Do You Have Enough Cash in Savings to Cover a $1,000 Emergency?

If you answered, “no” to this question, you’re not alone.

A report recently released by the Associated Press stated that two thirds of all Americans would have a hard time coming with enough cash to cover a $1000 emergency.

Stop and think about this for a minute. Only one in three Americans have $1000 or more in cash available.

Americans on the edge of financial ruin

A report from the Corporation for Enterprise Development shows that things are even worse as nearly 50% of US households (132.1 million people) don’t have enough money in savings to weather a financial emergency or to even finance their long-term needs such as healthcare, college tuition and housing. And according to the Assets & Opportunity Scorecard these people would not be able to survive for three months if their income suddenly ended. More than 30% don’t have a savings account and 8% don’t have a bank at all.

Less than three months of savings

A lot of middle-class Americans are now considered to be “working poor.” In fact, more than 1/4th of all households earning $55,465 to $90,000 annually have less than three months of savings. And another 25% are categorized as net worth asset poor, meaning that they have very few assets such as a savings account, a home, or a car.

Relying on plastic

What’s happened is that when Americans can’t handle emergency costs they must rely on plastic. The average borrower is now carrying more than $10,700 just in credit card debt and 20% or one in five households continue to depend on high-risk financial services that target low-income and under-banked people.

Where do you stand?

Do you have enough cash available to cover a $1000 emergency? Do you have the equivalent of three months’ living expenses in a savings account? If not, and if you’re hit by an emergency expense you’ll have to do what many Americans are forced to do and that’s rely on your credit cards, which means piling on debt.

Start now

If your goal is to stay out of debt or to pay down the debt you have, there’s a simple answer. It’s called learning to live below your means – a fancy way of saying you need to learn to live on less money then you earn. To do this you will need to first determine where your money goes. This means you will need to track your spending for at least a month and then organize it into categories such as food, shelter, utilities, clothing, entertainment, dining out, debts, insurance and the like. Total this up and compare it to your net or take-home pay. Did you find you’re spending more than you earn? This would explain why you’re continually having to rely on your credit cards. You’re living beyond your means and need to go back, review your spending categories and look for areas where you could make cuts until your spending on necessities (food, utilities, shelter) totals no more than 40% of your net monthly pay.

The 40/30/30 rule

Most financial experts teach that the ideal budget is 40% for necessities, 30% for savings and 30% for discretionary expenses such as entertainment, eating out, clothing and so forth. If you find that, at this point, it would be flat impossible to hit that 30% for savings, try for at least 10%. For example, if your net monthly pay is $4500, try to stick away at least $450 a month into a savings account. Do this and you will have the equivalent of three months’ living expenses ($6075) saved up in just 13 months.

Earn more

If given your current financial situation. there’s just no way in the world that you could save $550 a month, there’s an alternative. It’s called finding a way to earn more. For example, you might be able to take on a part-time job working at a Staples, a Best Buy or a Dick’s Sporting Goods. This type of job generally pays only about $10 an hour, but it you could do 20 hours a week you would take home something over $600 a month.

Does working retail not appeal to you? There’s Uber and Lyft where you could literally determine your work schedule. If you’re an artist or a craftsperson you could put your handiwork on Etsy where it would be seen by thousands of prospective buyers. You could open a store on Facebook or create a website and sell stuff. And today there are also a number of offbeat ways to earn extra money such as renting out a room in your house (think Airbnb) or having your car wrapped with ads.

10 Offbeat Ways to Earn Money for Debt Negotiation

Debt settlement through negotiation is a very accepted way to get out of debt. The way it works is relatively simple. You contact a lender and offer to settle your debt by sending a lump sum payment for maybe 50% of your balance. If the lender accepts your settlement offer it will then treat the debt as paid in full – at least so far as you’re concerned. Of course, for this to work you must have the cash available to make that lump sum payment. For example, you might be able to settle a $4000 credit card debt for $2000 but this means you would need to have the $2000 in cash ready to send your lender either by wire transfer or certified check. Assuming you don’t have cash just lying around to send your lenders, where would you get the money? You could earn it working just part-time and by using some or all of these 10 offbeat suggestions.

1. Share your car

If you have a car and some spare time you could sign up to drive with Uber or Lyft. these two ride-sharing companies have become incredibly popular in most metro areas and for good reason. It offers a way for riders to get transportation at less cost than taking a taxi and for the people who drive to earn extra money. Driving for one of these companies is also very flexible as you can literally choose your own days and hours.

