Debt Assistance Guru

photo credit: mockstar

For many people spending money is a lot more fun than saving it. When you spend money you’re able to buy yourself lovely items that bring you pleasure. When you save money you deny yourself this pleasure and this is why saving can be so tough.

About six months ago I decided to try out an idea I had late one night which I call the “last $10″ concept.

The principle is simple enough. Whenever you’re going to buy something – from a newspaper to a sandwich to a coffee – imagine that you’re down to your last $10 till pay day. Imagine that money in your pocket is all the money you have.

Now consider whether you really want that newspaper that much. Or whether you’d rather hold onto your money. Maybe you can borrow someone else’s paper. Maybe you’re just wasting time and don’t really want the newspaper anyway.

I find this “last $10″ concept makes it easy to either not spend money or to at least try to find a cheaper alternative to what you were going to purchase. And either way you save money that you can put to better use elsewhere in your life.

photo credit: papalars

Despite that fact that many of us work a similar number of hours day-to-day and week-to-week and that our general living expenses can remain similar throughout much of the year many people still find that they experience “peaks and troughs” in their finances.

A peak might be receiving a bonus at work, having a birthday or selling some unwanted items on eBay where you end up with more money than you normally do in a particular month.

The troughs are far easier to identify. Christmas, with all the spending it involves, the extra power you normally use over winter with the colder weather and darker nights, vacations and months in which it seems half your family have a birthday can all result in there being “too much month left at the end of the money”.

Fortunately there are a number of tricks and techniques you can employ in the hope of smoothing out this financial boom and bust leading to a more sustained, predictable and enjoyable way of managing your money – all while avoiding that sense of dread every time you go to the ATM!

Recognize Expensive Months And Save For Them

Some months are going to be more expensive than others so accept that this is the case and try to put some money aside each month to help you cover these extra expenses. For example even a hundred dollars a month put into a savings account will make life a lot easier when Christmas rolls around or you want to book your summer vacation.

Overpay Bills When You Have The Money

When I have a “peak” month I like to try and overpay my bills. I send extra money to the utility companies, to my credit card company and my cell phone provider. By doing this my accounts get into credit which means future bills will be far smaller.

Of course I could just save the extra money to use on those bills in the future but I choose to overpay for two reasons. Firstly I then know this money is safely on my account rather than being a temptation sitting in my own bank account. Secondly there is something wonderful about receiving an electricity bill or phone bill to find that you’ve actually already paid it thanks to the credit on your account!

Put Money Away Where It Can’t Be Touched

Don’t just try to save money in your normal checking account. It will eventually get eaten through – often without you even realizing that it is happening. Instead get yourself a new savings account into which you place your extra cash so that you know it is safely locked away and won’t disappear without your knowledge.

Start A Piggy Bank For Your Loose Change

This is a fun little tip that my girlfriend and I use. We select a certain coin and every time we have one of those coins in our change from our everyday spending it goes into the piggy bank. You will be surprised just how quickly this money can add up and yet because you’re just getting rid of lose pocket change you barely notice it’s gone. You then have a reservoir of cash waiting for you when you really need it.

Make Saving A Game

Saving money can be a bit like going on a diet because it feels like it takes effort. Because you need to control yourself and even potentially deny yourself certain things. This can make it more of a chore than a pleasure.

If this is you then why not consider changing how you think about saving and actually try to make it into a game? See just how much you can actually save each month and consider having a contest with your partner or friends to see who manages to build up their savings account quickest.

Clear Out Your House

Just as I mentioned selling items of eBay consider clearing out your loft or garage and selling unwanted items from time to time to provide you with extra cash that you can save. Try to do this in plenty of time before your expensive months are upon you so you can carry out the process at your leisure and enjoy it rather than feeling under pressure.

Work Overtime

If your workplace offers overtime, consider taking it whenever it is available. Even if you don’t need the extra cash now it can be saved “for a rainy day” – which, lets be honest, always come sooner than we would like.

photo credit: fauxto_digit

Have you ever had that situation where you get to the end of the month and wonder where all your money went? You’re sure you had a few hundred dollars left in your checking account but now it seems to be empty.

