The Ultimate Guide to Getting Out of Debt

Posted on September 9, 2015 by VP of Marketing and Business Development Jessica

1. Commit to getting out of debt.

Getting out of debt is hard. It takes maintaining discipline over a long period of time. It demands lifestyle changes.

While you shouldn’t build a plan so strict that it would be impossible to stick to, you will have to make some tough choices. If you’re used to treating yourself to spa days or shopping sprees, you’re going to have to give up some of these tangible and expensive pleasures in order to obtain being debt-free. If you and your partner are collectively in debt, they’ll need to be on board as well. It’s not possible to do this on your own if your other half is still spending up a storm.

For motivation, create a visual reminder of what you’re working toward, such as a photo of the kind of house you’d like to buy, or the destination you plan on hitting when you can afford it. Put the image in your wallet, on your computer or wherever you spend money — to remind yourself of what you’d really like to do when you get out of debt.

2. On a spreadsheet, list all your debt, balances, interest rates and minimum payments — and find out the total of what you owe.

Knowing the total will give you a rough sense of how long this might take. If you’re shocked by the number you see, just remind yourself that this is the highest the number will be. Within the next month, it will start to get smaller. Knowing your minimum payments will help you budget, and having your interest rates will help you decide on your debt repayment strategy. List your debts in order of highest-interest rate to lowest. Tally up your minimum payments so you know the minimum amount you need to put toward your credit cards every month. Keep the list easily accessible and editable so you can refer back to it in the coming months.

3. Try to make 0% balance transfers, get your APR lowered, or refinance.

Now that you’re committed to paying down your debt, it would really help if it weren’t simultaneously increasing bit by bit. If you’re eligible for 0% balance transfers, see if it makes sense to transfer your credit card debt.

But beware the fine print. If the 0% offer only lasts six months, be sure you can pay that debt off within that timeframe. If not, you could end up paying higher interest than you were before — and it could even apply to the initial six-month period (look for the term “accrued interest” to see if this might happen). Also, calculate what the balance transfer fee is and make sure that even with the fee, you’ll still save money on the transfer.

If you’re not eligible for a 0% balance transfer or decide it doesn’t make sense for you, call your credit card company to see if you can negotiate the APR down. If your main debt is a mortgage, look into refinancing.

4. Start tracking your spending.

In order to pay down your debt, you’ll need to find ways to free up the money you already have. Knowing where your money goes will help you spot where you can cut expenses. Look for big expenses that don’t align with your priorities. If you’re surprised to see you spend $200 a month for work lunches, start packing lunch from home. Also keep an eye out for expenses that you’re not utilizing (do you actually use that monthly gym membership or Netflix subscription?). And note anything that was more expensive than it should have been, and get used to searching for coupon codes for online purchases and only shopping at in store sales.

5. Do a first pass at your budget.

Figure out your annual take home pay — what hits your bank account after taxes and 401(k) retirement contributions. If you receive a paycheck every other week, multiply the amount by 26, then divide by 12 to get the exact monthly figure. Tally up your necessary expenses: housing, transportation, utilities and groceries. Try to come up with a reasonable amount for your monthly groceries that you can stick to.

If the sum of your necessary expenses is greater than 50% of your take home pay, it might be hard for you to pay off your debt in an expedient fashion. (If you have other necessary expenses like childcare, which allows you to work, then it’s fine to go over the 50% threshold). Otherwise, if you’re exceeding the 50% mark, see if you can cut back on any of these necessary expenses in any way.

6. Work your debt and discretionary expenses into your budget.

Now, calculate what percentage of your take home pay your minimum debt payments are. If your necessary expenses are 50% or less, aim to put 20% of your take home income toward your debt. If your minimum payments are less than 20%, you’ll be able to put more than the minimum toward your debt each month.

Finally, see how much you have left to live on each month. From your monthly take home, subtract your necessary expenses and your projected 20% debt payment. Divide the leftover by 4.33 to see how much you can spend each week. Is this enough to live on each week for your dining out, shopping, gym, entertainment, travel, gifts, cable, health and other costs?

If not, get the numbers to a ballpark range that feels doable, even if it means not hitting that 20% debt repayment goal. Expect that you’ll have to go through a period of trial and error before you find the exact plan for you. But make a decision, and head into the next step knowing what you’ll be paying toward your debt every month.