2. Rent out your car when you’re away

The company FlightCar says it service is better even than free airport parking. Why is this the case? It’s because the company will rent out your car while you’re on your trip and then pass most of the earnings on to you.

3. Have your car wrapped

When you sign up with the company Wrapify it will cover your car with a giant advertisement and you will then earn money based on how much you drive. If you live in a popular metro area and drive a lot, you can earn $50-$100 a week – just for making trips you would have made anyway.

4. Create and sell your own T-shirt designs

With the company Teespring you create your own cool T-shirt designs and then market them to friends, family members and relevant audiences. Your earnings are the spread between the cost of the T-shirts from Teespring and whatever you can sell them for. One of the best things about working with this company is that if your campaign does not hit a minimum critical mass of orders (that you sell) the shirts won’t be printed and you won’t be charged anything.

5. Rent your car when It’s just sitting around

Here’s yet another way to earn money without having to really do much of anything. The company Turo does what’s called peer-to-peer car rentals. This is an idea you might consider if your car sits idle a lot of the time. Newer and nicer cars in popular destination cities earn the most but even if you don’t live in a destination city you might be able to earn some extra dollars using Turo.

6. Show off your city to visitors

Vayable is where you serve as a tour guide and show off your city to visitors. If you enjoy meeting new people, have a passion for your city and had always thought you would make a good tour guide here’s your opportunity. As an example of hosted Vayable tours there’s one in San Francisco hosted by a woman named Freda called “Bike Wine Country” for $109 and an “Historic House Boat” tour with a woman named Victoria for $66. Could you offer visitors a unique experience in your city? If so, Vayable could be a fun way to earn extra money.

7. Sell your arts and crafts creations

The website etsy.com is easily the largest and most popular marketplace for handmade items. If you have an artsy and crafty side, you could create things and then put them on Etsy where they would be seen by the website’s thousands of prospective buyers. And if your items are truly unique one-of-a kinds you could price them accordingly and make some really big bucks.

8. Sell your expertise

If you’re an expert in some subject matter why not let the Expert Institute connect you with corporations and attorneys that will happily pay for your opinions and analyses.

9. Be a coach

If there are topics your qualified to help with you could sign up with PopExpert and provide one-on-one coaching and advice. This platform appears to specialize in mindfulness, wellness and health but it does offer experts in other fields as well. You get to set your own rates and can actually do virtual sessions from your office or your home and at your convenience.

10. Share your “Kit”

With the website Kit you create just that – a Kit with all the essentials that you would bring on, say, a business trip. You then create affiliate links where people could buy the products on Amazon. You would then earn money every time someone purchases a product you had recommended. In addition to creating a Kit for a business trip you could make up one for a beach vacation, a camping trip or a trip to a mountain resort.

The Biggest Pros and Cons of Debt Settlement

Debt settlement is not something to be taken lightly. Whether you try to settle your debts yourself or hire a debt settlement firm it’s important to understand its pros and cons.

The pros of debt settlement

  • The biggest pro of debt settlement is that you should be able to pay off your debts for less than their actual balances. In fact, in most cases you should save anywhere from 50% to 60% or more.
  • You should be debt-free in two to four years so you could then begin rebuilding your credit.
  • Some of your lenders may agree to re-age your accounts and bring them up to a current status. This would boost your credit score right away.
  • Debt settlement can be a very good option if most of your debts are unsecured debts and medical bills as they can all be included in debt settlement.
  • In most cases, the debts that you settle will no longer be subject to collection or other legal action so you could forget about debt collectors hounding you.
  • Since you’re settling debts for much less than their balances you should have more disposable income available to pay for your food, insurance and housing.
  • Finally, this should help you reset your financial life and give you a fresh start. You should have learned some valuable lessons from having gone through the settlement process that will help keep you from making financial mistakes going forward.

The cons of debt settlement

While debt settlement can help you enjoy a new peace of mind because you’ll be freed from the worry and stress of dealing with your debts it does come with its trade-offs.