Or how about creating a budget to carefully manage your money and limit your spending only to find out that once again you run out of money just before the end of the month?

The fact is that money in a bank account can be difficult to track. Money flows in and out and we only check our balance from time to time meaning that days or even weeks can go passed where we don’t realize how much money we have available to us. And this can lead to some unfortunate situations.

Using plastic – whether that is a debit card or a credit card – cane make it harder to manage your money and increases the chances of blowing your budget no matter how carefully you try. If we’re honest here we go into the supermarket, for example, grab what we need, hand over the plastic and leave. Many of us, myself included, have little or no idea how much we actually spent. The card went through so we left. Problem solved.

Except that when you’re not seeing exactly how much you’re spending, when you’re not keeping track there can be massive differences between how much you think is in your bank account and how much really is there. And this can cause problems with managing your money and particularly with regard to making debt payments.

This is why, when it comes to spending money, I now prefer to use actual money rather than pay on a card. If you have a budget of $200 to live on a week if you are to meet all your debt repayments, then withdraw this $200 from the ATM and put it in your wallet.

It’s not only a lot easier to see at a glance how much of this money you have left but it also affects your behaviour to a degree. This means that little treats that you may give yourself (an expensive coffee, a magazine etc.) are less likely to happen when you actually have to hand across cold, hard cash rather than a plastic card.

And it can also be fun to try and “beat the budget” to see how much you can keep hold of by the end of the week. And *then* if you’ve managed to economize you can spend the remainder on a treat if you want.

So if you want to manage your money better and pay off your debts easier why not try the “cash not card” challenge? I think you’ll be surprised by how much of a difference this simple technique can make to managing your personal finances.

photo credit: me and the sysop

Debt has a nasty habit of affecting our personalities. Serious debt problems particularly those which are overdue or which you are struggling to pay have an unfortunate way of causing us to lose sleep, to feel tired or overly sensitive all the time. It can make the postman arriving or the phone ringing a stressful situation.

As humans we naturally try to avoid stressful, confrontational situations and so the most common action when you are in a situation like this is quite simply to stick your head in the hand. Ignore the phone. Throw those brown envelopes in the bin. Try to get on with life though always with that feeling of dread in the back of your mind.

Contrast this with the feeling of paying off a debt once and for all. The feeling of freedom, of control and of feeling like you’ve really achieved something. No longer do your creditors hound you. No longer do they take money from your pay each month. You’re free. You feel a few inches taller and life seems to have more color.

Clearly the smart thing to do, no matter how unpleasant it may be, is to face up to your debt problems. Facing up to them enables you to start taking control of the situation which will make you feel better right away and starts you down the path to financial freedom.

And yet taking that first step to face up to your debts and take control of the situation is a very difficult thing to do; in my opinion one of the hardest of all. Your adrenaline will likely be running. You’ll be red and feel hot and maybe even sick at the thought of opening those letters, facing up to the facts and then trying to work out a solution.

But the sooner you do it, the better you will feel and the better the outcome will be. Ignored debts only get worse and ignored creditors only get more persistent.

Having been in this situation a few times myself over the years I thought it might to be useful to not only tell you that you’re not alone if you feel like this, and to highlight that facing up to your debts is the best (only?) long-term solution, but also to offer a little guidance on taking that first step.

Personally in a really stressful debt situation I like to gather together everything I might need to deal with the situation. I check my bank balance so I know what payments I can afford. I grab the letters from my creditors. I grab my cell phone so I can call them, together with a notepad and pen to make notes. I grab my checkbook and some envelopes. Lastly I grab a drink, throw all of it into a bag and go out into the countryside – somewhere quiet where I won’t be interrupted.

Once you’ve settled yourself down your sole focus should be on dealing with the financial situation and it’s important to make yourself a promise that you won’t go home until it is resolved. It might take you half an hour or it might take you the best part of the day but you need to make yourself this promise if you are to be successful. Today is the day and no excuse is going to change that.

When you feel ready it’s time to commence. There are a number of steps and if you’re really stressed about the situation then simply take it a step at a time and congratulate yourself after each step.

