Try this Revolutionary New Method to Pay Off Serious Credit Card debt

If someone asked you to picture your debt, what would you see? Would you picture it as a prison cell, an incredibly steep mountain, or maybe a huge pit?

Regardless of how much debt you have, or how you picture it, one thing is certain. You’re desperate to get rid of it.

So, What could you do?

The two proven methods

Until recently, only two proven ways to pay off debts existed. They were the snowball method and the avalanche method.

The way the avalanche method works is that you make a list of your debts in order from the one with the highest interest rate down to the one with the lowest. You then put all your efforts towards paying off the debt with the highest interest rate. This is because that will save you the most money. Once you have it paid off, you move on to the debt with the next highest interest rate, and so on.

The other way, the snowball method, is where you list your debts from the one with the lowest balance down to the one with the highest. Then, instead of focusing on the debt with the highest interest rate, you put all of your energy towards paying off the debt with the lowest balance. The psychology behind this method is that it should be relatively easy to pay off that first debt, which will give you motivation (as well as extra money) to begin paying off the debt with the second lowest balance and on and on.

The problem with both these methods

Unfortunately, both of these methods share a common problem. They rely on you budgeting money every month to make the minimum payments on all your other debts while throwing extra money at the debt you prioritized

This can be very taxing financially as both require you to come up with large payments every month.

Introducing the snowflake method

An alternative to both the snowball and avalanche methods was recently developed – the snowflake method.

The way it works is that instead of having to worry about coming up with those big payments every month, you just find ways to shave some money off your everyday spending. You then use this money to make small, frequent payments on your credit card debt. You may feel those small amounts are microscopic when compared to your overall debt balances. But over time, those little payments will save you hundreds of dollars and knock months off your repayment term.

Of equal importance, you can use the snowflake method in combination with any other repayment options.

Apply those everyday savings to your debt immediately

At the heart of the snowflake method is applying those everyday savings to your credit card debt immediately. As an example of this, let’s suppose your weekly budget for groceries is $50. However, thanks to coupons you only spend $46 this week. With the debt snowflake approach, you’d take the surplus or the $4, and immediately make a payment on your credit card account. Then, do this every time you save some money. Instead, of spending $60 for a haircut, go to Great Clips for $25. Then, put that extra $35 towards your debt the minute you get home.

Does this really work?

If you visualize your debt as that very steep mountain, the idea of paying an extra $4 or $5 here and there might seem kind of ludicrous. But, believe it or not, those little snowflake payments can end up having a big impact.

Here’s an example. Let’s suppose you have a credit card with a balance of $3000 that has an APR of 15%. Assuming your minimum monthly payment is $100, it would take you 38 months to pay off the debt and would cost you $784 in interest.

If you could save four dollars a week by clipping coupons and apply that extra $16 a month to your credit card debt, you would be able to pay it off in just 32 months, and you’d pages $647 in interest. As you can see, applying those snowflakes, or small savings, each month would get that debt paid off a full six months earlier.

In summary

If you’re trying to pay off a mountain of credit card debt, it can be unrealistic to try to find large sums of money to repay your balances. This is why the debt snowflake method can be effective. If you’re diligent about applying those little daily savings to your credit card debt, you’ll both pay off your balances sooner and save a lot of money to boot,

Should You Use Your Equity to Pay for Debt Settlement?

If you’re unfamiliar with debt settlement, it’s where you contact a lender, and offer to make a cash payment to settle the debt but for less than you owe. Suppose, for example, you owed $8000 on a credit card. You could contact the bank and offer to make a lump sum payment of, say, $4000 to settle the debt. If the bank accepts your offer, it will treat the debt as if it had been paid in full – at least so far as you’re concerned. Unfortunately, it won’t report it to the credit bureaus this way. It will report your debt as “settled,” “settlement,” “settled for less than full amount due,” or some similar wording.

The downside

While debt settlement has become a popular way to achieve debt relief, It does have one big downside. You must have the cash available to pay for any settlements you’re able to negotiate. Getting back to our example of settling a $8000 debt for $4000, you’d need to have the $4000 ready to send the lender in the form of a wire transfer or certified cashiers check. Needless to say, if you’re struggling with debt it’s unlikely you’ll have enough cash available to pay for that settlement.

Do you have equity in your home?