  • If you choose to work with a debt settlement firm, you may be told to stop paying your creditors and use that money to make payments to the settlement company instead. When you stop paying your lenders, your credit score will take a definite hit.
  • Debts that have been settled are never reported to the three credit bureaus as “paid in full”. They will be reported as ” settlement”, “settled” or “settled for less than full amount”. This, too, will have a negative effect on your credit. Of course, if you are opting for debt settlement you probably already have bad credit so this may not be as much of an issue.
  • You will be saving money because you will be paying your creditors less but if you choose to use a debt settlement company you will be charged a fee, which will probably be anywhere from 15% to 25%. You should first do the math before hiring a settlement firm to see how much money you would actually save. For example, let’s say you had $35,000 in unsecured debt and the settlement company was able to get that down to $17,500. If it charged the full 25% or $8750 you would still have a net savings of $8750 ($17,500 less the $8750), which might be enough to justify choosing debt settlement.
  • Debt settlement can’t do anything about secured loans such as a mortgage or an auto loan as this type of debt cannot be settled. Some unsecured debts such as alimony, spousal support, family support, college loan debts and past due taxes also cannot be settled. 

So before signing up with any debt settlement company you should make a two-column list of your debts – those that can be settled and those that can’t. Add up the two columns and this will give you a good idea as to how much debt settlement could benefit you.
  • Some lenders won’t agree to debt settlement. These companies could end up selling your debt to a debt collection agency.

Weigh the pros and cons

As you can see there are some good reasons to choose debt settlement. But there are also reasons why debt settlement might not be for you. It’s important to weigh the pros and cons to ensure that debt settlement would be your best option. You should also consider some alternatives such as consumer credit counseling or a debt consolidation loan. These are both ways to get debts under control and paid off but without any of the cons of debt settlement. Of course, neither of these alternatives will save you money because only through debt settlement can you get your debts reduced. In the other two cases all you’re really doing is moving your debt around from one set of creditors to a new one.

To Get Out of Debt You’ll Need to Know These 6 Critical Numbers

There are a number of different ways to get out of debt including what are called the snowball method and the avalanche method. Other options include consumer credit counseling, transferring high interest credit card debt to a 0% credit card or getting a debt consolidation loan. While you could use any of these methods to tame your debt there are six numbers you must know in order to get started.

1. The total amount of your debt

Have you gotten in the habit of just letting your bills pile up on your desk or table because you simply can’t face them? It will be painful but you need to dig out all your bills and determine exactly how much you owe. Just grab a pencil and a piece of paper and your bills and write down each of their balances. This needs to include any auto loans, student loans, mortgages, credit card balances, personal loans, loans in collection and any private loans you’ve received from friends. Write this information down on the left side of the page so you will have room to add more information going forward.

2. Your interest rates

The next step is to write next to each of those debts their interest rate. The reason to do this is that one good way to pay off debts is by focusing all your efforts on first paying off the debt with the highest interest rate as it’s costing you the most money. This is commonly called the avalanche method. There is also the snowball method. It’s where you put the emphasis on paying off the debt that has the lowest balance first. Since you should be able to do this fairly quickly you’ll then have more money available to attack the debt with the second lowest balance and so on.

3. Your minimum payments

Regardless of whether you decide to snowball or avalanche your debts you need to know the minimum payments required on every one of them. You will list them in a third column on your page. Add them up and you will then know the total minimum payment required by all of your debts each month.

4. The total of your absolutely bare bones budget

It’s just impossible to make any headway in getting rid of your debt unless you change the behaviors that got you there in the first place. This will most likely mean you will need to trim your spending dramatically to determine the lifestyle you can actually afford. The best place to start this is by developing an absolutely bare bones budget. It should include only the bills you need to pay each month and the minimum amount of spending you need to do to get through the month. Sadly enough, this will mean eliminating many of your “extras” as you will need to learn to get by without spending much on entertainment, clothing and eating out. You may have to “cut the cable” as well as eliminating those trips to the health club or salon. But when you learn to live on a bare-bones budget you’ll free up money that can then be used to pay down your debts.

5. Your monthly net pay

If your family has multiple earners and you’re typical, you may not actually know your exact take-home earnings until tax time rolls around. You need to total up your monthly earnings and when you do, be sure that you’re using your take-home pay and not your gross salaries. The easiest way to calculate your total net or take-home pay is to just sit down and total up your family’s paychecks for the last month. The reason why it’s important to do this is that it will give you a better understanding of what you can actually afford as well as how much money you
have available to pay off your debt.

