es, You Can Get High on Debt Settlement

How often do you add up your bank accounts and other assets to learn where you stand financially? For that matter, do you bank online? If, so how often do you check your transactions and your balances? We check ours at least once a day and sometimes more often.

If we like the numbers, we feel pretty darn good – at least most of the time.

The fact is, money is like a drug. You’ve probably seen writers use this as a metaphor. However, scientists have found that your brain will react to money in some of the same ways it does to drugs. For that matter, the way your brain responds to different financial circumstances can actually cause you to feel pain or pleasure, get you feeling stronger, or even have you to refuse free money.

Money can be like cocaine

Scientists have used fMRI (functional magnetic resonance imaging) to scan the brains of people while they are thinking certain thoughts or engaging in specific activities. What these studies have done is help them learn more about the effect money has on our brains.

In one experiment, participants were hooked up to fMRI devices while they played a game for money. Believe it or not, the fMRI scans revealed that the way these people’s brains worked was almost the same as those of drug addicts high on cocaine. In fact, they found that even other things like corpses or naked bodies did not have the same effect on people as money. It just got people riled up the way food motivates dogs.

What another study found

Researchers found in another study they could predict that people would choose investments that were riskier based on the activity in their nucleus accumbens.

Two takeaways came out of these studies., The first is that people could use the money for a safer high than drugs. The second is that the “high” you get from money could lead to making riskier choices. In other words, if you’re feeling too excited about a financial decision, slow down, take a deep breath, and think about it.

Why your brain might have you refuse free money

There is a thing called the ultimate game. It’s an experiment with two volunteers. The way it works is that scientists specify a certain amount of money and then offers a portion of it to a “responder.” In the event the person who responds accepts the offer, he, or she gets the money and the person that did the proposing gets the rest. If the responder refuses the money, both get nothing.

Here’s an example of how this works. Let’s suppose that you’re the responder and a proposer offers you $20 of the $100 you get to share. You then have the ability to say yes or no. In the event, you say yes, you get the $20 and the proposer gets $80. If you say no then neither of you gets anything.

There is a thing in game theory that says proposers will offer as little as they can in order to keep more, and the responders will take any proposal rather than getting nothing. However, in practice, proposers usually offer about 50% of the money, and the responders often refuse low offers – especially if those offers are 20% or less of the money. And scientists get the same results worldwide, even if participants are playing for an amount equal to their salaries for three months.

One of the best examples of this is real estate. Sellers often turned down offers for their homes for less than what they feel the homes are worth. But they then end up actually taking less.

Debt settlement and your brain

Most people who find debt relief through debt settlement also report a feeling similar to using drugs. They say they feel elation at the idea of being debt-free, as well as a sort of euphoria. Some actually likened their emotions to being about the same as taking an opioid.

Money can relieve pain

There have been a number of studies revealing that money can actually relieve pain. In fact, there was one experiment that found when people counted money they experienced less pain when they put their hands in hot water afterward. Another study revealed that people felt more pain from the hot water when they first thought about their recent expenses. The researchers also found that counting money lowered the pain of social distress.

So, next time you get a headache or are feeling social distress, try counting money.

In summary

It’s clear from the studies that maybe money can’t buy happiness but it can get you high. And getting high on money is certainly better than getting high on drugs. Plus, it can be a lot cheaper.

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 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 and reported on, 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,, or The site is a little pricey but helps you to create your own 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, 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 and

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.

Tips for Settling Debts With a Debt Collector

Being contacted by a debt collector can be very scary.

The debt collectors’ only objective is to collect as much money from you as possible, as they’re usually paid on a commission basis. If they can’t collect much money from you they earn less.

The Federal Trade Commission has rules about how debt collectors can act and what they can say. Unfortunately, there are unscrupulous ones that will say anything to get you to pay up.