If you have equity in your home, you could use it to pay for your debt settlements. There are three ways to cash out equity. The first is to refinance the mortgage. Today’s mortgage rates are at nearly all-time lows, though they are expected to gradually rise over the next year. For example, Consumer Direct is currently offering 30-year fixed-rate mortgage loans with an APR as low as 3.875%. The online mortgage provider, GSF, has 30-year fixed-rate loans with an APR of 3.77%. And American Financing is offering 30-year fixed-rate refi loans with an APR of 4.250%.

If you don’t want to refinance your mortgage, you could get either a home equity loan or homeowner equity line of credit. FlagStar Bank now has a home equity loan with an introductory rate of 4.49% with a loan to value of 80% required. It’s also possible to get a home equity line of credit (HELOC) with an APR of 3.99% from PNC Bank or 4.0% from Alliant Credit Union.

Note: To be eligible for the interest rates quoted here, requires a credit score of 740 or better.

Do the math

Now, compare these interest rates with the interest rates on your debts. If most of your debt is credit card debt, you’re probably paying anywhere from 14% to 21%. Plus$4000, you’d’s compound interest. If you’re making just the minimum payments on your credit card debts, you’re actually paying interest on interest. As an example of this, if you owed a total of $10,000 on your credit cards at 17%, and made just the minimum payment each month of $242, It would take you five years and three months to pay off the $10,000. And it would cost you $15,147 in interest.

In comparison, a home equity loan for $10,000 with an interest rate of 7.5% would require a monthly payment of just $100 for 48 months. And it would cost you only $2,750.23 in interest. So, if you were to take out a home equity loan and use the $10,000 to pay off your credit card debts, you’d realize potential savings of nearly $13,000.

If you don’t own your home

Of course, if you don’t own your home, you lack equity. In this case, you might be able to get a debt consolidation loan and use the money in debt settlement. If you have at least a “good” credit score (above 700 points), you could get an unsecured loan with a term of five years at an 11.21% interest rate, which would mean a monthly payment of just $218.

Hire a debt settlement company

If you can’t get a personal loan, another good option is to hire a debt settlement company. There are two advantages to this. First, it eliminates the need to have the cash available to pay for your settlements. Second, it lets you avoid having to haggle with your lenders yourself. Of course, debt settlement companies do charge for their services. The best ones charge a percentage of the amount of debt being settled, which usually ranges from 15% to 25%. However, the reputable ones, like National Debt Relief, don’t actually collect their fees until they have settled all of your debts. This means if you were to become unhappy with your program at any time, for any reason, you could simply drop out, and it wouldn’t have cost you a cent.

In conclusion

If you owe $10,000 or more and have a sufficient amount of equity in your home, you should think seriously about cashing it out and using the money in debt settlement. This will save you money versus trying to pay off the debt yourself. Plus, if you use a debt settlement company, you could be debt free in as few as 24 to 48 months.

The 7 Most Frequently Asked Questions About Debt Settlement

We don’t have to be mind readers to guess you’re having a problem with debt. The fact you’re reading this article Is a definite clue. Of course, we have no way of knowing the size of your problem. You could be just a month or two behind on your bills, or you could be drowning in debt and looking for a life preserver. If you fall in the former category – if you’re just a few months behind on your bills – there are probably better solutions to your problem than debt settlement. For example, if your problem is credit card debts, your best solution might be to do a balance transfer to one of those cards that offer 0% interest for 12 or 18 months. Or your best answer might be a debt consolidation loan.

If you fall in the latter category and feel as if you’re drowning in debt then your best choice could be debt settlement.

1. What is debt settlement?

According to Wikipedia, “Debt settlement, also known as debt arbitration, debt negotiation or credit settlement, is an approach to debt reduction where the debtor and creditor agree on a reduced balance that will be regarded as payment in full.”

2. Why would a lender ever agree to settle a debt?

Lenders are never eager to settle debts, as their first choice is always to collect all you owe. Secured lenders, or those where you used an asset to get the loan (think mortgage), will rarely, if ever, negotiate. Credit card companies and banks will usually negotiate because these are unsecured loans. They have only two options if you default. They can either sue you or sell your debt to a collection agency. They’ll negotiate settlements if you can convince them that you’re in such bad shape financially, there’s just no way you’ll ever be able to pay off the full amount of the debt.

Another reason lenders will agree to negotiate is if you can offer to make a lump sum payment to settle the debt. Experienced customer service people at the credit card companies and banks do understand that getting half a loaf now is better than getting nothing or getting very little over a long time.