6. The amount of your discretionary income

By now, you should have a very good handle on your debt, your interest rates, the sum of your bare-bones monthly budget and your net income. If you add up your bare-bones budget number and the minimum payments you’re required to make each month and subtract this total from your net income, you’ll now have a pretty good idea of what’s called your discretionary income. If you use this money to either start paying down the debt with the lowest balance or the one with the highest interest rate, you’ll begin digging yourself out of that debt hole. Of course, you will need to do every month without fail. But if you do you’ll be on the path to becoming debt-free once and for all.

8 Household Expenses You Could Eliminate to Pay for Debt Settlement

Debt settlement has become an increasingly popular way to get rid of debts because it’s the only way to get them reduced. In fact, if you’re a reasonably good negotiator you might be able to get your debts paid off for fifty cents on the dollar using debt settlement. However, even this option requires you to have money – to pay for any settlements you’re able to negotiate. So what can you do to accumulate money for debt settlement? Here are eight household expenses you could eliminate and start banking the savings.

Rethink your grocery shopping

Of course, you have to eat. But that doesn’t mean you necessarily have to shop at Whole Foods or buy takeout for lunch five days a week. You can make a big impact just by eliminating all take-out and dining out meals. We know that fixing meals at home can be a pain but the food will be much better and fresher than anything you could get at a restaurant. If you find yourself going to the grocery store almost every day you could save a considerable amount of money by stopping this and learning to buy at least your necessities in bulk.

Have a plan

You should also have a plan before going to the grocery store and it should include coupons. However, we understand that couponing is not for everyone. What you can do instead is learn what the top 20 things you buy most often cost (think milk, eggs, butter and cereal). If you do this, then when you see the prices go down you’ll know you’re getting a good deal.

Cut your cable bill

You can get quality entertainment these days without cable although we don’t suggest that you ditch it altogether. It’s easy to Internet stream your programming using devices such as Roku, Apple TV or the Amazon Fire Stick. Streaming services such as Amazon and Netscape even allow multiple users so that you could split a subscription with family members or friends. Of course, you may need to wait several days after their original broadcasts to see your favorite shows but that should be a small sacrifice vs. the money you’ll be saving.

Reconsider your cell phone plan

Competition has become so fierce in the cell phone industry that you should be able to easily find a cheaper plan than your current one. For that matter, you might be able to get a better deal from your current carrier just by calling and threatening to cancel. Also, don’t be afraid to look at those pre-paid cell phone plans. These plans eliminate the guesswork as to how much your bill will be from month to month yet provide good service because these plans use the same networks as the big carriers.

Drop the landline

Ask yourself the question, “Why do I still have a landline?” The odds are you won’t have a very good answer or maybe no answer at all. Your friends and family members undoubtedly call you on your cell phone so that the only calls you get on that landline are junk calls. If this is the case, it might be time to unplug that landline for good. If there is some reason why you still need a landline – like because you run a business out of your home – you could invest in something like Ooma Tek, where you connect the phone to your router and can make voice calls nationwide for just $3.98 a month.

Shop for your insurance

The chances are that you’ve left your home, health and auto insurance with the same carriers for many years just because it was the easiest thing to do. But all insurance is negotiable so if you don’t shop around at least once a year you may be missing out on much better rates. The insurance business is like the cable business in that competition is high. Make just a couple of phone calls and you could get essentially the same coverage you have now but for 10% or even 15% less than you’re currently paying. Plus, there are the online insurance providers such as Esurance where you would undoubtedly get a better deal.

Do your own housecleaning

It’s very tempting to have a housecleaning service but even if you live in a small rental house you could be spending $100 or more for each cleaning. Multiply this by 12 and that’s probably enough to cover one month’s rent each year. So ditch that service and dedicate 30 to 60 minutes each week to speed clean your place. You could also divide that into five and 10 minute chunks each day. That way things will never get out of control.

Use carpooling

If you could carpool with some of your coworkers, you would save on both the cost of gas and parking. And you would have more time to read or catch up on your paperwork. Alternately, you could take public transportation or if you live relatively close to your work you could just ride your bike, which would not only save you a lot of money but would also help you get in really good shape.

8 Important Questions to Ask Any Debt Settlement Company

There are a number of ways to manage debt. But there is only one way to get debts actually reduced and that is to settle them by offering to make a lump sum payment for less then you actually owe. This option has become increasingly popular since the Great Recession. In fact, it has become so popular that many of the major lenders have waiting lines of people queued up to discuss debt settlement.

