6 Things You Must Do After Debt Settlement

If you’ve chosen debt settlement as a way to become debt free, congratulations! You’re now part of the thousands of other Americans that have used debt settlement to achieve debt relief.

It is possible to settle your debts yourself. But most people hire a professional debt settlement company. The biggest reason for this is that they simply don’t have the cash required to make the lump sum payments that are necessary in debt settlement. Hiring a debt settlement company eliminates this as people in debt settlement programs are required only to send one, affordable payment a month to the debt settlement company. Beyond this, here are six tips that can help with debt settlement and make your financial life much, much easier.

1. Cut up your credit cards

Yes, cut them up or burn them. It was probably credit cards that got you in trouble with debt in the first place so why would you want to keep them? You don’t want to cancel those cards because that would have a seriously bad effect on your credit score. The reason for this is that 15% of your credit score is based on the average amount of time you’ve had credit.
If you cancel all your cards, your average is bound to drop and so will your credit score.

Cutting up those credit cards also means you’ll have fewer financial accounts to worry about, fewer erroneous and miscellaneous fees and your credit reports will be much cleaner.

2. Consolidate your accounts

Do you have three checking accounts, two savings accounts and three retirement accounts? Why in the world would you have this many different accounts? You should be able to consolidate this down to one checking account, one savings account and no more than two requirement accounts – a traditional and maybe a Roth IRA or a traditional IRA and a 401(k) account. This will simplify your financial life so that you’ll be ready to get a fresh start after debt settlement.

3. Create a post-debt settlement budget

Once your debts have been settled the last thing you want to do is fall back into those practices that got you in trouble with debt in the first place. This means creating a budget. There are numerous smart phone apps and software programs that make it easy to create a budget. However, before you create one you need to track your spending for at least a month and, again, there are smart phone apps that can help with this. Some of the most popular of these are Cashbook Expense Tracker (for Android phones), Expenditure (for iOS phones) and Expensify (for both Android and iOS phones). Once you can see where your money’s been going you can create a budget for living below your means, which will keep you from getting into trouble with debt once again.

4. Cancel all your subscriptions

It’s those “little” subscriptions that can kill your budget because they tend to sneak up on you. Let’s say you subscribe to a couple of magazines, a local gym, four Internet-based games and one of those greeting card services. That could be costing you more than $40 a month or $480 a year. Here’s a case for you need to be ruthless. Cancel all of your subscriptions then start re-subscribing based on the ones you actually miss.

5. Consolidate any debts that were not settled

It’s possible that all your debts were not settled. This is due to the fact that some lenders simply won’t settle debts. If this is the case, try to get a loan to consolidate them. This might be tough, given the fact that you are having so much of a problem with debt that you chose debt settlement but it is possible. If you are able to get a loan this would simplify your finances as you would then have just one payment and one payment date to remember a month in place of the several payments you’re currently making.

6. Start thinking in terms of lifetime cost

When the time comes to buy a big-ticket item don’t think just in terms of the monthly payment. Negotiate and buy based on the lifetime or total cost. The question to always ask is what’s the total price? As an example of this you might be able to buy a car for around $200 a month but that’s only the start. You need to factor in things such as the cost of gas and oil changes, tires, routine maintenance and insurance payments over the five or seven years you’ll own that car. If you do this, you may find that another car with a monthly payment of $270 would actually be a better value.

In addition, when you think in terms of lifetime cost you’ll probably make fewer impulse purchases, have less clutter around your house or apartment and smaller monthly payments.

What to Consider When Hiring a Debt Settlement Company

If you’re behind on your bills and just can’t see any way to get caught up, then debt settlement could be your best option. It’s helped thousands of Americans get their debts under control and paid off and it could most likely help you. However, there’s a big if. And that’s if most of your debts are unsecured debts such as credit card debts. Debt settlement can’t do anything about secured debts such as auto loans and home mortgages. Other debts that can’t be settled include back alimony, spousal support, family support, past-due taxes and most student loan debts.

If your debts consist mostly of credit card debts, personal loans, personal lines of credit, payday loans, old cell phone bills and other unsecured debts then debt settlement could be a great option.

It used to be a jungle out there

A huge number of debt settlement companies sprung up following the Great Recession of 2007. Many of them were scammers. They charged big upfront fees, without actually settling any of their customers’ debts, then closed down only to appear four or five months later with a new name, and a new website.

Our Federal Trade Commission (FTC) has eliminated many of these scam artists. However, there are still some lurking out there so it pays to be careful when choosing a debt settlement company. Here are things to look for that can help you choose a reputable one and avoid being scammed.

