All posts by lesbecker

Step 2: Get Your Stuff Together

pastdue-billsSo you have those scary figures in front of you. Now it’s crunch time. You need to break it down into affordable monthly payments while at the same time, STOP USING CREDIT. Debt elimination is what 100% of your extra income is going to go to.

If you are in SERIOUS financial trouble, as in “I’m about to declare bankruptcy,” trouble, you need to do two things fast, BEFORE you begin bankruptcy procedures. First, look up and make an appointment with a financial advisor. Your bank may have people on staff who can help you.

If you can make an arrangement with your bank to pay off your debtors by giving you a fixed-term, equal payment, low-interest loan, you can simplify your debt elimination from the beginning. As long as you make that one payment on time each month, you could be debt-free and rebuilding your credit in as little as three years.

I know, three years is a long time; but if you don’t start now, it could be thousands of dollars worse and you’ll have slid even further backwards financially.

If your bank or a financial advisor is not available to you, it’s still possible to eliminate that debt on your own.

Call the billing departments of all your creditors: major credit cards, department store cards, utility companies, the landlord or your mortgage-holder if those payments are behind. Let them know that you are beginning to clean up your finances and you want to know if they are able to help you with a repayment plan.

This does two things for you. It lets your creditor know that you are taking responsibility for the balance you owe, immediately putting your account closer to being in good-standing. It also eases your burden, if the company is willing to work with you by either lowering your bill if it’s a recurring, billable service, forgiving a certain amount of the balance owing (yes, some companies WILL do this for you), and/or lowering the interest rate or waiving a monthly fee provided you continue to make a timely payment each month until you’re caught up.

Once you have struck all the deals you can strike, it’s time to get back to the calculator again. If you’ve had help from a financial advisor, he or she may have already done this with you. If not, here’s how:

Find out exactly how much money you have coming in on a monthly basis. Add up your NET take-home pay from any jobs you have. If you have a partner or spouse who is on board with you, you can amalgamate those figures. Don’t forget to add alimony payments, child-support, government rebates or any other regular income you are getting.

Next find out what this coming month’s MINIMUM payment due is for each of your creditors. Include rent or mortgage payments, insurance premiums, car payments, internet, cable, phone and cell phone bills.

Add all these payments up and hopefully, your income is higher than your out-going payments. If it isn’t, you have to bite the bullet and cancel some of this stuff out of your life. There is ALWAYS a cheaper option – just sometimes, that means giving it up. A future post will cover inexpensive and free trade-offs to replace expensive entertainment options.

What you’re aiming for with all these calculations, is an almost even board with hopefully a little extra income coming in than payments going out.

Here’s where you make a choice: pick ONE of those creditors. This creditor gets more than the minimum payment every month. I chose the creditor with the smallest balance, with the reasoning that the entire bill would get paid down faster and I would feel like I was seeing results sooner.

It worked, too!

So next month, you are going to pay just the agreed-upon minimum balances to all of your creditors except for one. That one gets all the extra money you have after paying your expenses.

Future posts will cover how to speed things up with two financial foundation blocks: earn more – spend less.

Want to play The Money Game with me, get out of debt and learn to live a Prepaid Life? Subscribe to the Debt Elimination category of posts in the form below.

Enter your email address:

Delivered by FeedBurner

Step 1: Knowing is Half the Battle…

Canadian CoinsHow much do you owe? Most people in debt don’t really have an inkling. They bury their heads in the sand, sometimes not even opening their bills each month, so they never commit to getting out of that hole.

You have to open those bills – even just the most recent one; just to find out how deep you are. Answer the phone when a bill collector calls. If you dodge them long enough, your account goes REALLY bad. You may be written off as a deadbeat and your account will be sold to a collection agency and your credit rating goes straight into the toilet. If this has already happened to you, you STILL need to get that stuff paid down.

Once it’s paid down, your credit rating will slowly get cleaned up, but the longer you wait to deal with it, the crappier your credit will get.

Step one is scary. The alternative is worse. Speak to your creditors, open your bills; find out to the penny how much you owe. In dollars and cents.

Once you KNOW, you can take CONTROL of it all.

Go get your calculator.

Make a list of every one of your creditors, and the amount you owe them right beside the name.
Add that column of debts up.

Try not to faint.

Next is Step 2.

It all gets better from here.

***

Want to play The Money Game with me, get out of debt and learn to live a Prepaid Life? Subscribe to the Debt Elimination category of posts in the form below.

Enter your email address:

Delivered by FeedBurner