7. Start your debt repayment plan.

Now that you have a monthly debt repayment target, go back to your debt spreadsheet. Pay the minimums on every debt except the highest interest rate debt. Put the rest of your debt repayment money toward that debt every month until it’s gone. Afterward, cross it off the list and do the same for what is currently the second highest interest rate debt. Continue like this down the list. This method of repayment will ensure you pay the least interest.

8. Stick to your weekly allowance.

The only way you’ll be able to pay off your debt is if you don’t keep adding to it. This means being vigilant about living within your means. Depending on your income and the cost of living in your area, this can be difficult unless you keep an eye on it. If you know you need to make a shift in your spending habits, try using cash. Take out your weekly allowance in cash each week and only let yourself spend that amount until it runs out.

9. Adapt to your new lifestyle.

Now that you’ve started on your plan, you need to learn what behaviors will support it. If you feel comfortable doing so, tell friends and family about your debt repayment goal so they understand why you’re suggesting more potlucks. If a friend suggests an activity that will be difficult on your budget, look for good free or inexpensive alternatives.

Even for non-social activities like personal hobbies, look for ways to cut costs: If you dropped the gym, can you run outside or play tennis with a friend? Maybe you realize that with advanced planning, you can more cheaply stock up on household items by buying in bulk. To freshen up your wardrobe, browse good local thrift shops or hold clothing swaps with friends.

10. Earn more money, and put gifts and windfalls toward your debt.

Finally, one of the best ways to get out of debt — is to earn more money. While cutting costs might free up a few hundred every month, a solid side gig could give you an extra $1,000 or more to put toward your debt. Do you have a hidden talent that you could put to work for you? If so, let everyone in your network know that you’re looking for freelance gigs. Put your gifts and windfalls to work as well. If you receive a large sum, put the vast majority toward your debt. With a little discipline, you really can become debt free!

Article Source: Laura Shin, http://www.cuinsight.com/the-ultimate-guide-to-getting-out-of-debt.html

The 10 Commandments of Saving Money

Posted on July 23, 2014 by Marketing Intern Brianna

There are thousands of savings tips that can help you grow your nest egg. Whether they involve brown-bagging it to work or using coupons at the supermarket, these are generally useful savings habits that can give you a leg up on ending each month in the black.

But there are only a few super-sized savings rules that can truly transform your finances. Rules so big they deserve to be etched in stone. So, here are the “The Ten Commandments” of saving.

1. Thou Shalt Know Where Thy Money Goes

When generals go to war, they need an overview of the battlefield. Maps, exploration and data show them where the enemy is susceptible. In the battle for savings, the first thing you have to know is where your money is going.

Sites like Mint.com allow you to connect all your bank accounts, credit cards and loans to cloud-based software so you to track your finances on one screen, in real time, with just the click of a button. They also analyze your expenses and highlight areas where you might be wasting money. Best of all, it’s free.

2. Thou Shalt Eliminate Debt with Extreme Prejudice

Debt is bad, but it’s the interest on that debt that’s like kryptonite to your savings goals, and the sooner you eliminate it, the sooner you can become a savings Superman.

Moving debt from high-interest instruments, like credit cards, to lower-interest instruments, like a line of credit, is a start. Consolidation loans can be a help as well, but the easiest way to get out of debt fast is to take the interest expense you save and put it directly toward your debt’s principal amount.

First Financial’s Visa Platinum Credit Card has one of the lowest APRs around! It’s a good idea to check the APR on your current credit cards to see if it’s time to switch. Keep in mind, we also don’t have any balance transfer fees at First Financial. You can apply for a balance transfer by stopping into any branch or by calling 732.312.1500, Option 4.*

3. Thou Shalt Read the Fine Print

Most people would be shocked at the amount of money that they waste on service charges, convenience fees and annual dues hidden in financial contracts. If that low-interest credit card charges you $99 annually no matter if you use it or not, is it really that great of a deal?

Make sure if you transfer a balance to a lower-interest credit card that there is not a transaction fee attached. And if you rarely or never use that credit card with the annual fee, think about applying for a card that better suits your financial well-being.

4. Thou Shalt Pay Attention to Timing

At the risk of sounding like a ’60s folk-rock star, to everything there is a season, and waiting for the right season to purchase big-ticket items can save you a bundle. For example, car dealers will discount their inventory when the new model year arrives to free up room on their lots, so If you are in the market for a new car, that’s the season to buy.

