Discharge of Debt - Cutting my Credit Card Bills
There are many companies out there offering ways to reduce credit card debt. While this sounds like a great idea, you need to get more details. After all, if it sounds too good to be true, it probably is.
What these companies are not likely to tell you is that they usually reduce your income by getting the credit card companies to discharge some of your debt. Which may sound great but will have a very negative effect on your credit score. Thus, while it may help you in the short term, in the long term doing this will result in higher interest rates the next time you try to get a card, vehicle, or house.
In the past, many people dealt with credit card debt by taking out second mortgages on their house to pay off the debt. Now, however, it is difficult if not impossible to do that in many states due to the declining home values and reluctance of banks to lend money.
The best way to get rid of debt without negatively affecting your credit score is to not accumulate debt in the first place. However, if you do have the debt, you need to come up with a plan to get rid of it. Start budgeting to pay a certain amount of the credit card each month and don’t put anything extra on the card. It is nearly impossible to pay off a large credit card debt if you keep putting more debt on the card. While that can be very tempting this time of year, to get ahead you have to say no.
One way to keep from spending on your cards is to keep them in a safe or drawer rather than your purse. If the credit card isn’t always right there tempting you to use it, you will be more likely to just buy spend wisely because you know the money is coming directly out of your account rather than thinking about a bill that will have to be paid someday in the future.
Once you get out of the habit of reaching for the card for impulse purchases, you will be amazed to realize that you don’t really need the credit card as much as you thought. Try living without a credit card for 3 months. At the end of that time, you will likely realize that you haven’t even missed it and that your finances are in a better position because you are watching your spending more carefully.
The best way to get rid of credit card debt is to not have it in the first place, but if you do have debt that you need to get rid of, put the card in a place you won’t be tempted or cut it up. Then, set aside some money each month to start paying down the balance. I would also recommend using any extra money you receive such as your income tax return or some extra cash from friends or your boss at Christmas to pay down a little extra on the debt. Life really is much simpler and less stressful without the debt. Try it and I’m sure you will feel the same.
What if I get laid off?
Christmas is literally just around the corner and the market delivered more bad news today. In November a record 533,000 people lost their jobs and 1 in 10 families is behind on their mortgage. That doesn’t paint a very pretty picture of the economy or encourage must optimism in market forces. Instead, many people are wondering if they could be next. The best way to survive this economic crisis is to make a plan.
In several of the previous columns I mentioned the importance of budgeting, whether you are budgeting to ensure you have enough money to pay the bills, shop for Christmas, or save for retirement, budgeting is key. In this market, you also need to be budgeting for the rainy day possibility that you may become one of the thousands losing their jobs.
In the past when times got tough, Americans got plastic. Now, however, credit cards are increasing their fees and interest rates and reducing their credit limits because they are afraid of not being able to last this crisis either. Like it or not, Americans now need to prioritize their needs, learn how to budget, and start saving, which means eliminating the plastic unless you can afford to pay the entire bill when it comes due.
By prioritizing what you need from what you want, you may find that you can live without a few little comforts and use the money you would have spent on that to pay down your credit cards or save just in case the unthinkable happens and you do get laid off. The government can’t save everyone.
Shopping Alone
I have written before that one way to save money is buy bring a To Buy list every time we go grocery shopping. This is because if we have a clear view of things that we truly need, there is not much time and energy spent deciding which things to buy. Also, this helps not to go over the budget.
I would like to add that when doing our grocery, it helps if this is done alone, without the kids in tow. I know this is a fun time to be with the kids so that they can take part in the activity too but if one is working on a budget, it might be difficult to say no to the items the kids will put on the grocery cart. Add to this that after grocery, the kids might be hungry and then there will extra expenses for food and other stuff. Sad to say, this will ruin the budget and it will be difficult to come up for money to cover for this.
While it is indeed a fun, bonding moment to do grocery with the kids, maybe this can be done once in a while or maybe if you or your husband just received your paycheck. Think if there is money to spare, if there is by all means, have the kids tag along. Otherwise, it is better to do this alone.
5 Tips to Help Cut Back Expenses
Most everyone at one point in their life is going to go through a period where finances are short for a long period of time. Sometimes it’s due to the loss of a job, sometimes it’s due to a major hospital stay, or a new child, or maybe you’re just starting out on your own. For whatever reason, you need to learn how to cut back on expenses so that you don’t run up more debt. Here are 5 tips to help you in that respect.
Reduce your utility bills. Take steps to help cut down on your light bill by cutting off unused lights, turning off the computer when not in use, using high energy appliances less, etc. If you have a water bill, cut down on the consumption of hot water and water in general, especially during the summer. If you make a lot of long distance calls, reduce the amount of time your on a phone, or even get an unlimited long distance plan.
Reduce or eliminate your cable or satellite bill. If you have an extensive DVD collection and are able to get basic TV channels without cable or satellite, then cut out that bill. If you have to have cable, then get basic cable. Stay away from all the fancy packages. There are plenty of channels on basic cable.
If you have both a phone and a cell phone, get rid of one. In today’s age, unless you have a real need to have both a home phone AND a cell phone, the extra phone is just a luxury. Also, if you are someone that has very low talk time on the phone, you may want to think of going to a prepaid plan on your cell phone.
Reduce entertainment expenses and unnecessary travel. This may mean telling your friends that you cant go to the big game or to the movies with them some of the time, but in the long run this can really rack up some saving.
Get rid of your vices. This is the hardest thing to do for some people. I know a lot of people that talk about how they are broke all the time or are complaining about money, yet they still are able to keep themselves in cigarettes, beer, or whatever their vice may be.
Taking some of the steps above can help reduce monthly expenses and help get you through hard times and help you avoid going into debt.