Other Places To Find Money
Once you have determined that you are committed to paying off your debt each month, there are several other options where you may be able to get money and consolidate all your credit card bills into one payment with lower interest rates.
If you have life insurance that has a cash value, you can borrow against the policy. The interest rate is usually much better than you can get with credit cards. Before doing this, however, you need to weigh the risks and you will want to repay this loan as quickly as possible. If you do die without the loan being repaid, the outstanding loan balanace and interest would be deducted from the value of the life insurance that was to be paid to the beneficiary. Since you are taking the resposibility right now to get yourself out of debt, the last thing you want to do is pass that debt onto your loved ones.
Another option is to borrow from your 401K plan if you have one. Most 401K plans allow you to borrow the lesser of 50% of your account's value or $50,000. Interest rates are usually well below credit card interest rates and, even beter, the interest you pay back on the loan is to yourself and goes directly into your 401K account. There are, however, some issues of which you need to be aware. The loan needs to be paid in less than 5 years which should not be a problem if you can follow the guerrilla debt reduction plan. The area that you must be extremely careful about, and sometimes have little control over, is that if you leave your employment before full repayment, any outstanding balance must be repaid immediately. If you can't, that money will be taxed as income by the IRS and a 10% tax penalty will be levied if you are not 59.5 years of age for early withdrawl froma retirement plan.
A final place you may be able to find money is from family or friends. You need to consider this option quite carefully since the potential to ruin close relationships that can't be replaced by money comes into play. If you do believe a loan from family or friends may be a potential area to help consolidate your credit card bills, then take the responsibility up front to write a contract of the amount to be repaid plus the interest over a specific period of time. Not doing so could cost you and the lender IRS problems if you don't.
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Other Places To Find Money
Now that you are committed to tackling your debt problem, it's time to step back and take a critical look at where you really stand. Since you're still reading, you already know that you have debt you want to get rid of. The only way to do this is to find out where your monthly paycheck has been going. The logical step is to take the time to write that information down. In other words, you need sit down and put your current budget into writing (okay, that was your first test to see if your commitment was true or just a passing fantasy).
There is something about the word "Budget" that brings about the image of all things terrible. It ranks right down there next to going to the dentist on the list of things people want to do. Before you stop reading, let us try to reassure you a bit. Making A Budget doesn't mean you can no longer do any of the things you like to do. It's merely a process that allows you to see where all your income is currently going. Unless you understand where the money is going, it will be difficult (if not impossible) to understand where the debt is coming from.
For most people, compiling their current spending habits is a truly eye opening experience. For many, the outflow that is causing the debt is often not the result of what they imagined. Many times it is not the big ticket items (sometimes it is), but the accumulation of easy to forget small expenses that is causing the problems. These seem to fly below the radar screen never to be seen until you take the time and effort to put your current spending habits down into writing so they are right in front of your eyes.
Once this is done, you are in the position to make the needed changes to bring your spending back within the limits of your current earnings. That, however, won't be enough. In addition to balancing your cash inflow and outflow, we will also search out an additional 10% of your earnings which will be used to pay off your debt. Okay, okay...we can already hear the shouts of "Impossible!" If you have already given up, it's time to go back to your reason for reading this article in the first place. The resources on this site will show you plenty of ways to do it if you have the commitment.
For most people, simply limiting credit card use to tangible items that do not disappear once they have been purchased will bring you back into balance. Purchases such as dinners, bar drinks, movie tickets and the like that no longer exist once they have been used are where most people get into trouble. It doesn't mean you can no longer do these things...just that if you chose to do them, you need to pay for them in cash. For those further in debt, and in order to find that extra 10% you will need to pay down your debt, a look through the saving articles such as Savings Games, as well as the saving tips on this site, will make it possible for you to easily accomplish this. If after reviewing all this, you still can't even balance your income and spending, you need to jump to step #10 to decide if that is your only alternative or if you want to give this step another shot.
This process will also give you a clear picture of all the debt you currently have. This debt will most likely include a minimum of number of credit and department store cards, a car payment and possibly some student loans and a house payment. Once you have figured out a way to live within your current means and have the current debt information directly in front of you, you have put yourself in the position of finally being able to take care of the debt. You are now ready to tackle the next step.
Here are a few questions you probably have never asked yourself because the answers seem so obvious. First: Why do you have a savings account? As the account name would imply, most people have saving accounts to save money. Second: If you have a savings account, does that mean you have saved money? The obvious answer would be "Yes" but let us take a closer look. If you have credit card debt and are paying double digit interest on it, and a savings account that is earning only single digit interest, you are actually paying out more money each month than you are saving.