Step one is opening up the envelopes from your creditors. Put the envelopes into your bag and then concentrate on step two which is actually reading the letters to figure out what you owe, to whom, and what they are hoping you will pay.

The final stage is to try to resolve these debts. There are two ways to do this. Either write out a check (if you can afford it), address it and pop a stamp on so it is ready to post off as soon as you find a post box. The other option if you can’t afford to pay what they want is to ring them up and negotiate and we have covered these negotiation tactics elsewhere on the site.

Keep a note of everything you have agreed and then basically get on with your life. Depending on how stressed you may be about the situation this whole process of facing up to your problem and dealing with it may take you quite some time so try not to put yourself under any pressure. Carry out this process on your day off when you have no other responsibilities.

And lastly enjoy the walk home. By now you should have resolved all your issues and will be feeling far more confident about life. It will feel as though a weight has been lifted and you’ll find it easier to relax, to enjoy life and to laugh.

May I take this opportunity to wish you the best of luck and reiterate how the sooner you resolve these issues the better it will be for you and the happier you will feel with life.

photo credit: Jeff Keen

Do you set a monthly budget to control your expenses, pay off debt and ensure there isn’t too much month left at the end of the money? And how does that budget work out, normally?

If you’re like most people you’ll start off with your monthly income and subtract from that fixed costs like your mortgage or rent, utility bills and debt repayments.

Based on what’s left you either divide this up into a weekly spending budget or you make guesses about how much you will spend on transport, food and the more variable costs each month.

The fact is that while budgets are a nice idea – and certainly have a place when it comes to managing your personal finances especially in terms of getting out of debt – creating a decent budget can actually be a far tougher process than it may initially appear.

One of the reasons for this is all the “other” costs we forget about or assume can be covered in our “other” column. We consider food and shelter but forget about buying birthday presents, new toiletries, dinners out, a new dress for a party or new shoes for work and so on.

These “other” expenses are often the things can ruin a perfectly and lovingly created budget turning it more into a general idea than a carefully-designed income/expenses statement to guide your financial decisions.

A good concept therefore when creating a budget is to pay attention to your “fudge factor” – that is how much your estimations and guesses are normally out by. By keeping a note of unexpected costs, and costs that were higher (or lower) than you anticipated you can get a better understanding of your spending habits. And by doing this you can use the information you gather to create a new, more accurate (and more useful) personal budget that will serve as a far better goal for you.

For example if despite your budget the week before payday is always a struggle financially you will be able to examine why that is, and where the money is draining from and hence modify your budget for the following month.

Which makes controlling your money and paying off debt that much easier.

photo credit: AH!Photography

These days if you don’t have a cell phone people tend to look at you a bit strangely. Like you just told them you live in a cave. Like it or not, cell phones are an essential (and to many people necessary) part of everyday life.

But they can also be very expensive if you’re not careful with some people spending far more money than they need to on their monthly bills. As someone who spent a few years working in the cell phone industry I’d like to explaint today some of the ways in which you can save significant sums of money on your cell phone bill.

Go Prepaid

Many of us are on contracts because if you’re a heavy user of your cell phone these can still work out far more cost effective if you are smart with how you use your phone. But one way to control your costs is to consider going prepaid so you know you’ll never spend more than you want. If your contract has expired it is typically very easy to move your phone over to a prepaid plan though some people find the impracticality of having to top up regularly an annoyance.

Change Your Tariff

Take your last three cell phone bills and work out the average number of minutes of calls you make and the number of texts that you send. From this work out the best tariff for you and contact your cell phone provider to try and make the change.

Surprisingly some people can actually save money by increasing their plan rather than reducing it because on a lower plan you may only have a small number of inclusive calls and may pay a premium for any phone call over that limit. Doing some simple math here can really save you some significant money each month.

Understand Your Inclusive Calls

Speak to your cell phone provider to understand firstly how many inclusive calls you get each month but also the fine print on those calls. Many providers exclude certain numbers from these inclusive calls such as premium rate numbers and they may have a limit on how long you can talk for before they start charging you.