Many big-box retailers and department stores have semi-annual sales where you can pick up appliances, electronics and home goods at a discount. The key is to fight against the urge for instant gratification on your purchases.

5. Thou Shalt Keep an Eye on Interest Rates

Even if you are able to pay off your credit cards and loans, the one debt most people can’t pay off is their home mortgage, which is why you should watch interest rates. When interest rates move down, it can be an opportunity to refinance your home loan and save money on your monthly mortgage payment.

But remember, if you just take the money you save and spend it, you’re not saving at all. Earmark the difference between your new mortgage payment and your old one for your bank account, or if you plan to live in your home for the life of the loan, put the extra toward your principal and own your home sooner.

6. Thou Shalt Find Money in Thy House

Most people would be surprised to learn just how much money they have laying around their house. Those books you’ve already read can be sold on Cash4Books or Amazon.com, and your old phones and mobile devices can be sold to companies like Gazelle.

Cleaning out the clutter in your home doesn’t just feel good but provides you with an opportunity to feed your piggy bank by having a garage or yard sale. And what about those figurines you inherited or your comic book collection? Do you still really want them? If not, try listing them on eBay.

7. Thou Shalt Use Technology to Find Deals

The Internet makes saving money so easy that your grandmother would likely throw her coupon box at your head if she knew. Sites like Groupon and Living Social will send deals on goods and services in to your inbox, and apps like Out of Milk can alert you to store sales just by driving by them.

The Internet also is a great resource for finding free activities for you and your family to do on weekends, holidays and school breaks.

Subscribe to our First Scoop Blog and receive free, fun financial education straight to your inbox – at the beginning of each month we post a budget-friendly activity list for that month in Monmouth and Ocean Counties, NJ!

8. Thou Shalt Not Forget to Prioritize Your Retirement

This is a tough one, because it’s hard to save money now that you don’t expect to use for 30 or 40 years. But like it or not, there is going to come a time when your earning years are over and we will all need a retirement fund to bankroll the golden years. So if you don’t want yours to be bronze years, you have to make retirement saving a priority.

The good news is that you have many years to accumulate those funds and to let them grow, which means that small amounts of savings directed toward it can go a long way. For example, you can take a percentage out of every saved dollar, say 25 percent, and earmark it for your retirement. This is an easy and painless way to create both a short-term and long-term savings fund.

To set up a no-obligation appointment with our Investment & Retirement Center to go over your retirement and investment portfolio or to get started with one, call 732.312.1500 or email Mary.Laferriere@cunamutual.com.**

9. Thou Shalt Not Try to Keep Up With the Joneses

A huge part of winning the saving game is changing your mindset about how you think of money and what its function is. Too often we get caught up in the game of keeping up with the Joneses and buy things we don’t really want — and certainly don’t need — just to keep up appearances.

What many people don’t take into account is that that boat, RV, ATV, third car or giant flat screen that their neighbor bought probably comes with a loan or a high-interest credit card payment. Before making that next impulsive purchase, ask yourself if you really want it and if it will bring you that same warm fuzzy feeling that a full savings account will.

10. Thou Shalt Act Like Thy Don’t Even Have It

We can’t spend what we don’t have, so the more you act like you don’t have it, the more you will be able to save it. Have retirement and college savings funds automatically deducted from your paycheck before you ever see it. Schedule a “secret” payment from your checking account to your savings account each week.

When you come across found money — like a rebate, an overpayment refund or even $20 in your pants pocket — just act like you never had it and put it right into your savings. With practice, you can get pretty good at this, so much so that if you have an unexpected windfall — say from an investment or an inheritance — you’ll forget it even happened. Only your savings account will know.

Click here to view the article source by Brian Lund of Daily Finance.

*APR varies when you open your account based on your credit worthiness. This APR is for purchases, balance transfers, and cash advances and will vary with the market based on the Prime Rate. Subject to credit approval. Rates quoted assume excellent borrower credit history. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. No Annual Fee. Other fees that apply: Cash advance fee of 1% of advance ($5 minimum and $25 maximum), Late Payment Fee of up to $25, Foreign Transaction Fee of 1% plus foreign exchange rate of transaction amount, $5 Card Replacement Fee, and Returned Payment Fee of up to $25. A First Financial membership is required to obtain a VISA Platinum Card and is available to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties.

**Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.