What Debt Collectors Can’t Do

It’s Important to understand that according to the Fair Debt Collection Practices Act FDCPA), debt collectors cannot:

  • Call you before 8:00 Am or after 9:00 PM
  • Call you on a Sunday
  • Contact you at work if the debt collector knows that your employer does not want you to be contacted there during working hours
  • Get in touch with your employer about a debt you owe, unless the debt is past-due child support.
  • Contact your relatives, friends, or neighbors about the money you owe in order to embarrass you into paying your debts
  • Swear or insult you when you are having a conversation, or threaten you with the loss of your reputation or with jail time
  • Call you repeatedly during a relatively short period of time. Such behavior is harassment, and the FDCPA makes harassment illegal

The first step in dealing with a debt collector

The first, or next time a collector calls, you need to verify the debt. This means requesting what’s called a Debt Verification/Validation Letter. You can ask for this letter either verbally or by mailing/faxing a letter to the collection agency.

Make sure it’s not a “zombie” debt

Your next step is to see if it could be a “zombie” debt. This is a debt that’s many years old and has passed the statute of limitations. The statute of limitations varies from state to state but is typically five years from the time you last took some action on the debt like making a payment. Before you do or say anything, make sure you get your debt verified or validated, so you will know it’s not a “zombie” debt. If you do say or agree to something, you could restart the debt’s statute of limitations, so it would once again be active.

Negotiate to pay as little as possible

The little secret of debt collection is that collectors buy debts for much less than their balances. The collector’s agency could have paid as little as $20 for your $800 debt. A debt collector often will settle for much less than your balance. As in any negotiation, you will want to start low because once you name a number you can’t go any lower. For example, you might start at 30% or less of what you owe. You can also make your offer more appealing by offering to make a lump sum payment.

Ask to have the debt reported as “paid as agreed upon”

It’s very bad to have your debt reported to the credit bureaus as settled or settlement. Ask the collector to report the debt at least as “paid as agreed upon.” While the collector may not agree to this, it’s worth asking – especially if you’re offering to pay the debt in a lump sum.

Reduce the debt by no more than $600

Any amount of debt over $600 that is forgiven will be reported to the IRS and taxed as ordinary income. You can keep this from happening by reducing any debt you settle by no more than $600. Of course, it may be worthwhile to pay taxes on an amount over $600 because that’s debt you don’t have to pay – assuming you can dramatically reduce the amount you owe.

Get everything in writing

If you and the debt collector are able to come to an agreement, make sure you get everything in writing before you pay off the debt. This is so if the collector doesn’t do what the two of you had agreed on, you will be able to prove your case.

Check your credit reports

Finally, wait for a few weeks after you’ve paid the collection agency and then check your credit reports. This is to make sure that everything was reported to the credit bureaus per your agreement. If you find an error, you will need to go back to the debt collector and work to get it corrected.

In summary

Getting contacted by a debt collector can be a frightening experience. But if you understand your rights, as you have read this in article, you can keep the collector from making your life miserable. And if you follow the tips you’ve just read, you should be able to get any debt reduced considerably, paid off and then reported to the credit bureaus in a way that won’t damage your credit history as severely.

Why Debt Settlement Companies Are a Good Idea

When you think of your debt how do you visualize it? Do you see it as a huge swamp you’re slowly sinking into or as a big boulder that’s crushing you. Or maybe you see it as a tidal wave that’s sweeping you away.

Regardless of how you see your debt the one thing you’re probably longing is freedom from it.

You have options

If you truly want to become debt free, the good news is that you have several options. For example, if most of your debt is credit card debt you might be able to transfer your balances to a 0% interest credit card where you’d have anywhere from nine to 21 months’ interest free on both your balance and any new purchases. This could give you enough time to either get your debt paid off entirely or at least cut down to a more manageable size.

The credit counseling option

Consumer credit counseling is a second option. Find a good non-profit credit counseling agency and you’ll be assigned a counselor who will review your finances and then suggest either a budget designed to help you become debt free or what’s called a debt management plan (DMP). If the counselor recommends one of these plans you’ll stop paying your creditors and make a monthly payment to the credit counseling agency instead, which will then distribute the money to your lenders. This can be a very good way to consolidate debts and get them paid off. However, a DMP generally takes from four to five years to complete and all your credit card accounts will be closed.

The debt settlement option

A third way to deal with an overwhelming pile of debt is through a process called debt negotiation or debt settlement.