As an example, even if I have two hours of calls available with my provider, if I talk for more than an hour on a single call (which can happen with me) they start to charge me on a per-minute basis at minute 61. So check this out so you exactly what is included and what isn’t.

Keep Your Old Phone

Do you have an upgrade due where you can change your phone to the latest model? If so, consider speaking to your cell phone provider about keeping your phone but issuing you with money off instead. Some providers set aside a certain amount of money that they assume it will cost them to provide you with a new phone.

However if you keep your old phone, they get to keep this money and so may give you some of it back. My own cell phone provider gives me $100 each year if I renew my contract but keep my old phone rather than demanding a new one and this is the equivalent of several months of free calls for me.

Threaten To End Your Contract

Cell phone companies are in a competitive business and are desperate to keep you as a customer. If your contract has ended, consider ringing them up to complain that your monthly bills are too high and that you’re considering leaving.

Many of these companies have “customer retenton teams” who are authorized to offer crazy deals to keep you as a customer. On several occasions I have halved my cell phone bill for the next 12 months just by threatening to leave.

Disable The Internet

Unless your plan includes internet access you will likely be charged a premium if you try to access the internet on your phone. Worse, one can sometimes log onto the internet accidentally by pressing the wrong button on your phone. So unless you *need* the internet on your phone, consider disabling it so you won’t accidentially run up extra charges this way.

Text Don’t Talk

Texting is often cheaper and easier than calling your friends so consider relying more on this medium of communication.

Insure Your Cell Phone

Replacing a cell phone can be an expensive business so consider insuring it. Many cell phone companies offer cell phone insurance but you can often find it cheaper elsewhere. Specialist insurers exist who concentrate on cell phones and some bank accounts and household insurance policies cover your cell phone by default. Try ringing your bank and insurance company to see if they cover it for free and if so give them the details they will need to register your handset on their system.

photo credit: laffy4k

Most people will understandably seek out happiness wherever they can. They’d rather have fun, rather be loved, rather do something exciting, than be unpopular, miserable and bored.

One observation that I have made again and again however is that it seems that many of us have some form of mental “scales” in which we try to balance out the bad and the good in life so that overall there is more of the positive than the negative.

Imagine you crash your car and write it off. That’s bad. To try and even up the scales therefore we may try to find some positive in the situation – such as the way we decide we didn’t like our old car anyway – or add something positive onto the scales such as treating ourself to a night out to “make up for it”.

Every time something negative happens, we try to balance it up with something positive.

And I believe this same “balancing act” can have quite extensive effects on our personal finances in all sorts of ways.

Firstly, one of the quickest and most obvious ways to create a positive situation is to buy yourself something nice. Something that brings you comfort. How many times do you hear of someone splitting up with their partner, and then immediately going out and spending money on getting a hair hair cut, new clothes or joining the gym? They’re trying to balance up those scales.

But the problem with using the act of spending money to balance up your scales is that this can quickly start to get very expensive. Worse, debt itself can cause us distress and become a negative. And if your gut reaction to deal with that anguish is to go and spend more money on yourself then you’re risking getting into ever decreasing circles.

Far better is to find something else – something that doesn’t cost money – that will cheer you up. Whether that’s simply spending time with a friend having a good chat, going for a walk in the countryside or taking up a low-cost hobby like painting; the results will likely be far longer term than just buying yourself something new (by default it won’t be “new” for very long) and you will also find it easier to dig yourself out of debt.

However another common area where I see this happiness balancing act is in terms of people with stressful but highly-paid jobs. The long hours and the stress of their jobs can be a real negative. They feel tired. On edge. Struggle to spend enough time with their friends and family. So they try to even up the scales; often by buying nice things.

How many times have you heard the phrases “but I deserve it” or “but I’ve earned it”?

I know one person who has an insanely busy job which really gets them down. So on their days off, they go shopping. They treat themselves to unnecessary purchases because they believe they deserve them after all their hard work.

