Quit Stressing About Your Debts and say “Hello, Debt Settlement”

One of the most stressful things you can suffer is the stress related to your debts. You could actually be lying awake nights worrying about how you’re going to keep from losing your car because of late payments or just how you’ll pay this month’s utility bills. If you live in a constant state of fear over your debts it can affect you both emotionally and physically. Debt is a serious issue because unlike some things in life it just basically never goes away. Stress related to debt can occur if you become underemployed or unemployed or just because you did a poor job of managing your finances. For example, maybe you had the habit of spending more than you earned and so your credit card bills have become so huge they’ve damaged your credit rating.

How to manage debt-related stress

Managing stress is easy, right? All you need to do is take a deep breath and then tell yourself to relax and not stress out. Of course, that’s not really the solution because if it were that simple you wouldn’t be stressing out over your debts.

Unfortunately, the only guaranteed way to get rid of debt-related stress is to get rid of the debt. This is the time when you need to steal yourself and look for a solution to your problem. You want to pay down your debt – you do want to pay it down, right – and this could mean getting a debt consolidation loan from friends, family or some lending institution.

Just putting together a plan for getting out of debt is the best way to get rid of those sinking feelings in the pit of your stomach. When you don’t have a plan – or strategy for rectifying your debt problems – you will likely feel unprepared and overwhelmed and this can lead to depression and anxiety that you don’t really have time to deal with now.

Budgeting is a powerful tool

It’s just about impossible to pay off debt without first creating a budget. It’s also a powerful tool for reducing the anxiety and depression mentioned above. The good news is that it doesn’t take a lot of work to create a budget. Where it requires work and commitment is staying on it.

You will need to start by tracking your monthly expenses and then comparing them to your net income or take home pay. Next, you will need to evaluate your spending habits and decide if you need to bring in more money every month or if the answer would be to decrease your spending in areas where you could cut back.

Say “Hello, debt settlement”

If you feel that budgeting wouldn’t help and that your debts are just totally out of control, there is a solution called debt settlement. This is where you hire a company to negotiate with your lenders to get your unsecured debts reduced. The way most debt settlement companies work is that you will have an agreement spelling out the amount of money you’ll need to transfer each month to an escrow-type account that you control. When there is enough money in your account to settle one of your debts, you will be contacted by the settlement firm and asked to release enough money to cover it. This will continue until all of your debts have been settled, which generally takes from 24 to 48 months.

Your unsecured debts will be consolidated

Debt settlement is actually a form of debt consolidation because you’ll have only the one aforementioned payment to make a month in place of the multiple payments you’re currently making. Plus, that payment should be for a good deal less than the total of the payments you’re currently making – because your debts have been reduced substantially. In fact, most good debt settlement companies are able to get their customers’ debts reduced by 27% to 30% – even after their fees.

There’s a cost

Most good debt settlement companies charge a straight fee that can be from 15% to 25%, depending on the amount of debt being settled. While this may seem somewhat steep it’s important to keep in mind the services that is providing. It’s doing all the negotiating for you, it’s relieved you of the burden of making lump sum payments to settle your debts and it’s doing all the bookkeeping for you.

Why debt settlement equals stress relief

Debt settlement is an excellent way to get relief from the stress related to your debts because you’ll be turning all of your unsecured debt problems over to the debt settlement company. Of course, this is true only if the majority of your debts are unsecured debts such as medical debts and credit card debts, as well as any other form of credit where you didn’t have to provide an asset to secure it. In comparison, auto loans and mortgages are secured debts and cannot be settled nor can some forms of unsecured debts including spousal support, family support, alimony, past due taxes and student loans. But if all or most of your debts are unsecured, then debt settlement would absolutely equal stress relief.

How to Know if Debt Settlement is Your Best Option for Debt Relief

Getting into debt has become as American as apple pie and the Fourth of July. In fact, American households are now carrying an average of more than $15,000 just in credit card debts. Even worse is the fact that U.S. households now carry an average of $48,988 in student loan debt. So if you feel as if you’re buried under a big load of debt, you’re far from alone.

You do have options

There are four popular ways to deal with debt. They are debt settlement, a debt consolidation loan, consumer credit counseling and bankruptcy.

How can you know which of these would be best for you?

Debt settlement

Most debt settlement companies say that you must owe at least $7500 (or in some cases $10,000) and be several months behind on your bills for debt settlement to be your best option. However, most people that choose this option owe a lot more than this — like $20,000, $30,000 or even more.

If you qualify debt settlement it could be your best choice for several reasons. First, it will save you money. Reputable debt settlement companies such as National Debt Relief are able to save their clients 37% on the average after their fees. This means if you owed $20,000, debt settlement could very well save you $7400.

Debt settlement will consolidate your debts as you will have just a single payment to make a month in place of the multiple payments you’re currently making. And this payment should be considerably less than the total of your current payments because your debts will have been slashed.

Third, when you hire a debt settlement company you’ll no longer have to deal with your lenders and with any debt collectors that have been hassling you. You’ll be able to relax, forget about your debts and get back to concentrating on the things in your life that are really important.