3. What does debt settlement cost?

If you choose DIY debt settlement your only cost will be your time. As you might guess, debt settlement companies are for-profit organizations. The best ones charge fees based on the amount of debt being settled. This typically ranges from 15% to 25%. The good ones don’t actually collect their fees until they have settled all of your debts. This is essentially a 100% satisfaction guarantee as if you became dissatisfied with your program for any reason, you could drop out, without it costing you a cent.

4. How long does debt settlement take?

If you negotiate your settlements, it could take a long time as you will need to save up enough money to pay off a debt, then save again to pay off a second debt, and so on. If you choose a debt settlement company, it will likely take from 24 to 48 months – depending on how much you owe.

5. Will debt settlement affect my credit score?

Unfortunately, it will have a bad effect on your credit score whether you choose DIY debt settlement or a debt settlement company. This is because you’re basically paying back less than you promised. Debt settlement will also make it more difficult for you to get credit in the future when lenders see that you had settled your debts, instead of paying them off in full.

6. How can I know a “good” debt settlement company from a scam?

Good debt settlement companies never contact you. In fact, if you’re contacted by a debt settlement company, you can just about bet it’s a scam. Reputable debt settlement companies never charge any fees upfront. And they will be very open about their fees, and how long It will take for them to settle your debts. Their contracts will be easy-to-read, and you’ll be able to easily contact them anytime you have questions or concerns. Good debt settlement companies have at least A ratings with the Better Business Bureau and are usually members of the American Fair Credit Council (AFCC)

7. Which is better, debt settlement or bankruptcy?

Debt settlement is the better option unless you’re so deep in debt that not even it could save you. The thing about bankruptcy is that it leaves a stain in your credit reports that will be there for 10 years. Bankruptcy will have a more serious impact on your credit score than debt settlement, and may even cause your insurance premiums to increase. You might be able to get new credit a few months after debt settlement but it will take years after a bankruptcy. Worst of all, the bankruptcy will stay in your personal file for the rest of your life. You could get turned down for a really good job 12 years from now when the prospective employer sees you’ve had a bankruptcy.

In summary

Debt settlement can be a very good option, but whether it’s the right one for you will depend on several factors such as how much you owe and your overall financial situation. You need to think carefully before choosing debt settlement because it’s nothing to be taken lightly. And be sure to check out the other options before choosing debt settlement.

Debt: How Can Something That Feels So Normal Be So Bad?

Ask any 10 people if they have debt, and the odds are overwhelming that at least eight will answer “yes.” Debt has just become a fact of life for most all Americans. According to the website StatisticBrain.com Americans with credit cards are now carrying an average balance of $15,675. American household debt now averages $132,158.

More than 40 million Americans have student loan debt. The average monthly student loan payments for borrowers age 20 to 30 is $351! And the delinquency rate on student loans is 11.2% – meaning that more than one in 10 borrowers default on their student loans.

According to a study commissioned by Bankrate.com and reported on Yahoo.com, only 51% of those with credit card debt worry about it. This same survey revealed that only 25% worried about their credit card debt, and only 28% felt guilty about how much money they were putting on their credit cards.

The disconnect

What these statistics reveal is that there’s a substantial disconnect between the amount of debt Americans are carrying, and their feelings about it. It suggests that Americans may be carrying a considerable amount of debt – especially credit card debt – but they don’t worry about it.

Some do struggle

Df course, some people do struggle with their debts. A recent article in the Durango Herald reported that people earning less than $30,000 a year feel they will never be debt free. It has also been reported that millennials are worried about their student loan debts. And older people who are taking out student loans to help pay for a child or grandchild’s education may also feel they won’t get that debt paid off in their lifetimes.

It may feel normal but it’s bad

These statistics suggest that debt has become an accepted fact of life for most Americans. The problem is that most of them apparently don’t understand that debt is bad.

You’re penalizing your future self

The first bad thing about debt is that you’re penalizing your future self because the money you borrow today will have to be repaid by the future you. This will leave less money available for you to enjoy a good life. While many people don’t think of it this way, debt is like writing an IOU that you’ll have to honor sometime in the future.

Debt costs money

Unless you have a rich uncle who agrees to loan you money interest-free, all the other money you borrow will cost you in the form of interest. Credit cards can be especially costly due to compounding interest. Let’s say you borrow $5000 at 14%. The next month you’ll owe $5014 and will be paying interest on it. It gets even worse if you make just the minimum payments on that debt. Here’s an example of how bad this can be. If you make a minimum monthly payment of $200, it will take you 30 months to pay off the $5000 and cost you $946.20 in interest charges.