Why people choose to hire a debt settlement company

You could settle your debts yourself. This is called DIY debt settlement. However, most people choose to use a debt settlement company. There are several reasons for this not the least of which is that most people don’t consider themselves to be good negotiators. Second, if you choose DIY debt settlement you’ll need to have the cash in hand to make the requisite lump sum payments. Hiring a debt settlement company eliminates this because you’ll be sending it a fixed payment each month until it has settled all of your debts to your satisfaction. Of course, debt settlement companies are for-profit organizations and charge fees for their services. This is why it’s critical that you ask any debt settlement company these questions before signing an agreement.

Are you a member of the American Fair Credit Counsel?

Reputable debt settlement companies belong to this organization. It’s the watchdog of the settlement industry and its members must follow a rigid set of guidelines that include proper disclosure for consumers and maintaining practices to maximize consumer experience and completion rates.

How do you collect your fee?

No reputable debt settlement firm will try to collect its fee upfront. In fact, this practice has been banned by the Federal Trade Commission. A reputable settlement firm will determine its fee (usually 15% to 25% of the total amount of your debt) and then add a percentage of it to each of your monthly payments. For example, let’s say you owe $18,000 in credit card debt and the settlement company charges you 20% or $3600. If your program is for 24 months, then the settlement company would add 1/24th of that $3600 or $150 to each of your monthly payments. However, it won’t collect the $3600 until it has settled all of your debts. This actually amounts to a 100% satisfaction guarantee because you could drop out of your program at any time and it won’t have cost you a cent.

Have you had many client complaints?

Virtually every debt settlement company has had some client complaints as that’s just the nature of the business. However, the good ones won’t have very many of them. The way you can determine this is by searching for the company on the BBB (Better Business Bureau) website to see the number of complaints the company has had and how many were closed (successfully resolved). If the company has had numerous complaints and has a short history then it’s one you should definitely avoid.

Are you a member of the International Association of Professional Debt Arbitrators?

Members of this association have passed a training and certification program. This program requires participants to read and understand the Fair Debt Collection Practices Act and have had training in negotiating techniques, proper ways to communicate with lenders and budget analysis.

What‘s your right-of-recession period?

Right-of-recession is the amount of time you have to cancel out of your agreement after you’ve signed it. The purpose of this is to give you time to review your paperwork one last time and ask any questions before committing to a settlement program. For example, if a debt settlement company has a three-day right-of-recession and you sign an agreement on February 5 you would have until February 8 to cancel without any cancellation fees or penalties. Naturally, the longer the right-of-recession the better.

Are you a full service company?

Some so-called debt settlement companies are basically marketing organizations. Once you sign an agreement with them your file will be immediately transferred to a second company that handles all the negotiations and provides the customer support. This second company may have so many clients you have a big problem just trying to contact it. In comparison, debt settlement companies that are full service will handle every aspect of your case from negotiating to consulting and client support.

Will I be able to access my account online?

A reputable settlement firm will operate very transparently so that you’ll be able to go online and see exactly what work has been performed on your behalf. You should be able to see recent activity and progress as well as all settlement offers that have been made and the responses from your creditors. And, of course, you should be able to send emails directly to the company’s customer support department.

6 Surprising Truths About Getting Out of Debt

You’ve made the big decision. You’re finished struggling with your debts. You’ve taken the pledge to do whatever’s necessary to become debt free. We say, “Good for you!”. You have a journey ahead of you that will be bumpy at times. But it will be a bit easier if you understand in advance these six truths about getting out of debt.

Changing can be difficult

Unfortunately, there’s no way to get out of debt without making some serious changes in your lifestyle. You will need to begin budgeting and tracking your spending so that you can see where your money goes each month. It’s likely that you will need to forget all about that muffin at work and those daily drive-through lattes. Instead of going to a decent restaurant for lunch you may have to go to Taco Bell or brownbag it. Or it might require you to make even more substantive changes. You may have to cut the cable and find inexpensive ways to stream your entertainment. If you have memberships in health clubs, salons or spas you may have to cancel them. You may have to dramatically slash your budget for eating out and for entertainment. But remember, you’ve made the big decision. You’re serious about getting out of debt so you’ll need to embrace these changes. There may be times when you’ll find this hard to believe but change is good when it brings great new things into your life.