What it charges

All debt settlement companies are for-profits and charge fees for their services. The reputable ones charge nothing until they have successfully settled all of the debts in your program. They will add a percentage of their total fee to each of your monthly payments but not actually collect the money until it has settled all your debts. This fee generally ranges from 15% to 25% depending on the total amount of debt its settling.

Your monthly payment

Your monthly payment must be something you can afford. You may be making that payment for as many as four years so it’s important that you are convinced you can handle it.

Reputable debt settlement companies will have you transfer your monthly payment to an escrow-type account that you control. When it settles one of your debts it will contact you and ask that you release enough money to cover it. This amounts to a 100% satisfaction guarantee because you could drop out of your program at any time and not pay the settlement company a cent.

Its standing with the Better Business Bureau

Before signing up with any debt settlement company be sure to check its status with the Better Business Bureau. It should have at the minimum an A rating and any disputes it’s had should have been successfully resolved. If you find the company has a poor rating and a number of unresolved disputes then run, do not walk away from it.

Its fee and terms

An honest debt settlement company will be upfront and very transparent about its fee and its terms. You should get them in writing before you sign anything. The information should be written in clear, understandable language. A sure sign of a fraudster is if it fails to provide this information upfront in writing or if its language is so complicated and obtuse that it would take a lawyer to translate it.

Does it have satisfied customers?

Good debt settlement companies will be able to share stories from customers that have used its services and have been pleased with them. These stories should include their customers’ email addresses so that you could contact them if you have questions or to verify their statements.

Are there favorable reviews

There are sites with reviews of debt settlement companies. You should be able to find the one you’re considering and its reviews should be very favorable. Two of the best sites for these reviews are topconsumerreviews.com and 10 Best Debt Relief 2016.

Are its debt counselors experienced and knowledgeable

A top-flight debt settlement company will have knowledgeable counselors that have good working relationships with all the major lenders. The counselor you’re assigned should discuss the options to debt settlement such as consumer credit counseling and debt consolidation and then let you decide which one would be best.

How long it will take to  settle your debts

A reputable debt settlement company will let you know in advance how much time it will take to settle your debts. It typically takes anywhere from 24 to 48 months to settle a client’s debts depending on the total amount of debt being settled. If you’re quoted a much longer amount of time or if the settlement firm refuses to tell you how long it will take to settle your debts, you may be in the clutches of a scammer.

The negatives of settlement

Finally, an honest debt settlement company will discuss the negatives of debt settlement as well as the positives. The biggest of the negatives is what it will do to your credit score and your credit reports. But there may also be income tax implications. Your debt counselor should review these with you so that you understand them and can make an informed decision.

How Credit Card Debt Settlement Programs Work

How credit card debt settlement programs work is pretty simple – at least in theory. Let’s suppose you owe $7500 on a credit card. You could contact the card issuer (usually a bank) and offer to make a lump sum payment of, say, $3000 to settle the debt. With a little haggling back and forth, the credit card issuer might agree to settle the debt for $3750 or half your actual balance.

Sounds simple, right? In

Well, not so fast there.

It’s really not that simple.

What’s your financial emergency?

The credit card companies weren’t born yesterday. None of them will agree to settle a debt for 50% of what you owe just because you ask nicely. They have certain criteria for settling debts, which are generally related to financial issues. So to qualify for a credit card settlement you must have experienced something such as being hit with a huge medical bill, just went through an ugly divorce, are temporarily employed or took a big hit in pay.

That lump sum thing

The second thing that makes credit card debt settlement less than simple is that you must have the cash available to make those lump-sum payments. For example, suppose you owe a total of $35,000 to six different credit card issuers and that each has an average balance of around $6800. If you were able to successfully settle these debts for $3400 (half their balances), you would need to have around $20,400 in cash to send to your lenders in the form of cashier’s checks or wire transfers.

What are the odds?

What are the odds you’d actually have that much cash available? Probably not very good. What you would need to do is accumulate enough money to pay off that first credit card, then start saving to pay off the second and so forth. As you can imagine this could take a lot of time. And all the while that you’re saving enough money to pay off one of your credit cards the rest will be running up even more in interest charges. The harsh reality here is that DIY debt settlement isn’t really doable for most people unless they owe less than $10,000 and the lesser the better.

The advantages of using a debt settlement company are …?

The overwhelming majority of people who are seriously in debt, meaning that they owe more than $10,000 or even $20,000, end up using a professional debt settlement company instead of trying to settle their debts themselves. There are several reasons for this, not the least of which is that lump sum payment thing. Using a professional settlement firm eliminates them because you’ll have one affordable monthly payment in place of those lump sums. Assuming you chose a reputable settlement company you will transfer these payments to an FDIC-insured trust account. You control this account so that none of the money in it can be used without your express approval.