If you are earning 3% on your savings and paying 18% on your credit card debt, you would assume that you were losing 15%. Not good at all, but in reality, it is even WORSE than it looks on paper. You have to pay taxes on all the interest you earn in your savings account while you are paying the credit card interest rate with after tax dollars. Looking it at this way, you can see why even when you try to save, it's nearly impossible to get ahead if you have unpaid credit card debt outstanding.
Now that we have brought this out, it should be pretty clear what the best course of action for the savings would be. No matter where you look, getting a guarenteed double digit return on your money is pretty difficult, but that's exactly what you'll get by taking your savings and paying down your current credit card debt. No one wants to use their savings in such a way since it has usually been saved with the intentions of having it around for an emergency. What is essential to realize is that credit card debt is an emergency that will make it impossible for you to ever save for anything until it is taken care of.
If this eliminates all of your credit card debt, count yourself lucky and you can move onto other debts that need to be paid off. If you are like most people, however, you still probably have outstanding balances on your credit cards. Have no fear...we'll get them taken care of in the next step.
It sounds very clichι to say, but now is the time for all good debtors to begin reducing that debt. Of course I suppose that a "good debtor" has not allowed the debt to take over and is well in control. The point I am making here is that when we are talking about anything involving interest, like credit card debt and loans, time is very important. Every day the debt grows. Even if you are making your payments, it is fighting back against you.
Every time the interest is posted, you have either taken a step to reduce your debt, or you have missed an opportunity to do so. Putting off your debt reduction costs you money in the form of higher interest charges every month. You have done research, you checked the debt reduction calculators, and you have even come up with a plan in your mind, but if you have not started yet, you have wasted your time. I have heard many excuses from people who are waiting for a better time to start reducing their debt.
There are a lot of people who think their bills are under control and although a little help could pay them off faster, they are not in a financial crisis, so they do not need to hurry. Others have a goal in mind, but the debt calculators say that to achieve this goal they need to use 10% of their monthly income for debt reduction, and they can not spare that 10% so they are waiting until they can. Still more are waiting for some sort of windfall to take down a big portion of their debt, so that they have a smaller hole to dig themselves out of. Then there are the people, like me, who want to start now, but something always comes up.
The something that comes up can range from major necessary expenses such as needing a new refrigerator or furnace, to trivial things such as that new video card that, although it will be obsolete in 6 months or a year, you just have to spend the $150 to obtain. I am being generous here, because most people in this category want to have the really good card so they can say they have one of the best until its own need to be replaced arrives. These will cost $300-$500 easily and some may even require new secondary cards to achieve their full potential. I am not saying that you should wait until you are debt free to upgrade your computer equipment, but instead of shelling out every cent that you have to do so now, you could put aside $100 this month and use the rest to pay down your highest interest credit card. In a few months, you have enough for that upgrade, and you have made an impact on your debt.
Those waiting for a windfall may have a little extra money each month, but their debt is either too large for them to see this money as able to make a difference, or small enough that said windfall will pay it off so why not wait. Perhaps they are waiting for their tax return and see no need for debt reduction for two months or so while they wait. Maybe they are expecting a bonus check or a raise at work, or a gift is on its way. Paying what they can at this time may actually result in tens or hundreds of dollars saved in interest, but they would prefer to wait. The other important thing for this type of debt reducer to think about is that if they adjust their monthly spending a little to generate a small amount to pay down their debt while they wait for their ship to come in, so to speak, they can send this money to some sort of savings account or retirement fund once the debt is no longer looming overhead.
People who feel that they cannot free up the amount that the calculators or economists recommend, need to look at the big picture. Sure, most say that you should use 10% of your income to tackle the debt that you allowed to get the best of you, but you can start with whatever amount that you can spare.
Every $100 that you can afford to send on top of the minimum payment on a credit card with 12% interest is roughly $1 saved on every month's interest charges for the remainder of the time you pay on said card. This may not sound like much, but if you are due to pay on a large credit card for several years, those $1 savings each month add up fast.
The second month you are actually sending an extra $101 if you consider the decrease in interest. This makes the interest savings $1.01 this time, because you are not paying interest on that $1 you saved last month. So in two months you have knocked $202.01 from the principal and saved $2.01 on the third month's interest charges. Once you get this bill paid off, you can add the minimum deposit from it to your $100 and work even harder on the next bill that you target for elimination.