One form of this is called DIY debt negotiation. This is where you contact each of your lenders and negotiate a settlement by offering to make a payment for less than your balance. As an example of this, if you owed $3800 on a credit card you could contact the bank that issued the card and offer to make an immediate payment of, say, $1900 to settle the debt. Of course, you will need to have the $1900 available to immediately send the lender. And you would need to be experiencing some kind of financial emergency otherwise no lender will agree to negotiate with you.

However, very few people try DIY debt negotiation. Instead, they choose to use a debt settlement company.

Why this is a good idea

The cheapest way to handle debt negotiation is to do it yourself. The reason for this is because debt settlement companies charge for their services. Most have a fee ranging from 15% to 25% depending on the total amount of the debt it’s negotiating for you.

However, there are reasons why using a debt settlement company is still a good idea.

For one thing, it will save you money despite its fee. Let’s suppose you owed $11,000 on a credit card and the debt settlement company charges a 20% fee – or $2200. This might seem like a lot but if it were able to settle that debt for $5500 (50% of the debt), you’d still save $3300.

With a debt settlement company, you’d have a fixed monthly payment for a fixed amount of time instead of needing to have the cash for those lump sum settlements. And your monthly payment should be for considerably less than the sum of the payments you’re currently struggling to make.

How it works with a debt settlement company

Your fixed monthly payment won’t actually be a payment. It will be a transfer of money from your checking account to an escrow-like account you manage.

When there is enough money in your account to settle one of your debts, the settlement company will ask you to release the funds from your account to pay it off. This process will continue until the company has settled all your debts. This typically takes from two to four years.

Living stress-free

Another big benefit of using a debt settlement company is that this will relieve you of the stress of having to deal with angry creditors and those nasty-tempered debt collectors. Once you sign a contract with a reputable debt settlement company you’ll be able to sit back knowing your debts are being managed by a team of professionals. Plus, you’ll know exactly when you’ll be debt free.

A Few Words of warning

Using a debt settlement company can be a real godsend but it does come with its downsides. For one thing debt settlement will damage your credit score. This is because your debts will not be reported to the credit bureaus as “paid in full”. Of course, if you’re so far behind on your bills you’ve decided to use a debt settlement company then debt settlement may not have that much of an effect on your credit score – because it’s already been pretty well trashed.

Second, not all of your lenders may agree to debt settlement. So, you could end up both making payments to the debt settlement company and to some of your lenders.

But even considering all these things if you’re being crushed by your debt and don’t know which way to turn then turning to a debt settlement company would definitely be a good idea.

Busted –The Myths of Debt Management Work

Have you’ve seen TV commercials or read ads from debt management companies such as Consumer Credit Counseling Service or Consumer that promise to save you thousands of dollars?

That’s the myth they want you to believe.

The truth is that yes; they can get your debts reduced but only by getting your credit trashed.

They’ve sprung up like dandelions in the spring

Debt management companies have sprung up mostly as a result of the Great Recession of 2007. Their promise is that they will help “manage” your debts by requiring you to make one payment a month to them, which they then divvy up among your creditors. In addition, they are often able to negotiate lower interest rates and lower payments to your creditors.

A form of debt consolidation

If you contract with a debt management company to take over your debts, it’s not a loan as would be the case if you were to borrow the money to pay off your debts. However, it is a form of debt consolidation. People sometimes get the two of these confused.

The biggest difference is that with a debt consolidation loan you’re required only to pay interest on the money you borrow. In comparison, debt management firms charge fees that can be as high as 25% of the amount of debt being managed.

It comes at a price

It is true that a good debt management company should be able to get your interest rates and maybe even your monthly payments reduced but it comes at a price. If you use a debt management company and then apply for a conventional, VA or FHA loan, you will be treated about the same as if you had a chapter 13 bankruptcy.

And if you apply for a traditional mortgage the guidelines for underwriting the loan will consider that your credit is trashed.

The truth – hard work is in

The truth of debt management is that what’s required is that you must change your behavior. This is only where you can get real debt help. Changing your financial behavior will change your life for good! The fact is that true debt management is just about one thing – and that’s you controlling your money.