You will need to learn the true necessities

Things we do over and over begin to feel like necessities. But upgrading to the latest iPhone is not a necessity. Buying a newer car is not a necessity. Trips to the gym are not a necessity. And upgrading your wardrobe every year is not a necessity

The fact is the only real necessities of life are food, water, oxygen, basic clothing and shelter. The faster you accept this the faster you will get your debts paid off. In addition, once you understand this, the pressure to always be upgrading and constantly buying stuff will go away and you’ll probably find your life to be less stressful and more peaceful. We drive a 12-year-old car that runs beautifully. Every time we step into it we feel at peace knowing that it’s totally paid for.

Not everyone will be supportive

This may be hard to believe but not everyone will be happy about your quest to become debt free. While most friends and family members will applaud what you’re doing, there are others that won’t be very supportive. In most cases these will be people that don’t have to worry about debt. “What do you mean you can’t go to the movie with us? It’ll only cost you like $30.” When you hear comments like this, stay strong. Keep reminding yourself that what you’re doing is right for you and your family.

Staying on track can be tough

One of the basic truths about getting out of debt is that it requires perseverance. You will run into roadblocks and setbacks. Maybe your hot water heater will quit working or you need to replace your roof. There may be unexpectedly big medical bills or there may be times when you just fall off your budget. When you run into issues like this you basically have two choices. You can either give up and go back to managing your money with no thought about your future or you can buckle down, persevere and keep going. As Newt Gingrich once said, “Perseverance is the hard work you do after you get tired of doing the hard work you already did”. And this is no truer then when it comes to getting out of debt.

You may have to face some underlying issues

You may find, as many people have, that accumulating debt is not just about the money. In many cases there were underlying reasons why you got into debt in the first place. Was it because you were afraid to disappoint your partner or your family? Were you trying desperately to keep up with the lifestyles of your friends or family members? Whatever were the underlying issues as to why you got into so much debt you need to face them, which will require courage on your part. However, if you can successfully overcome those issues you will permanently eliminate the effects they’re having on your life.

It will feel much better than you can even imagine

When you get all those debts paid off you may, for the first time in your life, be able to quit worrying about money. Living this way can be truly amazing. Just imagine how it will feel paying your bills every month on time because it’s simply something you do. There will be no more sleepless nights thinking about how you’ll be able to cover all of your bills. You’ll always have enough money to cover the necessities of life with money left over for those things that are not truly necessities. And wouldn’t this all be pretty great?

The True Facts You Need to Know About Debt Settlement

Debt settlement has become a very popular way to get debts paid off – especially since the Great Recession. The best part of debt settlement is that if you’re a good negotiator you might be able to get your debts reduced by 40% or even 50%. Unfortunately, there is a serious downside to debt settlement. You must have the cash in hand to pay for any settlement you negotiate. There are two reasons for this. First, it’s a great negotiating tool. If you can tell a lender, “I can only pay you 50% of what I owe you but I can send you the money tomorrow” you can almost bet your offer will be accepted. Second, if you can’t pay for the settlement immediately there’s actually no reason for the lender to settle with you.

It will be a very lengthy process

If you’re so seriously in debt you’re considering debt settlement you need to know it will likely be a lengthy process. Let’s say for the sake of the example that you owe $6500 to one credit card company, $4000 to a second, $3500 to a third and $6000 on a personal line of credit for a total of $20,000. If you were able to settle those debts for fifty cents on the dollar you’d still need to have $10,000. Since it’s pretty unrealistic to think you’d have that much money in one lump sum you would need to make a plan to pay them off one at a time, which will likely take you two or even three years.

You may have to get in line

Debt settlement has become so popular that when you contact a lender you may be told that you have to get in line in order to negotiate with someone. Or you may be told to call back in a month or two. Or even worse you might be told, “we’re just not doing debt settlement at this time”.

Your interest charges will continue to accrue

Your lenders won’t stop charging you interest all the time you’re working on paying off that first debt. So you’ll be incurring interest on all the others and it will continue to compound – even if you make their minimum monthly payments. Going back to that hypothetical $4000 debt to a second credit card company at 18% interest if you make a minimum payment of $120 a month your debt would be increased $1,394.68 after just two years and you would now owe $5394.68.

You would need to be a very good negotiator

When you first call a lender it’s unlikely you’ll be talking to someone with the authority to negotiate with you. It may take you some time to work your way up through the company’s customer service telephone tree to get to someone who does have that authority. And that person won’t be your friend. Her or his job is not to give away the company’s money. This person will be a very experienced and tough-minded negotiator. If you want to settle that debt for, say, 50% of what you owe you will need to be equally tough-minded and a very good negotiator yourself.