A debt consolidation loan

If you have reasonably good credit, then a debt consolidation loan could be your best option but it only works if you have multiple debts at high interest rates. For example, suppose you have four credit cards at 12%, 15%, 18% and 19% and a personal loan at 9%. This would mean an average interest rate of 14.6%. If you were able to get a personal loan at, say, 9.5% you’d then have just one payment to make a month and it should be much lower than the total of the payments you’re currently making. This again assumes you have relatively good credit.

Consumer credit counseling

Are your debts so much out of control that you don’t know which way to turn? Then consumer credit counseling could be your best option. If you contact a good, nonprofit credit counseling agency you’ll have a counselor who will review all of your debts and finances. Depending on the amount of your debt your counselor may develop a budget for getting it under control and paid off or she might recommend a debt management plan (DMP). If the answer is a DMP your counselor will contact each of your lenders and negotiate cuts in your interest rates and to have any late fees waived. Assuming your lenders agree to your DMP your debt will be consolidated in that you will no longer be required to pay them. Instead, you will make one payment a month to the credit counseling agency, which will then distribute the appropriate amount of money to each of your lenders.

Bankruptcy

If you’re completely buried under a load of unsecured debts (credit card debts, personal loans, personal lines of credit, payday loans, etc.) then your best option might be to file for bankruptcy. On the other hand, if most of your debts are secured debts such as a mortgage or auto loan or if your problem is spousal support, alimony, back taxes, student loan debts and family support then filing for bankruptcy won’t help.

You need to think carefully about hiring a bankruptcy attorney because a bankruptcy will have a very serious effect on your life for many years. For one thing, it will stay in your credit reports for seven years. You won’t be able to get any new credit for two to three years after the bankruptcy and when you do it will have a very high interest rate. It’s likely that your insurance premiums will go up and you may have a hard time renting an apartment or house. There have been relationships ended when one of the partners discovered the other had a bankruptcy. And that bankruptcy will be in your personal file for the rest of your life where it could continue to cause problems.

Which is Better Debt Settlement or Bankruptcy?

Have you fallen so deeply in debt you’re seriously considering bankruptcy? It can be very tempting. All you would need to do is hire an attorney, sign some papers and Presto! All or most all of your debts will go away as if by magic. You’ll be getting no more calls from angry lenders or debt collectors. Your life will be much less stressful. And you’ll be able to focus on the really important things in your life instead of your bills.

Before you contact a bankruptcy attorney

Filing for bankruptcy might be your best option. But before you pick up the phone to contact a bankruptcy attorney you need to know about an alternative called debt settlement and how it stacks up against bankruptcy.

What is debt settlement?

The simplest explanation of debt settlement is that you or a debt settlement firm contact your lenders and offer to make lump sum payments to settle your debts for less than their balances.

Why, you might ask, would a lender ever agree to this? It would be because you’re having a financial emergency and need help or because you’ve been able to convince the lender that if it refuses to settle, your only alternative will be to file for bankruptcy.

What a bankruptcy would do to your life

Unfortunately, there is a very serious downside to bankruptcy. It’s what it would do to your life.

First, it will be two to three years before you’ll be able to get any new credit. And when you are able to get new credit it will be what’s called low balance/high interest credit. As you might guess life without credit for a couple of years could be very challenging.

A bankruptcy will stay in your credit reports for 10 years and in your personal file for the rest of your life. You could lose out on a good job 15 years from now because your potential employer saw that you had had a bankruptcy.

If you’re a renter, you may find it very difficult to rent a house or apartment because of your bankruptcy. You may also see the cost of your insurance go up for the same reason.

Why debt settlement might be better

The primary reason why debt settlement might be a better choice is because it will have less of an impact on your life. While it will damage your credit score it won’t harm it as much as a bankruptcy. This is due to the fact that you did what you could to repay your debts instead of just wiping them out as would be the case if you filed for bankruptcy.

If you choose debt settlement you should be able to get new credit fairly quickly although that might not be a really good idea. In addition, debt settlement won’t prevent you from renting a new place nor should it cause your insurance premiums to go up.

How to know if you’d be a candidate for debt settlement

How can you know if you’d be a good candidate for debt settlement? Most debt settlement companies won’t accept people as clients unless they owe more than $10,000 and are least five months behind on their bills. If you’re seriously considering bankruptcy you would most likely meet these criteria.

The difference between the two processes

There’s no question about the fact that filing for bankruptcy is quicker and simpler than debt settlement. Once you hire a bankruptcy attorney, there’s very little more for you to do until your bankruptcy hearing as you will longer be required to pay your lenders.

The process for debt settlement is much different than this. You will first sign an agreement with the settlement company that will spell out how much money you will be required to transfer each month into an FDIC-insured trust account. This agreement will also spell out how many months before you’ll be debt-free.

When enough money has accumulated in your trust account to cover a settlement, the debt settlement company will contact you and ask that you release the money to pay for it. This process will continue until all of your debts have been settled satisfactorily.

