direction!
Regards
By Jo Bodey
A: We had to pay off a $100,000 business loan. Yikes! To motivate ourselves, we planned special dates each time we paid off $10,000. We went to different restaurants, each one better than the last. We started at McDonald's. By the end, we dined at a find French restaurant!
By Sally
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Constant Credit Card Payments
By Terry Rigg
Are you trapped into making only minimum payments on your credit cards? I hope not.
Minimum payments decline as the balance on the credit card declines.
Let's take a credit card with a $2000 balance at 15% interest to use as an example. You would expect to pay about a $40 (2%) monthly payment when you start making your payments:
By making the minimum payment only, it will take you 13 years and 11 months to pay off your credit card and you would expect to pay $2,126 in interest.
However, if you continued paying that $40 until the credit card was paid off, it would only take you 6 years and 6 months to pay off the credit card and you would pay about $1,100 in interest.
Read More: Click Here
So Far in Debt; Can't Seem to Breathe
By Scott Bilker
Scott,
Help please! I heard you on the radio and what you had to say made sense to me. I am so far in debt and can't seem to breathe. I have 6 credit cards and I am $25,000 in debt.
I know you hear this all the time, I have been paying for over 2 years not charging anything and still cant get anywhere. I cut them 2 years ago, and called the companies to ask for a lower rate. They gave me like a year with low interest, and lower payments so my credit reports would not be hurt.
Bottom line, my credit report looks so bad, we can't even refinance our home. I am in so deep that if I had a pill I'd take it! When I called a company to help me all they wanted to do was charge me more money that I don't have. I am not sleeping, and just don't want to leave my home. I own my own business, and I am just asking for your personal help. Please, please help me.
Thank you,
Stephanie
Stephanie,
Thanks for writing (and listening)!
Sorry to hear how much your debt burden is affecting your health. I can certainly understand how you feel. Knowing that you owe money, expensive money (at high rates), can certainly stress-out anyone who wants to make good on their financial commitments.
As you're probably aware, getting out from under this debt will not be an easy one-step solution. It's going to be an ongoing process that will take years of focus, attention, planning, and work.
Read More: Click Here
My way of not going too far into debt has always been the same: I don't spend more money than I have. I do use credit cards but never charge more than I have in my savings account (in case for some reason I can't pay off the charge from my regular monthly income).
Houses are not included in this plan of course. Mortgages are allowed. But not cars. Always buy used and pay cash if possible. Or at least not a huge debt.
This all comes from being old enough to remember when we didn't have credit cards. When I first went to work everything had to be paid for in cash. So I put some money in a savings account every week. Small purchases came out of the rest of my pay. When I wanted to make a larger purchase I had to wait until I had enough in my savings account.
By Pam from Plymouth, NH
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7 Steps for Eliminating Your Debt
By Scott Bilker
Many people may say that shedding debt is common sense: "Pay for everything in cash and don't incur any debt." Yeah, sure, easily said when you have a household income of 70 to 80 thousand (and no kids). Obviously the best way to handle your finances is to pay for everything with cash. Not everyone has that luxury.
I don't know anyone who purchased their home with cash. There are also other situations that arise-like medical and family emergencies, unexpected car failure, and the list goes on. Just because you have some debt, doesn't necessarily imply that you've mismanaged your entire financial life.
Once you suspect that your debt is starting to get as large as the federal government's, you may want to consider a quick diet for debt reduction.
Step 1: Stop incurring more debt-unless it's an emergency.
One thing I really hate doing is telling people how to spend their money. I prefer to help people identify the best lending deals. Unfortunately, the truth is that if you want to freeze your debt, you must freeze your spending, especially if you don't have the income to support that debt. No spending, no debt. Real simple.
Read More: Click Here
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