Debt can cause physical problems

Believe it or not, the stress of dealing with debt can lead to physical problems. A study done by AP-AOL found that people who say they have high levels of debt stress suffer from a myriad of illnesses related to it. This can include migraines, back pain, ulcers, depression, anxiety, and heart attacks.

Debt can damage your credit score

Like it or not, your financial life is pretty much governed by that little three-digit number called your credit score. It’s comprised of five components. The most important of these at 35% is your credit history or how you’ve handled credit in the past. If you were late in making payments, or worse yet, missed a few payments, you’ll likely have either a fair or poor credit score. This will make it more difficult for you to get new credit, and it will have a higher interest rate. In fact, a poor credit score good keep you from renting a house or apartment.

Debt can hurt your marriage

Debt can cause arguments as to how much debt is too much, who’s responsible for the debt, and who’s creating the debt. These arguments can put a serious amount of stress on a marriage. They can even escalate to the point where the marriage completely breaks down.

In conclusion

Don’t let yourself get lulled into the feeling that debt must be okay because it’s so normal. As you have read, debt can have very serious consequences, up to and including a heart attack. Stop thinking that debt is normal and start thinking what you can do to get rid of it. Your future self will thank you.

How to Have a Financial 911 Plan

You know about 911. It’s the number you call when you’re having or witnessing an emergency. Your daughter could have fallen off her bike, you could have had an automobile accident or witnessed a crime in process. Regardless of which of these happens, the first thing you’ll do is call 911

It’s good to know 911 is available in the event of an emergency, but do you have a financial 911 or emergency plan in place? Do you have a plan in the event of a car accident or some other type of emergency that could leave you thousands of dollars in debt? It’s great if you have an emergency fund, but you also need an emergency plan. When you have one, you’ll be able to cut through all the confusion and calmly deal with the emergency.

What’s the biggest financial emergency that could affect you? It’s probably losing your job. We have a friend who worked 17 years for an aerospace manufacturer under a contract with the US government. Two weeks ago, the contract was canceled. He will soon be out of a job, and he is in his mid-50s. We hope he had a financial emergency plan to help him through this.

What should your emergency plan consist of if you were to lose your job? Here are some suggestions.

Modify your budget

You’ll be living off your emergency fund, and you’ll need to adjust your budget to fit it. Be very deliberate in all your spending, constantly asking questions like do I really need to buy this particular item or could I live without it.

Cut all non-essential expenses

Make a list of your non-essential expenses. This should include recurring items such as Amazon Prime, Netflix, Hulu, magazine, and newspaper subscriptions, and maybe even your health club membership. You should also reduce your cell phone bill to the lowest possible tier, and your cable TV subscription.

Learn how to apply for unemployment benefits

Depending on where you live, getting unemployment benefits could be stressful. Learn in advance what you would need to do to apply for them. It should be much easier to do this than when you’re actually unemployed and feeling scared.

Where we live you can apply online or in person. If you choose to apply online, the first thing you will be required to do is prove your eligibility. This means you’ll need to have lost your job through no fault of yours. You may also be required to meet some other program requirements.

You can probably apply online wherever you live. Just make sure you have all your information on hand before you start the process. Believe it or not, this may include getting and submitting your credit score.

Decide how to tell your family

The hardest thing you may have to do is tell your family that you’ve lost your job. It can be easier if you prepare in advance. Just spend a few minutes rehearsing how you’ll break the news. Then, if the time comes, you’ll be calm and in control, instead of looking panicky.

Make a plan for finding a new job

The best time to create a plan for finding a new job is when you don’t need one. You should check out job sites such as ResumeRabbit.com, Indeed.com, or LiveCareer.com. The site Indeed.com is a little pricey but helps you to create your own Indeed.com resume. Plus, the site will actually recommend jobs.

If it’s been some years since you last created a resume, you might go to a website like Resume-now.com, where you can create a new resume instantly, or at least the site claims it can be done instantly. Other sites you might want to check out for creating your resume include livecareer.com and MyPerfectResume.com.

Determine how you will spend your downtime

Like it or not, you’re going to have lots of downtime on your hands. How you spend this time? It’s important to maintain a positive attitude as it might be many weeks before you find another job. The best way to use your downtime is to work on DIY projects that would give you a sense of purpose. This should help combat the frustrations you’ll feel during your job search.

