10 Simple Steps to Get Out of Debt Without Going into Bankruptcy

So you’re up to your neck in a massive pile of debt. There are many circumstances that could have led you here, but responsible financial planning is the one that will get you out. Most debt situations can be corrected with careful planning and intense effort over a period of one to three years.

You’ll need to be honest about the requirement for focused debt reduction efforts. You can do it if you follow these steps to achieve pay off all outstanding debt without filing for bankruptcy protection:

1. Save $500.

Figure out how to save $500 in an emergency fund that will be accessed in the event of an unexpected expense during the debt pay off period. Eliminate every discretionary expense possible and accumulate enough funds to meet the $500 goal.

2. Organize your debt.

Make a chart of every outstanding debt in order from smallest to largest without any concern for interest rates. Immediate feedback will be realized when smaller debt is paid off early in the process.

3. Stop all credit card use.

Cut up the credit cards and spend cash even at the grocery store. Take absolute control of your monthly expenditures by starting and sticking to a budget. Write checks to pay bills (or transfer directly from your checking account in online banking), and allocate cash for all other budget categories.

4. Trim the budget.

Make some difficult decisions and eliminate any expense that is not directly related to necessities for living (rent, mortgage, food, utilities). Consider disconnecting cable service until all your debt is repaid. Reduce the land line phone bill by removing unnecessary features, or do you even need a land line anymore? If not, it’s another unnecessary bill you can get rid of.  See if you can cut back on features or data usage within your cell phone plan to see if that bill can be reduced also.

5. Do not go shopping.

Avoid shopping for anything except for groceries. When shopping for groceries, buy items on sale and learn to cook from what is present in the kitchen. Reduce or eliminate eating at restaurants until all your debt is repaid.

6. Pay the minimum on all but the smallest credit card bill.

Every debt must be maintained in good standing to eliminate unnecessary fees. Pay the minimum payment amounts on all debt with the exception of the smallest on the list. Apply as much money as feasible within the budget to the smallest bill. Be realistic when setting this amount to prevent shortfalls in other budget areas. The idea here is to pay off the smallest bill first by continually hitting it with larger payment amounts, then moving onto the next smallest, and so on until all the credit cards are paid off.

7. Reward yourself.

When a debt is paid off completely, reward yourself. Order a pizza, purchase that Starbucks latte you’ve been missing out on for weeks, or purchase a new game for family game night. Celebrate your success (without going overboard of course).

8. Apply funds to the next debt.

Take the amount that was used to pay off the first debt and add it to the minimum payment that has been paid on the next debt on the list. This method will accelerate the amounts paid on the larger debts. The accumulation effect will cause faster progress in the later months of the process. Every time a debt is paid off all of the money is rolled into paying off the next debt.

9. Delay unnecessary purchases.

Throughout this process, the expense level must be reduced within your household. Spending cannot continue as usual if real progress is to be made on the debt repayment plan. Don’t go booking any vacations, or on any shopping sprees. The idea is to take back control of your debt instead of continually racking up more. And as you pay off debt, don’t tell yourself it’s okay to make additional purchases with what you’ve paid off already. This will just delay the debt repayment process even further (and is probably how you got into this situation in the first place).

10. Celebrate success!

When all of your debt has been repaid, immediately start a savings plan that will prevent the situation from repeating itself. Attempt to save half of the amount that has been applied to the debt from the previous months and years. Decide on a (realistic, financially responsible) reward for your achievement.

Financial spending habits must change to prevent a recurrence of debt overload. Live according to a budget and ensure that all your bills can be paid within the month they are incurred.

Evaluate the period of the debt repayment plan and determine what works for you and your family. Financial discipline is possible and you can do this!

If you need help with a debt repayment plan, make an appointment at your local First Financial branch or check our online event calendar at firstffcu.com for upcoming free seminars. Also, be sure to check out our credit management and debt reduction guide.

Article Source: David Ning for Moneyning.com 

5 Reasons You’re in Debt

Are you in debt and not sure how you got there? Some of these reasons may be the culprit.

1. You justify your purchases

Don’t try to rationalize unnecessary purchases. On some level, we are all guilty of this. Between “I deserve this” and “I need this,” we’re constantly making excuses for spending money. This doesn’t mean you can’t treat yourself, but do it affordably and make sure you budget for it.

2. You refuse to address your debt

The first stage of grief is denial, and dealing with debt can look very similar. Do not ignore your debt. As difficult as it is, you need to face your debt head on. Understand what you owe and create a plan of attack.