However of course there is another perspective on the situation here. And that is that if the person I know got a less-stressful job, they’d have less negatives on the scale and so would probably feel far less need to splurge on unnecessary luxuries. They’d probably work shorter hours, enjoy themselves more and, because they don’t need to keep on buying things to make themself feel better, they’d probably be no worse off even if their new job paid less.

So the thinking point for today is this. Try to be more conscious of the money you spend over the next few weeks, paying particular attention to the things you buy that you feel you “deserve”. To many people these purchases don’t feel like luxuries but more essentials so be aware of this.

Try to pay attention to how much money you really spend unnecessarily to balance up issues in other areas of your life and try to either reduce those negatives directly, or find new ways to make yourself feel good without spending money.

By doing so you’ll likely not only be happier, but will also have more money at the end of each month.

photo credit: Casey Serin

Have you ever been in the supermarket queue, waiting to pay, when the person infront of you flips open a wallet or purse the size of a small country? Inside they have dozens of cards for all possible situations. Store cards, discount cards, debit cards and credit cards of all varieties. Sometimes it taken them as long just to find the “right” card as it took the checkout assistant to actually scan the items in the first place.

This is what I refer to as financial clutter. If you have literally dozens of bank accounts, credit card accounts, loans, household bills and more then I think it’s fair to say that you’re making your personal finances far more difficult than necessary.

Of course getting into this situation is surprisingly easy these days with every shop you go into offering you an extra card. Credit card offers come through the post. You set up an extra bill for your satellite TV, or to buy a car, or for your cell phone.

Before you know it you have so many different responsibilities with money going in and out of each one that it can be almost impossible to keep track of them all. How do you know at any one point how much money you owe, and much of the money in your various accounts is your own?

But while getting into this situation is very easy, getting back out of it is rather more difficult. It requires not only a degree of patience and organization but frankly also a thick skin as the process can be rather dull at best.

However reducing your financial clutter is well worth doing as it makes managing your personal finances so much easier; which makes you far less likely to get into any further debt and also makes it much easier to pay off any existing debt because you have a far better idea of what is going on with your money.

The first step to reducing financial clutter is really to figure out what you actually need. Which cards do you rarely, if ever, use? Which accounts do you have but never make use of? Start off by scrapping these, or at least take the cards out of your wallet and put them away somewhere safe.

Store cards and credit cards typically charge ridiculous amounts of interest so I would also suggest you consider getting rid of these to make life easier. At the worst, if you have multiple credit cards, look at moving all your balances over to the card with the lowest interest rate and get rid of the rest.

This should have already cut down on a huge number of different accounts, bills, statements and payments each month meaning that it takes you less time to manage your finances and it is far easier to do.

Another useful step is to ring up all the companies that you make regular payments to – either in terms of debt repayments or in terms of monthly bills – and try to discuss moving your payment date to your payday.

This way you can automatically set up an agreement with your bank to pay all those bills at once, at the beginning of the month, when you get paid; and you’ll then know that everything else left in the account after that first day is yours.

Assuming you reduce down your bank accounts too, you could get away with just a checking account and a savings account. Your wages can go into your checking account, with all your bills going out on the same day from the same account.

You can then budget easily using the balance left in your checking account and if you have any “extra” left at the end of the month you can move this over easily into your savings account to get the higher rate of interest.

Personally I now carry with me just one credit card (for emergencies – not for regular purchases) and two debit cards (a checking account for my personal use, and one for business use). I also have a debit card for my savings account but keep this safely locked away at home.

Apart from this I have very little clutter and have certainly benefited from “stream-lining” and simplifying my finances. Perhaps it’s worth spending some time yourself over the next few weeks in getting rid of your financial clutter. It makes managing your money – and life in general – far easier and more enjoyable.

photo credit: redjar

If you’re like many people looking for debt assistance then you probably have more than a single debt to pay off. You may have overdrafts, loans, credit cards and more that you’re trying to juggle and pay off. But with all these different debt payments due it can be a struggle to figure out what you should prioritize.

The debt snowball principle is a concept to help you figure out exactly how to arrange your debt repayments in order to get out of debt as quickly as possible without having a monthly struggle over what to pay whom.