Other emergencies to plan for

Losing your job or suffering a major illness are probably the two biggest emergencies to plan for. But there are others you could encounter where you should also have a plan in place. For example, what would you do if one of your automobiles dies or is demolished in an accident? You should have a plan for getting by with just one car. Or what would be your plan if your oven, dryer, washer, or refrigerator stops working? These emergencies won’t be as painful as losing your job or having a serious illness, but they can be inconvenient and they do require a plan.

In summary

When you build your plan, don’t be afraid to add other emergencies to it. There is literally no emergency too small to be part of your plan. Take the time to plan for every possible emergency, as we guarantee this will pay off big time in the long run.

Spring is Here! Time to Clean Up Your Finances

We don’t know what’s going on where you live but where we are, we’re seeing signs of spring everywhere. Our roses are greening up, as is our grass. We’ve seen small leaves on a neighbor’s bushes, and another neighbor is having his lawn aerated.

Spring is a time when most people’s thoughts turn to cleaning out the garage, emptying those overstuffed closets and organizing pantries. But another type of spring cleaning that should be on your list is spring cleaning your finances.

What’s your goal?

Whether your goal is a comfortable retirement or financial independence, it’s important to get organized, and have an action plan in place to help you achieve it. Both these are difficult to do if you’ve gotten lost in paper trails or trying to cope with four file drawers of old documents. The good news is that you can simplify your finances just by following these seven simple tips.

Try out a mobile app

Dozens of mobile apps are available that make it easy to track your spending and keep your personal finances organized. Three of the most popular of these are Mint, PocketGuard, and Level. Each will help you in different ways like budgeting, bill paying, monitoring your credit score, or paying off debts. Take a look at these, choose one, and give it a try. You may be surprised at how much it will do to simplify your financial life.

Freshen up your budget

The best way by far to manage your finances is with a realistic balanced budget. Just about everyone’s situation changes over the course of six months or a year, and yours is probably no exception. If it’s been some time since you last revisited your budget, review it to see if there might be areas where you could cut down on your spending. If so, you’d then have more money for your emergency fund or retirement savings. Be sure to also review your categories as there may be ones you could drop or new ones you should add.

Create a process for bill payment

You should have as many of your bills as possible on auto pay. If you haven’t yet done this, now would be a good time to do it. You can probably auto-pay most of your bills through your bank. There may be some companies that won’t accept automatic payments from your bank. If this is the case, you will need to contact them to see if you could set up auto-pay with them. If you can’t do either of these, you should set up a calendar to track bills and their due dates. You might have a program on your mobile phone called Reminders, which you could use to send an alert when bills are due.

Make a debt payoff plan

Your debts are not going to repay themselves, and procrastination is never the answer. When you review your budget, try to find money for paying off your credit cards and student loans. If you can’t make a debt repayment plan yourself, consider going to a nonprofit credit counseling agency. You should be able to find one in your area through the National Foundation for Credit Counseling. Many credit unions, universities, housing authorities, and branches of the US Cooperative Extension Service offer counseling programs. Choose one of these, and you’ll be assigned a counselor who will help you develop an action plan. These organizations also offer helpful, free resources.

Check your insurance policies

Talk with your insurance agent to see if there might be ways to qualify for reduced premiums on your life, auto home insurance. We recently checked with one insurance company and found that, yes, it could reduce our auto insurance by that advertised 15%. You might also save money by increasing your deductibles or changing your coverages. Whatever money you save on your insurance is more money for the rest of your budget.

Review your financial documents and shred the old ones

We were checking out some of our documents the other day and found we were still keeping records from a home we had sold 10 years ago. If you’re typical, you probably also have a lot of old tax returns and documents that you no longer need. Go through everything, shred your older documents and then make a system to organize your papers. Do this and you’ll be able to easily access documents when you need them.

Stop clutter before it happens

You probably think that there’s no way to avoid all those loan and credit card solicitations. But there is. You can opt out of most of them by calling the national credit bureau’s phone number 1-888-5-OPTOUT (67-8688). Do this and you’ll stop clutter before it happens.

In summary

While your spring cleaning those closets, your garage and basement, find some time to spring clean your finances. Get them organized and freshened up, and you’ll be able to look forward to better and easier to manage personal finances.

5 Sneaky Things That Could be Damaging Your Credit Score

You probably know about those things that will damage your credit like late payments or abusingyour credit cards. It is extremely important to pay your bills on time and o use your credit cards responsibly. However, you could be doing these things while doing things you’d never think about that are damaging your credit.

Do you even know your credit score?