3. You are an impulse spender

With next day shipping and one-click shopping, this has never been a more prevalent issue for consumers. These purchases are beyond trying to justify, and that impulse is what is hurting your wallet. Try holding off on some purchases unless you’ve given them some thought, or saved up first.

4. You assume you are going to make more later

A great example of this is taking on student loans. Most students don’t have a choice if they want to go to college, and are now graduating with debt upward of $40,000 in hopes that they can land a job that will pay them enough to pay it back. In other cases, people are making purchases because they think they will be up for a promotion or have a raise around the corner. Even if all of these things do come to fruition, you will still be paying more in interest than if you’d waited.

5. You often dip into savings for expenses

J.P. Morgan once said, “if you have to ask how much it is, you can’t afford it.” When you look at a price tag and immediately start thinking about how to move money around, take a step back. Once that money goes into your savings, it should disappear from your thoughts. The only time you should ever spend money from savings is when there’s an emergency and you need to use your emergency fund.

Article Source: Tyler Atwell for CUinsight.com

3 Reasons Not to Pay Off Your Credit Cards Too Fast

When it comes to getting rid of debt, it seems like the best option is to pay it off as quickly as possible. This is especially true of credit card debt. It’s high interest, so you should just pay off what you can, as quickly as you can, right? Not so fast.

It’s actually possible to pay off your credit cards too fast. Wait, what?! Here are three reasons to take a step back and evaluate whether or not you should pay off your credit cards immediately.

1. You Don’t Want to Completely Drain Your Emergency Fund

If you have a chunk of change in your emergency fund, it might be tempting to just take the lump sum and pay off your debt.

The problem with this though, is that you open yourself to financial vulnerability if an emergency crops up. You might have to turn to your newly-paid-off credit card. When that happens, you wind up back in debt, and you’ve got no emergency fund on top of it.

There’s a reason financial experts suggest you keep at least $1,000 in an emergency fund before you start paying off debt. That way, if something happens, you can cover it without going further into debt. Don’t deplete your emergency fund in an effort to get rid of debt right now.

2. Watch Out for Cutting into Your Regular Expenses

You feel rich on payday. You feel like you can put $500 toward debt, and it makes sense. Pay it off faster and win right?

Unfortunately, you might not actually have $500 to put toward that debt. What about your regular expenses, like groceries and insurance premiums? Have you looked ahead to the bills you will need to pay in two or three weeks?

Your debt payment needs to be based on your budget and grounded in the reality of your regular monthly expenses. If you aren’t looking at all your monthly expenses, and just throwing money at your credit cards without a plan, there’s a good chance that you will need to turn to those credit cards in order to get through the rest of the month.

That means you take a step back for every step forward. Instead of getting excited and putting a large amount toward debt when you get paid, make it a point to map out your budget. Look at your income and expenses. Then make a debt payment plan that calls for an extra debt payment based on the money you have available.

3. Don’t Put Your Future at Risk

Finally, it can be tempting to take a loan out from your retirement account in order to pay off your debt more quickly. However, that can be a bad idea as well. Even though you are “paying yourself interest” on the loan, the reality is that you can’t replace the time the money is out of the market.

Another potentially dire consequence is that you could suddenly end up needing to pay the whole retirement account loan back at once. For instance, the entire loan comes due within a few months if you lose your job. The amount becomes an early withdrawal if you can’t pay it back — subjecting it to penalty and taxes. That could put you in an even worse position.

Just because it seems like you should pay off your credit card debt quickly, doesn’t mean that you should be so extreme that you put your overall finances at greater risk. If you are looking to pay off your credit card debt, ensure you have a budget and financial plan in place so that your daily expenses and emergency fund are covered first.

Article Source: Miranda Marquit for moneyning.com

3 Ways to Stay Out of Debt

Your student loans are paid off, and you finally got rid of that credit card debt. It’s a great feeling to be debt free, and it only feels better when you’ve stayed that way for a while. Going forward, here are three things to be mindful of if you don’t want to slip back into debt.

Be ready for the unexpected: A car wreck could happen in an instant and you could be responsible for car repairs or medical bills. If you’re not prepared with an emergency fund, you might have to put those payments on credit, and then you’ll be right back where you started. Make sure you start saving a little bit every month, so when those unexpected bills happen – you’ll be ready.

Stick to your lists: Always make a list before you go shopping. If you like shopping with your credit card (credit rewards or cash back can be great), make sure you buy only what you intended to. A few extra bucks here and there can cause you to go over budget, and even leaving a small balance on your credit card can get you in trouble over time.