In essence, you agree a sum of money that you can realistically afford to pay in debt repayments each month. This figure should be set in stone and you need to make yourself a promise, as well as your creditors, that this will be used each and every month to pay off your debt no matter how much or how little you have.

The reason it is called the snowball principle is because of the way a snowball rolling down a hill will grow in size and power over time until it is an enormous thundering ball of power at the end.

Because you commit to pay a certain amount in debt repayments each month, as your debts start to drop, you manage to pay off a bigger and bigger chunk each month. Every time you pay off a debt completely, rather than taking the money were using to repayment that debt to enjoy yourself each month thereafter you instead use it to make even bigger payments off your other debts. In this way you pay them off even faster, pay less interest as a result and get out of debt as quickly as possible.

Now it should be said that there are two schools of thought when it comes to actually calving up your monthly debt repayment. Firstly of course you need to ensure that you are at least covering the minimum payment for each of your debts to keep them in good order and to keep your credit strong.

But over and above your minimum payments of course, the more we pay off, the faster the snowball will grow and the sooner you will become debt free.

Therefore some authorities suggest that you should focus on your highest interest debts so you pay as little interest as possible overall. Once you have managed to pay those off, you can then focus your attention on paying off your smaller or lower interest agreements.

Other authorities suggest focusing your excess cash on your smallest debts initially because these will be the quickest and easiest to pay off and so you will find the concept tremendously motivating as you make your final payment on one debt after another. And as you pay off those smaller debts of course you have even more finances available to really start making some progress on the larger, higher interest debts.

I can see both the pros and the cons of both of these techniques and I would advise you to put some careful thought and consideration into which of these two techniques will really make the most sense from your perspective.

Would you rather get out of debt quickly, but using a method which requires far more motivation, or would you rather get out of debt more slowly, but all whilst being motivated as you see one debt after another being wiped out?

Which one will keep you most motivated? Which ones will help keep you going along this difficult but rewarding path?

photo credit: reintjedevos

One of the reasons that many of us get into debt in the first place is because of a financial emergency of some form. For example maybe our car dies on us, but due to our job or our lifestyle we simply can’t live without one so we go out and get a loan or finance agreement to buy a new car.

Maybe we fall sick and are unable to work which digs into our savings or we have a funeral or medical emergency to pay for and simply don’t have the funds. For some people even taking an annual family vacation is seen as a necessity and if we don’t have the funds for it we simply stick it on the credit card.

It’s a sad fact of life that no matter how well we may budget, these “emergencies” crop up more often than we would like and by their very nature normally take us by surprise.

A sizable sudden need for money can be a catalyst for getting into debt and even worse once we’re in debt to begin with it can be all too easy to think “well, we’re already $x thousand in debt, what difference is another few hundred dollars going to make?”. Before long you’ve dug a hole so deep you’re not sure if, let alone how, you’ll ever climb back out again.

So a key element to debt assistance and paying off your debt once and for all is to set up an emergency fund to cover these exact circumstances.

Experts disagree about what size the fund should really be with debt experts stating figures anything between 3 months and 12 months of your average monthly income. Whatever the figure you decide on, I think most people would agree that the bigger your emergency fund is, the more financially secure you will be and the less risk there will be of you having to rely on debt to cover your expenses.

The best way to set up an emergency fund is to set up a special savings account where the money can accrue over time. Ideally you want to find the account that offers the highest interest rate while fully protecting your money and allowing instant access. There’s no point in an emergency fund after all if it takes you 30 days to be able to access your money.

Then simply set up an agreement with your bank where they will automatically transfer a sum of money – 10% of your monthly income is a frequently-recommended sum – into your emergency account.

Note that the emergency account shouldn’t be the same as your standard savings account where you’re putting money away for your retirement or a deposit on a new house.

This fund should be seperate, untouched and *only* for emergencies. Keep on paying into that emergency account automatically each month until it reaches the sum of money you have decided upon.

Again don’t be tempted to dip into it – even temporarily – to cover things like a vacation. Save for these in advance and instead keep your emergency account fully safe and untouched.

Because next time a financial emergency *does* arise in your life you’ll be glad you have that buffer to protect you.