Both have a negative in common

Debt settlement and bankruptcy have a bad thing in common. Neither may not be able to eliminate all of your debts. There are some debts that not even bankruptcy can discharge Including child support, alimony, spousal support, family support, back taxes or student loan debts. And none of these debts can be settled. In addition, some lenders will simply refuse to negotiate settlements. This means you could end up paying both the settlement company and several of your lenders.

The net/net

The net/net is that debt settlement is usually a better option than bankruptcy. However, before you decide between the two you need to get a free consultation with a bankruptcy attorney and then talk with at least one debt settlement firm. That way you’ll be able to make an informed decision as to which of these would be your best path to debt relief.

7 Totally Surprising Ways to Earn Extra Cash for Debt Settlement

If you’ve decided to try DIY debt settlement you may have already learned one inescapable fact. You must have the cash to pay for your settlements. If you can’t promise a lender that you’ll get the money to it immediately – by cashier’s check or wire transfer – why in the world would it want to let you pay off the debt for less than your balance?

The second fact you may have discovered is that lenders won’t negotiate with you unless you’re having a financial emergency. Before you call any lender to discuss settlement you need to have a “story” or the reason why they should settle with you. You need to be experiencing a financial emergency such as a nasty divorce or because you lost your job. Or it could be due to the fact that you’ve had a serious medical emergency or were required to take a substantial cut in pay.

Where to get the money for debt settlement?

If you’re having such a problem with debt that you’ve chosen debt settlement you probably don’t have a lot of money just sitting around waiting to pay for your settlements. Fortunately, there are some ways to earn extra cash that you’ve probably never thought of and here are seven that may surprise you.

Sign up to coach a youth sports team

Were you a pretty good baseball player in your day, an excellent soccer player or a pretty good basketball player? Then maybe could use the skills you learned then to coach a youth sports team. Of course, this means you would have to be available evenings and weekends and late afternoons sometimes. Many recreational organizations pay their coaches especially if you’re coaching what are called traveling teams. As an example of this, the coaches of high-level youth soccer club teams earn around $2000 a month. Some high schools also hire outside people to coach the sports teams their teachers don’t want to coach. While the pay for this varies, there are part-time coaches that earn $2500 a semester.

Be an adjunct professor

Colleges and universities are almost always looking for professionals to serve as adjunct professors. For example, if you have a major in journalism or, better yet a Master’s Degree, you might be able to find a position teaching communications at a local university or community college. Ditto if you’re a graphics artist or a video producer. Again, the pay for these jobs varies but if you can get one it should add several thousand dollars a semester to your debt settlement war chest. Plus, there’s the fun of working with young people.

Get a job as a tour guide

Do you know a lot about the city where you live, a historical site or district? Then you could earn extra money as a tour guide. If you work with a guide site such as Vayable, you could make extra money guiding people around your city or a historic district. These tours range in price from $25 per person to $200 per person or even higher. Vayable takes a 15% cut of whatever you change your visitors but in return, it gives you online tools you can use to manage reservations, communicate securely with customers and accept credit card payments.

Sell those electronics you no longer use

If you’re like many of us you have old smart phones, tablets and game consoles just sitting around gathering dust. You can easily make extra cash by selling them online. If you have an unused smart phone or iPhone you could sell it on gazelle.com. NextWorth is a great site for selling laptops, smart phones, video games and tablets. Nextworth pays cash or you could take the items to one of its partner stores like Target and get a store credit. You can sell game councils, video games, textbooks, tablets and smart phones on the site uSell. Finally, you could take your stuff to GameStop where you would earn cash or a store credit and would avoid the hassles of having to ship the tablets, smart phones or digital cameras somewhere.

Hunt for unclaimed property

There are billions of dollars in unclaimed cash in state and federal coffers. Some of it could actually be yours. However, you need to track it down. As an example of this, the feds keep tax refunds that have been returned to the IRS due to mailing-address errors or because they were never claimed by taxpayers. In addition, the government hangs onto government-guaranteed mortgage-insurance refunds and forgotten savings bonds. Unfortunately, there’s no database of these items so you would need to go to each individual federal agency to find any funds you’re entitled to.

Adjust your withholding

Have you set up your W-2 so that you’ll get a big tax refund next year? Most people do. In fact, the average refund this year was $3034. But if you’re trying to accumulate money for debt settlement, why not change your W-2 to get the money now instead of next February or March.

Earn money from market research firms

You can actually get paid by market research firms for your opinions. These firms are hired by big businesses or even political parties to get into consumers’ heads. If you participate in a focus group like those run by Focus Pointe Global you would earn from $65-$200. You can also take online or phone surveys with companies such as Harris Interactive and Schlesinger Associates and earn rewards points redeemable for gift cards or merchandise. Attorneys are even getting into this act. EJury pays online jurors from $5 to $10 per case to give their opinions on legal cases and OnlineVerdict.com pays fees ranging from $20 to $60.

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.