Have you checked your credit score recently or ever? Many people don’t have a clue when it comes to their credit scores. Or they may know their credit score but not understand how it affects their lives. There are five categories of credit scores, ranging from Excellent to Bad (below 500). The interest rates you’re charged, your insurance premiums, and even your ability to rent an apartment or house are based on your credit score. It’s easy to get your credit score these days as there are a number of ways to get it free. Two of the easiest are CreditKarma and CreditSesame. The three reporting bureaus (Experian, TransUnion, and Equifax will also provide your credit score free though you may have to jump through more hoops to get it than with either CreditKarma or CreditSesame.

If you check your credit score and find that it’s less than 660 (Fair Credit), you may be wondering why. You’ve made your payments on time and you haven’t used credit irresponsibly. So, what goes?

Have you had a ticket?

Have you recently been pulled over and given a ticket for speeding, or maybe you ran through a radar trap, and a ticket showed up in the mail a few weeks later? Did you recently find a ticket under one of your windshield wipers? Getting a ticket will not only cost you money, it can damage your credit score.

If you did get ticketed, you need to take immediate action. You will need to either pay the fine or begin the process of contesting it. This is because if you let it sit there unpaid, it could come back in an unpleasant way. For example, your fine could be sent to a debt collector, so there would be a collection account in your credit reports. This will both damage your credit score for a long time, and will likely end up costing you more than if you had just paid the ticket in the first place.

Do you have unpaid tolls?

Most tolling today is done electronically so it’s possible to just breeze past a toll booth without paying. Whether you do this on purpose, and many people do, or if you just missed seeing the toll booth, you need to immediately go online and pay those tolls. If not, you will be billed for them at whatever address your car is registered to. If you don’t pay the tolls, or somehow missed the notice, you’ll end up seeing them on your credit report – again as a collection account.

Have you exceeded your limit?

You’ve just taken the family or your boss out for dinner at a really great restaurant. The bill arrives and you take out your credit card to pay for the meal without realizing you’re making a decision that could affect your credit score. This is because if that transaction drives up your balance high enough, it will affect your credit utilization rate. And if you don’t pay that credit card bill promptly, your credit will take a serious hit.

Do you have a pet?

Dogs and cats can be very unpredictable. They can cause damage that will affect your relationship with your landlord and even cost you a fair amount of money. Pet health care can also be very expensive. You could be looking at several thousands of dollars if your dog or cat requires surgery. If you don’t have enough cash available to pay for your pet’s care. This could cause you to have problems with your credit so, that your credit score will take a hit.

Have you been the victime of identity theft

Your identity could be stolen without you even being aware of it until the bills began rolling in. You could just click the wrong link in an email or download an attachment that looks inconspicuous, and give the intruder access to the information in your email. He could then steal your identity and use the information to open credit cards, get loans, order utilities – or just about anything – in your name. It’s taken some people literally years to recover from identity theft. Whenever you check your email, it’s important to remain security minded. A good rule of thumb is to never click on an email from someone whose name you don’t recognize people

In summation

The only way you can know that some of these ordinary things could be hurting your credit is to check your credit reports on a regular basis. You should check yours at least once a year. You can get t3hem from each of the three credit reporting bureaus or all three simultaneously on the website www.annualcreditreport.com. Some people choose to get their credit reports individually at four month intervals as this is sort of a free way to monitor their credit year-round.

 

How to be More Mindful When Working on Debt Settlement

Being mindful, or practicing mindfulness, is one of this year’s hottest topics – just behind our new president.

However, there seems to be a number of different definitions for mindfulness. One of the best is that of Leah Weiss, who teaches Leading with Mindfulness and Compassion at Stanford University’s Graduate School of Business. She says it can be viewed as “the intentional use of attention.”

Mindfulness, according to Weiss, has been used to treat anxiety, chronic pain, depression, and even OCD. But in this case, it’s important use is in debt settlement. This is because if you want to save as much money as possible for debt settlement, being mindful means making choices that will help you achieve your goals.

Build awareness

Carrie Schwab-Pomerantz says the best place to start is with what she calls a “financial cleansing.” This is where you focus on determining where your money goes. To do this, you will need to use money to cover all your everyday expenses for 30 days. You’ll undoubtedly find it harder and more painful to do this, instead of just pulling out the plastic. This should help you build mindfulness of your spending.

A second thing you need to do is delay purchases. No matter how badly you might want to buy that 50-inch HDTV, wait a few days, or even better, a week. You might then find it easier to resist the temptation. Or you might at least decide to put it off until you have the cash to pay for it.

