Debt Consolidation Help Blog

posted by Admin on Nov 30

Sometimes debt can seem overwhelming. In those instances, or even before things get that far out of hand, get back to basics and try some of these debt handling solutions.

BASICS Lower insurance deductibles for your homeowners, renters and vehicles policies where appropriate and save money. Dont take chances on bouncing checks; instead get covered with overdraft protection and pay about the same as what it would cost for one bounced check to cover our account for an entire year. Ask your banker about packaged account services. Many offer free savings and checking accounts with free overdraft protection and checks, free online bill paying and more. When you shop, check your receipts, even for groceries. Many times items ring up at incorrect prices. Sometimes store policy allows for no errors, meaning you get the items free if it wrings up wrong. So carry along a handheld calculator or pencil with small notepad to tally up your charges.

REACH OUT- If you have medical debt, the first thing healthcare offices try to do is get you to charge the bills or refinance your home, etc. STOP. Before you take such a drastic step, check with legal counsel. There are often other steps to take first. For example, notify the billing parties and tell them you need to apply for financial aid. Many have forms to complete, and although they may be lengthy, remember theyre for free money to pay your bills. Reach out, take forms and fill them out. Then set up minimum payment arrangements for the remaining balances, even if its just $10 a month for 30 years. Healthcare bills are not like credit card debt and do not need to be reported to the credit bureau in the same manner.

Also reach out with merchandise and return any recently purchased items that you can for a refund. Credit cards and mail order companies generally allow you 30 days to inspect your purchase. Return any you can for refunds. If purchases are beyond the 30 days and for various reasons dont hold up to their end of the bargain; i.e. they broke already or never worked right to begin with, get on a letter writing campaign pronto. Write the place of purchase and copy the manufacturer, the distributor, the Better Business Bureau and your state Attorney Generals Office. State the reasons our product is faulty and that you want a refund. Its often rewarding to get help with other entities like these. No need to go it alone!

So before your debt gets out of hand, take charge and get back to basics. Put some of these debt handling solutions into practice and make the most out of what you have.

e.

posted by Admin on Nov 30

(The author of this article is not a tax attorney, CPA, or enrolled agent, and this is not to be considered tax advice. If you need tax advice, you should consult someone who is certified in this arena.

Did you hear about Bill Gates? He decided to give away all his shares of Microsoft and start working at a car wash in Seattle. When Larry King asked him why he decided to do it, Gates admitted that he was losing too much money on the taxes. You see—by making $7 an hour, he would be in the lowest tax bracket, and if he could manage to make less than $19,000 a year, then he would not have to pay any taxes at all! Back when he was making a $1 billion annually, he was left with $500 million after taxes every year. So Gates thinks he can make more money this way.

As preposterous as the above example sounds, its exactly the same logic employed by consumers who fear the tax implications of debt settlement. For one, most people enrolled in debt negotiation programs dont have to pay taxes on their savings as is (more on this later). Secondly, why in the world would it ever even deter you from enrolling in a debt settlement program anyway? Its literally the equivalent of someone turning down a million dollar salary for minimum wages because of the favorable tax implications. Consider the following scenario.

Frank owed $20,000 at 19% interest when he enrolled in a debt settlement program. When it was all said and done, Frank was able to reduce his debt down by 45% and in the process he saved $9000 off the balance alone. Unfortunately, each of his creditors reported his savings to the IRS and he was forced to tack on $9000 to his $40,000 annual income. So he was taxed like he made $49,000, which put him in the 30% tax bracket and meant he had to come up with $2700 on April 15th. Regrettably, Frank did not have the money, so he got on a payment plan with the IRS, who charged him their current interest rate, which happens to be 8 percent annually. In the end, Frank paid off the IRS in 1 year for $2916. This means that Frank in actuality only saved about $6,000 off the balance. So would Frank have been better off continuing to pay the minimums instead of settling his debts? Lets see. He saved $6,000 off the balance alone and roughly $40,000 in interest charges, which brings his net savings to $46,000. Its pretty clear that it was still in Franks best interests financially to do debt settlement.