You need to prove you’re having a financial emergency

No lender will agree to settle a debt just because you ask nicely. You must be having a financial emergency. This could be that you lost your job, had a divorce, there was a death in the family or you had suffered a serious illness. Whatever the case you must have the documentation available to prove your financial emergency. This could be pay stubs, a termination notice, your divorce decree or a pile of medical bills.

Why people choose debt settlement companies

Now that you know the true facts of debt settlement you should be able to understand why so many people choose to hire debt settlement companies. First and probably foremost, using a debt settlement company eliminates the need to have lump sums of cash available to pay for the settlements. Instead, you will pay the debt settlement company a set amount each month.

The debt counselors at debt settlement companies such as National Debt Relief are trained and experienced. They are almost always able to negotiate better settlements than people can themselves. Equally important, they have excellent working relationships with all the major lenders so can get easier access to the right customer service people.

Finally, using a debt settlement company eliminates the need to prove a financial emergency.

How much do debt settlement companies charge?

Debt settlement companies are for-profit organizations. The reputable ones charge a fee that is typically a percent of your total debt. They divide this fee into the number of months it will take them to settle your debts and then apply that amount to each of your monthly payments. However, they typically do not collect that money until they have settled all of your debts. This essentially means a 100% satisfaction guarantee as you could pull out of your plan at anytime and not pay the settlement company a single cent.

Should You Try to Buy a Home With a Zero Down Payment?

If you are a veteran, you could get a VA loan with zero down. But a better question than should you try to buy a home with zero down is would you be able to keep it? Some people have described a house as a hole in the ground you continually shovel money into. And there’s more than a grain of truth to this. You could move into that zero money down house only to find two months later that your water heater had failed or you needed an expensive air-conditioner repair.

Make a five-year plan

A better idea than trying to buy a home with zero down would be to make a five-year plan to save enough for a really decent down payment. This might require you to make some sacrifices. You will need to determine your unnecessary expenses and then cut them out. What some people have done is consider themselves broke. When you do this you will stop all of that eating out and get rid of that expensive cable TV. There are a number of ways now to get your entertainment without spending $80 or hundred dollars a month. The DISH Network offers a plan called Sling TV where you can get 20+ channels including ESPN, AMC, TNT and Disney for just $19.95 a month. If you love movies you could add Netflix for $9.95 a month and get virtually all the entertainment you could want for less than $30 a month. Amazon Prime is also a good bargain as you can now subscribe to its Prime Membership Plan and get thousands of movies and TV programs for $11a month instead of having to pay $99 in one lump sum.

Get rid of your credit card debt

Americans are now carrying an average of $5700 in credit card debt. We hope you’re doing better than that average. But if you’re really serious about saving enough money for a down payment on that dream house you need to first get rid of your credit card debt. Since it’s unlikely you’ll be able to pay it off all at once you will need to create a plan. One of the most popular ways to repay debts is through a strategy called debt settlement. This is where you contact your lender’s and offer to pay off – or settle – your debts for less than you owe. If you’re experiencing a true financial emergency many lenders will agree to settle with you. And if you’re a good negotiator you might be able to get your debts whittled in half. Of course, you will need to have the cash available to pay off your settlements. Otherwise you will need to either find a different strategy or hire a debt settlement company.

Develop a new way to look at your spending

We read recently about a new way to look at expenses that made a lot of sense to us. Let’s say you get a drive-through coffee for $2.95. Since you didn’t really need the coffee or could’ve bought coffee with you from home that would be an unnecessary expense that you could have avoided. That $2.95 is now gone forever and you are now $2.95 behind where you were before and need to make another $2.95 to replace it. This means you are really out $5.90. That’s the $2.95 you just spent plus the future $2.95 you will have to earn to replace it. That’s the only way you will have the same amount of money that you had before you spent the $2.95.

Calculate the true cost of your spending

If you use this new way to look at your spending on unnecessary items, you should be able to cut out a lot of them. Take that $80 cable bill we mentioned earlier on. If you view $50 of it as unnecessary spending that’s really $100 a month you’re out of pocket or $1200 a year. Put that $1200 in a savings account and after five years you’d have $6000, which might be enough all by itself for your down payment. If you were able to find another $100 a month in unnecessary spending and add it to your savings account, you’d have $12,000 after five years. That should be enough to cover your down payment with money left over for those little unexpected expenses of homeownership.