Take a long look at your subscriptions: Whether it’s a gym membership, a streaming service, magazines, or whatever else, make sure you’re really getting value out of any recurring purchase that you’re subscribed to. If you haven’t been to the gym in the last couple years, it’s probably time to stop giving them your money – even if it’s only twenty dollars a month.

Article Source: John Pettit for CUInsight.com

Debt and Dating: Can Poor Financial Habits Keep You in the Friend Zone?

It’s the month of love. And dating is all about discovery. It can be fun to open up and share a few personal details with someone we’re attracted to. In turn, learning more about the other person is a great way to spark conversations that go beyond polite formalities. But while we’re more than happy to show our highlight reels, we all have those things we’d rather not talk about. You know, things like misspelled tattoos. Failed relationships. An affinity for Nickelback. High school, in general. But what about our financial habits?

Is it possible that the way you manage money could have an impact on your relationship prospects? It’s a fair question, and a recent survey of 2,000 millennials uncovered some interesting opinions about debt and its impact on a person’s dating potential.

Does debt matter? Yes. And no.

In short, significant debt is frowned upon, but according to survey responses, it’s not viewed as negatively as being a workaholic. That’s the dating game in a nutshell, isn’t it? Don’t work too little and don’t work too much. Apparently, sensible moderation is attractive. So, what do you do if you’re interested in someone but your finances aren’t as solid as you’d like?

Before you start fumbling for the right words to confess your mountain of debt, don’t get ahead of yourself. Less than 10% of people thought that this kind of information should be shared early on. More than 87% thought it best to wait until the relationship becomes exclusive or moves to the point of sharing household expenses. So, if you’ve just started seeing someone and have more debt than you’d care to admit—relax.  You’ve got time.

To share or not to share, that is the question.

Maybe all this talk about debt and dating has you wondering whether you’d be willing to share your most intimate financial details with a potential partner. The survey designers wondered the same and posed an interesting question: Would you rather tell your partner about your large debt or a pre-existing medical condition? Not surprisingly, the majority of respondents said they’d rather spill the beans about bloated borrowing. But it’s worth noting that more than 39% said they’d find it easier to divulge their most personal medical details.

If almost 40% of people would rather reveal their personal medical history instead of discussing monetary struggles with a potential partner, it’s safe to say debt-related anxiety can impact us emotionally as well as financially. If there’s a takeaway from this survey, maybe it’s the fact that debt and relationships have something in common: Neither improves when ignored.

Three tips for navigating the debt discussion

  • Understand your debt. Rather than lumping everything you owe into one negative category, it’s important to remember not all debt is bad. Home mortgages and student loans are traditionally viewed as desirable, while credit card debt and payday loans can be roadblocks to financial success. Knowing the details of your debt is essential to managing it effectively. (It can also help you sound smarter if, and when, the topic comes up on a date).
  • Eliminate bad debt ASAP. High-interest credit cards, auto loans, and title loans can throw you into a tailspin of making minimum payments that never pay down the principle balance. Whether you cut frivolous spending or pick up a side job, find ways to pay off the accounts with the highest interest rates first.
  • Get a good wingman. When it comes to your finances, there’s no shame in admitting you need help. With debt management tools ranging from credit counseling to low-interest consolidation loans, your credit union can play a pivotal role in your financial success. And judging from many of the survey responses, a solid financial foundation may improve more than just your credit rating.

Need a little help managing your debt and want to sit down with a First Financial representative to help with debt management strategies? Stop into your nearest branch location, email marketingbd@firstffcu.com, or call 732-312-1500 to schedule an appointment. We’ll help you get back on track!

Learn to manage your credit and reduce debt with our easy guide.

Article Source – Survey Data

How to Eliminate Debt Using the Snowball Method

The snowball method is a simple debt elimination strategy that can be employed by anyone of any income level to quickly pay off debt.

Begin by making a chart of all outstanding debt and list your monthly payment.

Then, organize your debt in order of highest monthly payment to lowest monthly payment.

Each month, pay the minimum payment on all debt except the lowest.

For the lowest debt, pay the minimum plus any extra you can. Ideally, pay double (or more if possible) to quickly pay off this loan.

After the lowest debt is paid off, roll what you were paying on it into the next lowest debt. It will be the next loan you pay off.

This accumulation method, like a snowball effect, works because it’s clear and concise.

By tackling the smallest debt first, it’s easier not to be overwhelmed. Once it’s paid off, you’ll feel more empowered to tackle debt after debt till there’s none left!

Article Source: Jennifer Reynolds for CUInsight.com