Another way to be mindful is to make sure you purchase that HDTV from a company where you know it has a liberal return policy. Then, if you decide you made a mistake, you can fix it.

Finally, make a resolution to stay away from jewelry, electronics, and clothing stores where you might be tempted to make an impulse purchase.

Learn to pay attention

If you just pay attention to things, this can help you stop before buying something. You might try meditating for as little as five to ten minutes a day, which will mean focused breathing. This will actually affect those areas of your mind that control motion, attention, and habit. If you’re truly committed to the idea of eliminating money-wasting or mindless choices, this will build that area of your brain that helps you be more mindful.

Determine what you want

Another financial planner plasters the wall next to her refrigerator with photos that represent her goals. If your goal is a wonderful, one-week cruise, you might put snapshots of the boat and your destinations in your kitchen where you see them every day. This becomes a daily reminder of what brings you joy.

If you make your goals specific, you’re more likely to act on them. Be conscious of your spending. Try to imagine what your finances will look like 12 months from now. What changes could you make that you’d feel good about? For example, you could decide to turn a spending habit into a once-a-year treat, and then put the money you saved towards settling a debt.

Make your spending meaningful

Start tracking your spending to figure out what you value, and what you’re likely to regret. Write down what you buy then, 24 hours later, note how you now feel about it. Do the same thing three days and a week later. Did that purchase give you the satisfaction you had imagined? Are you really enjoying TV more because you now have an HDTV with a bigger screen? You should be able to see patterns emerge after a bit that will help you make better choices in the future — to save even more money for debt settlement.

Don’t get discouraged

It may take time for you to see real progress towards your goal of debt settlement. Remember that it takes a supertanker one day to turn just one degree. It takes 24 hours before it actually alters course. Don’t get discouraged if you don’t see immediate progress. Hang in there, and you’ll soon have enough money saved to begin settling your debts. It just takes time and mindfulness.

What You Need to Know to Choose a Reputable Debt Settlement Company

Do you debt settlement companies? They’re companies that work with lenders to get their customers’ debts settled for less than their balances. In fact, in some cases a good debt settlement company can get your debts pared by as much as 40% or 50%.

Unfortunately, some debt settlement companies are scam artists. The Federal Trade Commission (FTC) has rules and regulations for what debt settlement companies can and cannot do. The problem is that some of them fail to adhere to these regulations. For instance, some will try to get people to pay them up front, despite the fact that this is forbidden by the FTC.

Would you be a good candidate for debt settlement?

The first thing you need to determine is whether you’d be a good prospect for debt settlement. The criteria for this are pretty simple. You need to owe a minimum of $10,000, though the more you owe, the more a settlement company can save you. You also need to be at least five months behind on your bills. Of course, this varies with each debt settlement company. If you owed $10,000, and were only four months behind, there are settlement companies that would still take you on as a client.

How to spot a dishonest debt settlement company

We’ve already mentioned the first sign of a dishonest debt settlement company, which is if it asks you to pay anything up front. Some bad debt settlement companies have collected thousands of dollars from their customers up front and then never settled any of their debts.

A second sure sign is if the company contacts you, as reputable debt settlement companies simply don’t do this. Dishonest debt settlement companies try to get around FTC regulations by contacting prospects via Skype, text messages or in-person meetings. This is because they believe – wrongly – that these techniques get them out from under FTC and U.S. telemarketing rules. Some of these scam artists will hire attorneys, as lawyers are exempt from FTC rules, or they pretend to be law firms.

How to identify a reputable debt settlement company

In addition to what you have read above, there are other ways to know that you’re dealing with a reputable debt settlement company.

The first sign is if the company belongs to the Better Business Bureau and has, at the minimum, an A rating. A second good sign is if you can find reviews of it on the Internet, where the vast majority are positive.

Third, the company should be a member of the National Foundation of Credit Counseling or the Association of Independent Consumer Credit Counseling agencies. Companies that are reputable want to maintain their reputations, and will make sure they’re a member of one of these agencies. If you find the company is registered with one of the two, be sure to check to see if there has been any feedback on it.

Reputable debt settlement companies are upfront about their fees. Most charge a percentage of the amount of debt being settled. This generally varies from 15% to 25%. But despite this, they can still save you money. Suppose, for example, you owe $18,000 and the settlement company charges a 20% fee or $3600. If it’s able to settle those debts for 40% ($7200, you’d still be $3600 ahead.