It does not end here. Most debt settlement candidates never have to pay taxes on the debt anyway. The IRS exempts anyone who was technically insolvent at the time their debt was settled from having to pay taxes on the savings. So the next question is, what does it mean to be insolvent? According the IRS, someone is insolvent when their assets (what you own) exceed their liabilities (what you owe), and it should come as no surprise that when someone is at the point when theyre seeking debt relief, theyre probably in debt up to their eye balls and therefore are insolvent. If you owe more than the value of your assets, then all you have to do is fill out IRS form 982 along with your tax return illustrating this fact. All told it will probably take you a couple hours to do this, and if you saved $46,000 like Frank in our example, then its the equivalent of making $23,000 an hour. Unless youre Bill Gates, its probably worth it.

th it.

posted by Admin on Nov 29

Im sure you have been told about the availability of debt consolidation companies, programs and services that can help you get out of your debt problems. Especially since these debt consolidation companies are growing and coming up like nobody business, with more American getting into debt problems nowadays.

The ease of getting credit and loans certainly did not help American from getting into debt problems. But the biggest question is can these debt consolidation companies really help you get out of debts?

Debt consolidation is only a method, or rather a system to help you get out of debts. The ultimate work hard has still got to be done by you.

Be honest with yourself now, Are you in debt because you overspend or because you spent beyond your capabilities? Well, its really a no-brainer: you will not be in debt if you dont over spend! Im sure you agree with me.

And if you dont know yet, overspending is a habit. To me, its just like smoking a bad habit. Like buying gums to help you quite smoking, Debt consolidation companies is just a tool to help you break off your bad habit, the hard work has still got to be done by you.

Take quitting smoking for example, if you think you have successfully quit smoking because you have make the first move to buy a quite smoking gum, you are just been na?ve period. Its just the first step forward to correct your habit, and the hard work is yet to be done.

Going back to debt consolidation, Im trying to say that debt consolidation is only the first step to work back your financial health. You still got to put in effort, be discipline and keep to your financial plan such that you can clear your debts and live a debt-free life again.

gain.

posted by Admin on Nov 29

Do you sometimes feel like youre making a lot of sacrifices to live debt free? Debt free living is easy if you dont have any debt. But, living debt free and working to eliminate debt, at the same time, can be a struggle. It can feel like youre always giving up what you really want to meet that goal.

Sometimes we cant help but get discouraged. Our desires and wishes get the best of us from time to time. But, it seems to me that things always work out for the best if you just hang in there a little longer.

On a diet commercial the other day, they said that all cravings pass within about 15 minutes. If you can just hold off for those 15 minutes, the craving will pass. Ive found this to be somewhat true with impulse buying. Justification of a non-purchase takes about 15-20 minutes and the urge to buy goes away. Let me tell you my own experience.

Ive been wanting a front loading washer and dryer set ever since they become popular styles for the home. Each time I go into a store that sells them, I stand and gaze at the beautiful pieces of machinery and even go so far as to compare prices. But, even at the low end, a set of these machines will cost you about $1600. I couldnt tell you how many times I almost approached the salesman about that easy pay plan.

Each time I hesitated, and after about 15 minutes of thinking about it, I would walk away. I would tell myself that the purchase wasnt necessary right now. Besides, my antique washer and dryer were still working by some miracle . And, I didnt really need a set that cost $1500 when I could get a perfectly fine washer and dryer for about $650, when I really need them.

Talking yourself out of a purchase is hard when youve been talking yourself into them for so long. Justifying a non-purchase for the cause of living and becoming debt free is well worth it. I have about four years to go before I see zero debt. After that, I can save enough to buy any washer/dryer set I want in as little as two months, based on my current debt payment. By then, my tastes and the styles may have changed.

I got my new washer and dryer. They arent front loaders and they arent new. But, they are new to me. During a remodeling project, a friend discovered that the machines they had would not be accommodated in the space and decided to invest in a new stackable set. They are less than five years old. Less than 1/4 the age of my current set (which wasnt even a matching pair), and in great condition. We acquired both for a total of $150.