No magic formula

There’s no mystical, magical formula for good debt management. The solution is a combination of common sense and having a plan for your money. Good debt management is hard work because it’s 80% your behavior and just 20% your knowledge. While some debt management companies might want you to think of it as rocket science, it’s not.

But it’s not easy. The truth is that it’s really pretty hard a lot of the time.

However, it’s worth it. If you create a plan and are determined to get your debts under control you’ll save money because you won’t be paying any debt management company a fee, your credit reports will stay clean and you’ll have more flexibility.

A real debt management plan

There are just five steps to a real debt management plan.

The first is to make a budget because without a budget there is no way you can know how much money you have to put against your debts. There are a number of free apps available for creating a budget and there are free budget worksheets available online you could download.

Step two is organizing your debts. This means making a list of all of your debts, with the names of your lenders, your balances, your payment due dates, their interest rates and minimum payments required. Again, you could just enter this information into a worksheet.

Calling your creditors is step three. When you call, ask for its hardship department. Explain to your contact exactly why you’re having a serious financial problem. This could be due to a job loss, a nasty divorce, a huge medical bill or because you were forced to take a serious cut in pay. In most cases, you’ll find that lenders will be willing to reduce your interest rates rather than having to deal with a default.

Your next step is to make a repayment plan. The two most popular debt repayment plans are called the snowball method and the avalanche method. Choosing the snowball method means ordering your debts from the one with the lowest balance down to the one with the highest and then concentrating your efforts on paying off that first debt. The avalanche method is where you order your debts from the one with the highest interest rate down to the one with the lowest and then focusing all your efforts on paying off that first debt. Regardless of which you choose you will need to continue making the minimum payments on your other debts.

Step five may be the hardest because it’s to begin using credit wisely. This may be the most difficult part because it’s the changing your behavior thing. If you have credit cards that are still open, you might use one of them to make several small purchases and then run home and immediately pay off your balance. You should also set up automatic payments for a small recurring bill to make sure it’s paid in full every month.

But the most important thing of all is to stay well away from any spending that would tempt you to get into more debt. You need to learn to use credit sensibly and not as “retail therapy”.

7 Reasons Why You Need to Start Budget Tracking Immediately

You’ve probably been told at least a zillion times that you need a budget and there are good reasons for this. Without a budget, it’s just flat impossible to know where your money is going and how much you have left over for debt settlement. We admit that budget tracking is not easy. It means noting everything you spend money on right down to that candy bar you bought out of your company’s vending machine – and you must do it almost immediately before you forget about it. If you’ve ever tried tracking your spending, you probably remember those days when you got home with $14 less in your wallet than you thought you had but had no idea as to where the money had gone. That’s because you weren’t budget tracking. If you’re not doing this, here are seven reasons to begin doing it immediately.

Budget tracking builds organization and discipline

If you are budgeting this can definitely help you remain disciplined to organize your finances, which is step number one in learning your overall financial health. The fact is that if you don’t have data that’s easy to read in the form of budget tracking there’s just no way you can know what’s going on in your financial life, let alone do anything about changing it.

It makes you think about your money

An important side benefit of having a budget and tracking your spending is that the more time you spend thinking about your money the more you’ll be focused on building your wealth. And when you start thinking about your money more often that’s when you’ll start finding ways to save more money or to increase your income.

It helps you prevent a crisis

If you’re tracking your spending and reviewing your finances regularly this will help you spot trends and discover areas that can be improved long before they become problems. When you prevent a crisis from starting, you’ll be way ahead of everyone else who will only be able to react.

Budgeting is a quantifiable way to measure your progress

We guess in theory that everyone would like to cut their spending but it’s impossible to do this unless you track your progress. Budget tracking can certainly be used to measure your progress but it’s not just a benefit, it’s really a requirement.

Budget tracking can be a great tool for starting family discussions

It’s always tough talking about money. But if you have a wife or husband that’s involved in making a budget and tracking expenses it’s always a good idea to lay out the facts when talking about money. Using an expense tracker is a really good tool to help with this. And if you have children that would be affected by your decisions you might want to involve them in some of your expense tracking.

