Bankruptcy & Foreclosures

More often than not, customers of mine come into the office and complain that while all of the tips and suggestion for managing their debt help, they wish to see more immediate results. In this line of thinking, there are some tips that yield almost immediate effects on your finances.

First off, consider ridding yourself of the plastic for the next few months. Literally lock away your credit cards in a safe deposit box at the bank or better yet, cut them up altogether. By no longer having the ability to charge impulse purchases, your balance has a hope of being paid down. Keep one low interest rate card for emergencies, but don’t be afraid to rid yourself of store cards which are known for encouraging you to purchase things you don’t need at outrageous interest rates at that.

If you think you can afford to pay off an outstanding loan in one shot, don’t be afraid to approach your lender and offer a reduced final settlement It sounds crazy, but lenders will often take far less than what is owed them just to close out the loan. There have been instances of customers offering to pay off bank overdrafts in which the bank asks for only 75% of the balance. It never hurts to ask.

Lenders, creditors, and just about everyone you talk to can candy coat it but the reality is that debt management begins with you. If your debt is out of control or even if you are in the process of getting your financial affairs in order, consider the benefits of devising a budget. This simple listing should act as a spending plan. The following four steps should be included in the budget:

1) Make a list of your household income
2) Make an itemized list of your household expenses
3) Compare the bottom line of income versus spending
4) Reset priorities to insure that income exceeds expenses

Sounds simple enough right? Well for the budget to work you have to first make sure all of the information in your two columns is accurate. Don’t overestimate income and don’t forget to include bills that may not be due every month. Car insurance, for example, is a bill that is often due on a larger than monthly scale. Let’s say you are billed $480 for six months of insurance coverage. Expect to place $80 per month in your outgoing column.

The budget simply aids in showing exactly where your money goes each month. For many, having the ability to visualize their cash flow on paper provides a much clearer sense of what is necessity and what is frivolous spending. It is a great idea to get into the habit of writing down every purchase, regardless of size, and including it into the budget. After a few months of doing so, clear spending patterns will develop. As always, any budget only works if you allow it to. Don’t think of it as a chore or obligation but rather as a tool to provide a better understanding of how you spend your money. Once it is spelled out, this is the time to cut back on areas of lesser priority so that bills can be paid accordingly.

Perhaps one of the most valuable tidbits of debt management advice I’ve encountered in my years as a mortgage broker is a simple reminder to the dangers of using credit cards unnecessarily. It is far too easy in our society to swipe a piece of plastic as a means of obtaining what we want. It’s quick, it’s easy, it’s painless, and it’s a loan. That’s right, whether we chose to think of it as one or not, the fact remains that every time we make a purchase with a credit card, we are taking out a loan. The next time you find yourself in a store with the desire to pull out the plastic, ask yourself the following: “Would I really take out a loan to buy this?” You will be surprised to how often the answer is no.

Here is a fact you may not have known. Last year credit card companies sent out a whopping 6 billion enticing offers to Americans in effort to lure them into signing up for more plastic. Credit card companies make their money by charging interest, plain and simple. They want to make it as easy as possible (not to mention as appealing as possible) for people to charge daily purchases, even if they have the cash folded a quarter of an inch away. Get into the habit of paying credit card balances off and keeping a card handy only for emergency uses. If the temptation to charge is too great, cut up the card or leave it at home. The easiest way to avoid drowning in a pool of credit card debt is to stay out of the water in the first place.