Im happy with the purchase. It satisfies my goal to become debt free and saved me money. Its a debt free purchase I can live with! Now, I dont have to worry about getting stuck without a washer or dryer. The old ones were getting temperamental and it was obvious that the day of retirement was nearing for both. Living without a washer and dryer is just not practical with a family of six.

Living to become and remain debt free is often a challenge in a world thats credit card crazy. We live with constant exposure to credit card debt pushers. If they cant get you at home, by mail or TV commercial, they get you as you walk in the door of the store and at the checkout.

When you want something and you happen to stop and look, just remember the 15 minute non-purchase theory. Walk around and justify not making the purchase for at least 15 minutes. Thats long enough to talk yourself out of it and save the day. Youll save money and stay true to your goal to become or remain debt free!

posted by Admin on Nov 28

I want you to take a good long look at your debt. Do you really know what it costs you to be in debt? Are you thinking that you can handle it or is it getting you down?

Once you start really analyzing your debt position and the cost (to yourself) of having the debt, the results can be mind-numbingly shocking.

Ive found that debt is a lot like smoking. When you start out, you believe youre in control and you can quit at any time. As the months and the years roll past, this initial belief does not fade away. With every debt you incur, the mantra I can afford this, repeats itself in your subconscious until you wake up one morning and realize that youre in over your head.

Debt has well and truly caught you in its trap. Debt has become a bad habit.

And just like any bad habit, debt requires as much hard work and discipline to shake. The first step in the process is to acknowledge that you have a problem instead of turning a blind eye, hoping it will go away or thinking that youll get around to it some day in the future.

One of the motivators to setting your feet on the path to debt free living is to look at the real cost of that debt. What is it doing to you? Where does it hurt the most?

Most debts (the ones that make you cry into your morning coffee anyway) are the ones that are incurred for a period exceeding one year. Youve probably seen or heard advertisements that go something like this:

Buy your Wiggly Snoogle for this special one time limited offer today 24 easy monthly instalments.

Beware this is where you can fall into the deadliest trap of them all. The interest rates are usually above average and youre stuck into a long term contract. Yes, getting your Wiggly Snoogle with the 25 000 features sounds like a good idea because of the easy monthly payments; especially if you compare it to the one time lump sum payment. (By the way, using the lump sum to monthly payment comparison is a well known sales technique to separate you from your hard earned cash.)

Lets take this out of the realm of philosophy with a real world example:

You borrow $ 10,000 to buy a new car. Over a 48 month period thats 4 years of monthly payments you will be paying an additional $ 2,000 in interest. So, your $ 10,000 vehicle is actually costing you $ 12,000. The cost of that debt is a whopping $ 2,000. If you had taken that $ 2,000 and invested it over the same period, it could have grown to $ 3,000. Instead, it has disappeared into someone elses pocket never to be seen again.

This is where the lenders make their money. The longer they can have you in their clutches, the longer they can smile all the way to the bank and you groaning on the way to work.

Now Im not saying that you shouldnt have a car its just an example of the REAL cost of debt. Sometimes debt is unavoidable, but as a species weve become too complacent about debt and we jump into it without thinking.

Your Magic Plastic (a.k.a. Credit Card) is another one of those fiendishly sneaky evils the banks developed to rid you of your money. If and thats a big if you manage your credit card correctly and pay off the full amount at the end of each month, they can be great to have and smooth the little rough patches in life. But most of us only pay the minimum amount required each month and thats exactly what the banks want. It leaves you in the red and owing them money. Which gives them ample opportunity to apply the thumb screws. Remember, every month youre in the red, youre paying interest on the outstanding amount which gets added to your bill.

The big mistake we all make is to look at our monthly statement and say: Hey, thats not too bad. I can still afford my repayments. And I have some credit available to buy that wiggly snoogle as well! The problem arises when you battle to make your income stretch through the month because of the various different repayments you have to make.

Its critically important that you start looking at the TOTAL COST of your debt over your lifetime. Once youre over the shock and horror of how much of your hard earned cash is going up in smoke, youll be in a position to tackle the problem head on and take the path to debt free living.

Remeber: Bad debt is a bad habit.

ber: Bad debt is a bad habit.