It is power

You may have heard the old saying that “knowledge is power”. It’s definitely true when it comes to keeping track of your budget. If you do this. you’ll know precisely how much money you need on a monthly basis. When you know this, you will be able to plan and create an emergency fund that will have a sufficient amount of cash. Plus, you will be able to calculate how you will treat unexpected issues such as losing your job or having a child and how that will affect your finances.

It will relieve you of much stress

A tremendous amount of stress will be lifted off of your shoulders when you know your exact financial situation. You’ll no longer have to worry about those unknown expenses of life. Even in a worst-case scenario, if you find your finances are on the shaky side, you’ll be spending your time fixing them and instead of hours worrying about them to the point where it makes you crazy.

Budget tracking is not all that difficult

The best part of this is that budgeting and budget tracking is not half so difficult as it used to be. This is thanks to all the budgeting apps now available either free or very low cost. Some of the most popular of these include Mint, You Need A Budget, Every Dollar, Easy Envelope Tracker, Billguard and Dollar Bird. Probably the most popular of these is Mint as it will not only track your spending but automatically divide it into budget categories. Once you set spending limits in each of your categories, Mint will actually notify you via email if you overspend in any of them. The important thing is to review the top-rated apps in this category, evaluate them carefully and then choose the one that you think will best fit your needs. And, oh, if you forget a candy bar or latte somewhere along the way, don’t panic. This won’t change your life and will have very little of an effect on your finances.

“69% of Americans Have Less Than $1000 in Savings”

Do you find this statistic hard to believe? Does it make you want to run off to to check if its valid or just truthy? We can save you the trip. This comes from an article in Money magazine, which also reported that this is a big increase since last year. What’s even scarier is that this 69% of Americans don’t have enough money saved to cover a $1200 emergency.

So how do you stand? If you’re considering debt settlement, do you have more than $1000 in savings or are you part of that 69%? If you fall into that latter category you need to get to work and build up your savings. This is because debt settlement can save you money – and probably a lot of money – but it has one drawback. You must have the money saved to cover the lump sum payments you’ll be required to make to settle your debts.

How much do you need to have saved?

This will depend, of course on how much money you owe. For example, if you owed $30,000 to four different lenders you might be able to settle these debts for around $15,000. But that begs the question, how would you ever get that $15,000?

How do you get there?

There’s the old riddle which begins with the question, how do you eat an elephant? The answer, of course, is one bite at a time. And that’s how you get the $15,000 or whatever to settle your debts – one deposit at a time.

Here’s the math.

If you could save 10% of your net income a month or $500 with a 1% return you’d have $5005 saved at the end of year one, which should be enough to settle one or more of your debts. Keep saving at this rate and you should be able to save enough in two or 2 1/2 years to cover all of your settlements.

If 10% is too much

You might be sitting there thinking, wow! If only I could save 10% of my net income given my current financial situation. If this is the case, you may have to start smaller. If you can start by saving just $50 a month you will eventually reach your goal – it will just take you longer. But the important thing is to start saving money until it becomes an ingrained habit. In fact, you might want to have the money automatically withdrawn from your checking account and deposited into your savings account so that you’d be saving every month without even having to think about it.

If you don’t have a budget

It’s just flat impossible to save money for debt settlement unless you have a budget. The reason for this is simple. If you’re not budgeting your money you could easily end up spending every cent you earn or even more. Does the B word as in budget cause cold shivers to run up and down your spine? Budgeting has become almost drop-dead simple thanks to the many apps available. Some of the most popular of these are You Need A Budget,, Wally and Billguard. will track your spending, divide it into categories and send you alerts at least once a week so you can easily see exactly where you stand. Once you’ve created your budget categories Mint will even email you an alert if you overspend in any of them. Plus, it gives you a nice graph of your spending so that you can see exactly where your money has gone.

The 20/50/30 budget

There is also a minimalist way to budget called the 20/50/30 budget. It’s so simple you could probably write it on the back of an envelope. The 20 is the 20% you save (at least theoretically), the 50% is to cover all of your necessities and the 30% is your disposable income or the money you can spend howsoever you choose. Of course, you will need to track your spending for at least 30 days before you can divvy it up into the 20%, 50% and 30%. You can also probably track your spending on the back of an envelope but make sure you write down everything right down to that $.75 bag of pretzels you bought from a vending machine.