Those sacrifices won’t look so much like sacrifices

If you can change your thinking and view your expenses as we have suggested – and learn to think long-term – the sacrifices you’re making now may not seem so much like sacrifices. Just try to think about cutting out those unnecessary expenses and saving the money as stairs to a better future and you’ll definitely have a better future to look forward to.

Is It Possible to Fit the Best Financial Advice on a 4”x6” Index Card?

Helaine Olen and Harold Pollack published a book earlier this year titled, “The Index Card,” subtitled “Why Personal Finance Doesn’t Have to to be Complicated”. The way this book came about is that Harold was challenged to put his best financial advice on a single index card. Believe it or not, he was able to do this. And from this emerged The Index Card Challenge where people were challenged to get their best personal finance advice on a 4″ x 6″ index card.

The most important part

The most important part of this book’s title may not be “The Index Card”. It may be “Why Personal Finance Doesn’t Have to Be Complicated”. That’s because the truth of the matter is that many people tend to over complicate personal finance when in fact it can be pretty simple. For example, the first piece of advice on Pollack’s index card is one that just makes common sense and that most of us already know – which is max out your 401(k), especially if your employer matches some percentage of your contribution.

How much to save?

If you sat down to write your financial advice on an index card probably the next thing you would add is to save some percentage of your money. Prof. Pollock suggest 20% though many people would say 25% as this would get you to retirement much quicker. What would you advise about buying stocks? This is another area of disagreement. Prof. Pollock advises you to never buy an individual stock because it‘s really hard to pick winners. Plus, the person on the other side of the table knows a lot more about that stuff that you ever will. If you agree with Pollock your financial advice might be to buy inexpensive, well-diversified mutual funds such as those offered by Vanguard.

Another one that just makes common sense

What would you tell one of your children about credit cards? You’ll be doing him or her a great disservice unless you write down on your index card, “pay your balance in full every month”. You may have read the famous Carl Sandburg line that “the fog comes in on little cat feet”. That was his way of saying that fog can creep up on you practically unnoticed. Unfortunately, the same thing is true of credit cards. If you’re not careful and fail to pay off your balance at the end of every month you could be deep in debt before you really notice it. And if you carry a balance forward you will quickly fall victim to the power of compounding interest, which is when you pay interest on interest. What’s even worse is if you pay only the minimum amount on a credit card debt.

Tax advantaged savings

If you’re not aware of tax advantaged savings plans you may not have written anything about them down on your index card. But plans such as a Roth IRA and a 529 account are always good ideas. Roth IRAs are tax advantaged in that you pay income tax on the money when you deposit it but it’s tax-free when you turn 55 1/2 and begin withdrawing it. In addition, any investments you make within a Roth IRA are also tax-advantaged. If you are self-employed you might open both a Roth IRA and SEP-IRA. SEP stands for Simplified Employee Pension Plan. It’s a variation of the traditional IRA as a way for employers to provide themselves with retirement benefits as well as any employees. One of the most significant advantages of a SEP is that if you are self-employed with no employees there are no significant administration costs. And since a SEP is a type of IRA you can invest your money the same way as with a traditional IRA.

Watch out for fees

The problem with fees is all they do is consume money you should be saving for retirement. You should also write down on your index card to avoid what are called actively managed funds as they have the same downside. More and more people are now using a Robo-advisor such as Betterment to manage their investments as the fees it charges are much less than you would pay a financial advisor. For example, as of this writing Betterment’s fee for managing $100,000 was just 0.15%. Since Betterment doesn’t have a minimum investment you could invest less than $10,000 and your management fee would only be 0.35% or $3 a month.

Don’t buy stuff

Pollock did not include this on his index card but it’s one you might put on yours. It’s don’t buy stuff, buy experiences. Stuff tends to get old and wear out or go out of fashion. In comparison, experiences can last a lifetime. For example, you could spend $1000 on a big, wide screen HDTV only to want to replace it in a few years with a 4K HDTV. Or you could spend that $1000 on a week-long camping trip in the high Sierras and have memories that would last forever.

See how simple this is?

You could spend countless hours reading books on personal finance or as you have read, you could just sit down and write your best advice on a 4” x 6” index card. Personal Finance is actually pretty simple. All it really requires is a little thought, some common sense and, yes, a 4”x 6” index card.