When enough money has accumulated

When enough money has accumulated in your trust account to pay for one of your settlements, the settlement firm will contact you and ask you to release the money to cover it. This process will continue until all of the debts in your program have been settled.

Which debts will eligible for settlement?

Whether you elect to settle your debts or hire a debt settlement company one thing remains the same and that’s the debts that can be settled. As you have read there are only certain types of unsecured debts that are eligible for settlement. Before you hire any debt settlement firm an important first step is to make a two-column list of your debts. In the first column should be all of your debts that could be settled and in the second those that wouldn’t be eligible for settlement. Total the two and this will give you a clear picture as to how much credit card debt settlement could help you.

Determining the company’s fee

Last but certainly not least you need to factor in the fee you will be charged by the debt settlement company. This is generally based on the amount of debt in your program and is usually between 15% and 25%. To be on the safe side you could calculate a 20% fee and subtract it from the amount of money you believe the debt settlement firm will save you – to see how much you’ll actually save.

Would you be a good candidate?

For a professional debt settlement firm to be interested in working with you, there are two important criteria. You must owe at least $10,000 in unsecured debts and be four or more months behind on many of your bills. If you owe less than $10,000 and aren’t very behind on your bills, then consumer credit counseling or a debt consolidation loan might be a better option than credit card debt settlement.

Surprise! Your Mediocre Credit Score May Not Really Matter

It’s almost impossible these days to go online without finding yet another article about credit scores, what they mean, how they’re calculated and what can be done to improve them. It’s easy to become fixated on your credit score because you can get it free on a weekly basis from sites such as CreditKarma and CreditSesame. Many of the credit card issuers now routinely include credit scores with their monthly statements. And you can also get your score from any of the three credit reporting bureaus.

Don’t obsess

If you’re not careful it’s easy to start obsessing about your credit score. The problem is that it can literally change almost from week to week depending on how you’ve been handling your credit. Credit scores are based on your credit reports, which, of course, based on your credit history. You can have a score in the high 700s one month and then see it drop into the 600s the next month because you were three days late making a payment on one of your bills.

How your credit score is calculated

Nobody with the exception of FICO, the company that created credit scoring, knows for sure how your score is calculated. However, it is known that your score is made up of five components.

Your payment history (35%)
The amount of your debts (30%)
Your length of credit history (15%)
New credit and credit mix (10% each)

As you can see, the biggest component is your payment history which explains why it’s so important to pay all your bills on time. Unfortunately, if you mess up and have a late payment it goes into your payment history and because history is history, it will just stay there.

How much does your credit really matter?

Despite all those articles about the importance of your credit, how to improve it and what to do to restore it, the fact is that it really doesn’t have that much of an effect on your life. If you have perfect credit, congratulations. We take off our hats to you. But let’s suppose your credit is less-than-perfect. Maybe you missed a payment several years ago or were several days late in making one. While this will have an effect on your credit score, it really won’t have much of an effect on your life. The primary reason to have a great credit score is so that you can access money at a low interest rate. But what if you aren’t about to buy a car or a house, apply for new credit card or take out a personal line of credit? In this case, your credit score doesn’t really have an effect on your life.

What you should be concentrating on

Instead of obsessing about your credit score and trying to find ways to boost it what you should be concentrating on is building an emergency fund and saving for retirement. Both of these are much more important in the long term than that little three-digit number called your credit score.

The importance of an emergency fund

Even before you begin saving for retirement it’s important to have an emergency fund. While many experts feel it should be the equivalent of six months of your living expenses most people find this to be tough to do. If you feel this would be hard for you, you might try, instead, for three months of living expenses.

The way you build that fund is simple. First, you will need to calculate your monthly living expenses. And by this we don’t mean the amount you spend each month. Your monthly living expenses are your fixed or non-discretionary expenses such as utilities, transportation, insurance and food. Once you calculate this amount you need to then multiply it by three to determine how much of an emergency fund you will need to have. For example, if your fixed monthly expenses are $2000 you would need an emergency fund of $6000.

Building an emergency fund

The way you build your emergency fund is pretty simple. You just take a certain percentage of your net income each month and deposit it into a savings account. One good rule of thumb is to try for 10%. So if your net income (the amount of money you actually take home) is $5000 you should try to save $500 a month, which means you would have your emergency fund fully funded in 12 months.

Saving for retirement

Once you have an emergency fund you need to begin saving for retirement. Again, you should try to save 10% of your net income each month. This will be relatively easy if your employer offers a 401(k) plan. If not, you will need to open an Individual Retirement Account (IRA) and deposit your money into it. Regardless of whether you have a 401(k) or need to open an IRA, most experts say the best thing you can do with the money you’re saving is invest it in low-cost index funds and then leave the money alone.

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.