An honest debt settlement company will settle all your debts before collecting its fee. What it will do is add a percentage of its fee onto each of your monthly payments, but not actually collect the money until it has settled all your debts. This amounts to is a 100% satisfaction guarantee, because if you were to become dissatisfied with your program, at any time and for any reason, you could simply cancel and it wouldn’t have cost you a penny.

Good debt settlement companies are never pushy or aggressive, nor do they promise quick fixes. How long it will take one of these companies to settle your debts will depend, of course, on how much you owe, but it will likely take from 24 to 48 months.

Finally, reputable debt settlement companies operate transparently. They keep their clients up-to-date as to the progress they’re making in settling their debts, and are also available to answer any questions you might have regarding your program.

The net/net

Debt settlement can be a good option depending on how much you owe. However, as you have read, it’s important to choose a reputable firm because if you were to choose a dishonest one, you could lose thousands of dollars and still be stuck with all your debts.

DIY Debt Settlement vs. Using a Debt Settlement Company

The Great Recession of 2007 left many people seriously underwater and facing financial disaster. Debt settlement turned out to be the equivalent of a life raft for a lot of these people. It’s not known how many people used debt settlement in the past nine years, but it’s known that thousands did, and in doing so saved millions of dollars, and averted bankruptcy.

The two options

If you’re seriously behind on your bills and can’t see any way to get caught up then debt settlement could be a good alternative.

The two types of debt settlement are DIY debt settlement and using a debt settlement company. In both cases, you would save money and get your debts paid off. So, the question is which of these options would be your best choice.

DIY debt settlement

This, as you can tell from its name, is where you settle debts yourself. It has several advantages. For one thing, some creditors may go easier on you and settle for less when they know they’re dealing with an individual and not a company.

Second, settling your debts yourself kind of forces you to organize and prioritize them, and face why it is you’re in so much debt.

You will save even more money when you settle your own debts since you will not be paying a debt settlement company.

You will be your only client

Debt settlement companies generally have hundreds of clients. When you handle the settlements yourself, you’re in complete control and are always your number one priority.

Using a debt settlement company means transferring a set amount of money each month to a trust account until all of your debts have been settled. In comparison, when you settle your own debts you have more flexibility. You get to decide which lender gets paid in what order and how much you will settle for.

The advantages of a debt settlement company

When all is said and done, most people choose to use a debt settlement company. There are several reasons for this. The biggest is that it eliminates the need to have the money available to pay for DIY debt settlements. The only way to successfully settle a debt is if you can make lump sum payments to your lenders to settle your debts. Let’s assume you owe $18,000. It’s possible you could settle those debts for 40% of your balances, but this means you’d need to have $7800 available to make the lump sum payments. And most people struggling with debt generally don’t have enough cash available for this.

There can be a lot of emotion involved if you’re negotiating with lenders yourself. In fact, negotiating with a lender can be a scary, as well as a long, drawn-out, experience. You may not be fast on your feet verbally or a good negotiator. When you choose to use a debt settlement company, it takes the burden of doing the negotiating off you. Plus, professional debt settlement counselors are generally able to negotiate better settlements than you could.

One set payment

As noted above, when you have a settlement company, you will not be required to make payments to your lenders. Instead, you would transfer a fixed amount of money each month to an FDIC-insured account that you manage. When enough money has accrued in your account, the settlement company will then begin negotiations with your lenders. The negotiations will continue until all of your debts are settled.

You won’t have to worry about anything

If you’re typical, you will have six debts to settle. If you figure several calls a day regarding each debt, you can see how quickly things could get crazy. You will need to take notes, remember the details of the offers you made, and the counter offers you received, and stay in contact with your lenders. All this goes away when you use a good debt settlement company. It will handle all these details for you, and keep you informed of how negotiations are going, so you will always know exactly where you stand. Your only job will be to sit back and relax, knowing your debt problems are in good hands.

It will cost you

Debt settlement companies are for-profits and charge for their services. Most charge a percent of the debt being settled. This can range from 15% to 25%. Going back to our example of $18,000 in debt, you might be charged $3600 (20%) by a debt settlement company. This might seem like a lot but if it’s able to settle those debts for 40% ($7200), You would still save money.

The net/net

As you have read, DIY debt settlement and using a settlement company each have their advantages and disadvantages. It’s important to weigh them to ensure you reach the decision that will be best for you. It may take some time and mental gymnastics to choose the right one, but it will be well worth the effort in the long run.