No matter which you choose

No budget is any better than the person that created it. This is a short form way of saying that regardless of which budgeting option you chose the critical thing is to stick with it. This will take more than a small amount of self-discipline at first but if you can stick with your budget for five or six months it will become such an ingrained habit you’ll hardly even think about it. And remember the words of Nelson Mandela, “It always seems impossible until it’s done”.

Debt Settlement Work and Fixing Bad Credit

Do you have bad credit? While it’s possible to live with bad credit it definitely makes life more difficult and more expensive. As an example of this, did you know that insurance companies usually charge higher premiums for drivers that have bad credit scores? Did you also know that if you’re getting utilities turned on the company will check your credit in order to see if you will need to pay a security deposit? And, of course, everyone knows that if you want to get a personal loan or credit card the bank will check your credit score.

Why fix bad credit?

Credit repair isn’t just important for saving money on loans, credit cards and insurance. There are other reasons why it’s critical. A better credit score can mean new opportunities for employment. And do you dream of starting your own business? Then you need to start credit repair sooner than later.

Get your credit reports

You can’t know about your bad credit until you get your credit reports from the three credit reporting bureaus – Experian, TransUnion and Equifax. They are required by law to provide you with your credit reports free once a year. Or you can get all three free simultaneously on the website

Look for errors

Review your credit reports carefully looking for errors that could be damaging your credit score. The credit bureaus process literally thousands of pieces of information a day and mistakes can be made. In fact, the Federal Trade Commission released a report several years ago that nearly 25% of us have errors in our credit reports that could be affecting our credit scores. If you do find errors in one of your reports, it’s important to dispute them. There are forms on the websites of the credit bureaus for this purpose. But it’s best to write to the appropriate bureau making sure to enclose any documentation that proves your claim.

The types of information that needs to be repaired

There are three types of information that you will need to repair.

  • Past due accounts that are late, that have been charged off or have been sent to collections
  • Incorrect information such as accounts that aren’t yours, payments that have incorrectly been reported as late, etc.
  • Maxed out accounts or those that are over their credit limits

Tackling accounts that are past due

The biggest factor in determining your credit history is your payment history as it makes up 35% of your score. If you have several past-due accounts on your credit reports they are significantly damaging your credit score. This means that taking care of them is crucial. Your objective should be to fix all your past due accounts that have not yet been charged off so they are reported as “current” or at least “paid”. You can save any debt from being charged off that’s less than 180 days past due. To do this you will need to contact your creditors to see what you can do to become current. In some cases, your lenders might even be willing to waive some of the late penalties or spread your past due balance over a few payments. Be sure to let them know that you want to avoid charge-offs but will need some help. This means actually talking to them to negotiate.

Accounts that have already been charged off

You’re still responsible for charged-off accounts. The good news here is that as those charge-offs get older they will have less of an effect on your credit score. However, the outstanding balance on one of these accounts will make it difficult – or even impossible – to get new credit and loans. This means an important part of your credit repair must include paying charge-offs.

When you pay a charged-off debt, your credit report will be updated to show your account balance is now $0 and the account is paid. The bad news is that the charge-off will continue to appear on your credit reports for seven years from the date the debt was charged-off. An alternative to this is to try to settle the charge-off for less than your original balance. If a creditor agrees to accept your settlement offer it will then cancel the remainder of your debt. However, the status of your debt as “settled” will also stay on your credit reports for seven years.

What to do about collection accounts

If you have accounts that have been sent to collection, then paying them off is much the same as for charge-offs. You could pay the debt in full and try to get a “pay for delete” in the process or try to settle the account for less than your balance. Again, the collection will stay on your credit report for seven years.

Fix your credit utilization ratio

The second largest component used in calculating your credit score is your credit utilization ratio. This is the amount of credit you have available divided into the amount you’ve used. For example, if you have total credit limits of $8,000 and have used $4000 of it, your credit utilization ratio would be 50%, which is too high. If you find that you have a high credit utilization ratio you should focus on paying down some credit card balances as this will improve your ratio and ultimately your credit score.