If you think you are in control of your debt and therefore are not interested in paying it off sooner than the minimum payments will accommodate, are you aware how much interest you pay each month? Take a look at all of your monthly bills. Add up the interest paid on all credit cards, car loans, student loans, and any other loans that you may have. The total amount of interest that you are being charged is effectively a monthly fine that you are paying for allowing yourself to live with debt. I don't know about you, but I try hard to avoid paying any fines as I have enough things that I want to spend my money on, or save it for. Reducing or eliminating even manageable debt is the smart choice.
Do you think you have a lot of bills? If so, you are probably right. But have you considered the bill that costs you the most each month?
On average your housing costs probably run about 30% of your take home pay. Your other bills which include utilities, credit cards, etc. also run about 30% of your take home pay. It probably takes another 30% to run your household and if you are lucky you can stash the remaining 10% in a savings account.
What are your percentages? Do you know? That's the problem. Most people run their budget out of their wallet.
There is that hideous word "Budget". Many people compare operating their finances with a budget to having a ball and chain attached to their wallet. They won't be able to get anything they want for the rest of their lives.
Let's see if the following scenario fits you:
You get paid.
You write out your bills.
You give your spouse some money.
You wait for next payday to get some more money so you can do the same thing.
You may not realize it but if you are doing this you are spending a lot more money than you need to.
Most of the people I work with have no idea how much money they make or how much they owe. While money may be important to them it is way to much trouble to learn how to manage it. This is the very reason there were $1.5 million bankruptcies in this country last year.
I can almost guarantee that if you are trying to run your finances like the scenario above at some point you are going to run into problems. It simply can't work.
The main reason for this is that you never get a broad picture of where you are financially. You pay the bills and hope you have enough money to buy your groceries and put gas in the car until next payday.
Most people can add and subtract. That's all there is to a budget. If you aren't willing to take the time then living paycheck to paycheck will be with you the rest of your life.
I call this "Financial Complacency" which simply means that you know you need to manage your money better but aren't willing to do what's necessary. Here are a few excuses I hear to justify this:
I don't make enough money.
I owe too much to set up a budget.
I'm not good with numbers.
I just don't have the time to keep up with a budget.
I can't get my spouse to work with me.
Do any of these sound familiar?
Well, that's the problem but what about a solution. The solution is simple no matter what your financial situation is.
First, you must find out where you stand now. That could be as simple as writing down your income and bills and expenses on a piece of notebook paper. Then subtract your expenses from your income. Make sure to include your household expenses (groceries, car gas, etc.) in your expenses.
Now look at the numbers. Do you have anything left over? If so what are you going to do with it? That's the next step. If you don't then you need to consider cutting some of those expenses.
Now you need to decide what you really want your money to do for you. Set your goals! This could be saving for your retirement, buying a home, college for the kids, getting a new car or any number of things. That's why you have to decide for yourself. There are just too many variables for someone else to help you.
My first suggestion is that if you have credit card debt you look for a way to pay them off and stop using them. Realizing that goal could make your other goals more likely to succeed.
Now it's time to set up that dreaded budget. Where are you going to find the time and desire to write everything down that you spend and all the other stuff that goes along with keeping a budget? The answer is that you don't have to!
One of the biggest myths about budgeting is that you need to keep up with it everyday. That's the reason so many people refuse to try.
It does take a little time to get your budget setup. There are a lot of things that need to be considered. But once your finances are down on paper there is no reason to work on it except on payday. You will find a link to a free budget like this in the bio of this article.
If you believe that managing your money is to difficult or just too much trouble consider the alternative. Not managing your money is probably robbing you of thousands of dollars a year and could lead to financial disaster.
Automotive Maintenance is something most of us ignore, until our vehicle stops functioning, that is. And then we wonder what went wrong, where. Auto Maintenance is one of the most serious aspects of ownership. It determines the longevity, performance and reliability of whichever vehicle you drive. Looking after your vehicle involves more than taking care of its external coat of paint and keeping it clean and shiny.
Car Maintenance means taking care of all the parts, even those that are inside the bonnet. These are the ones that directly concern the performance of your vehicle. Besides taking it to the service station at regular periods, it is a good idea to go through the owner's manual that will give a fair idea about its routine maintenance.
Checking the battery, keeping a check on the oils, changing the oils, checking the electrical system, are some of the absolutely unavoidable things to keep your vehicle in good shape. Keeping a log book in which you keep all the details regarding repair, auto maintenance, routine check-ups etc. will not only give you an accurate idea of what needs to be done when.
Tuneup - an old-fashioned maintenance term that's nearly non-existent today. With electronic ignition and fuel injection came computers that took over control of engine settings. Early versions allowed for some tinkering, but today's engines require advanced equipment and training. We could however learn some basic rules to follow and in turn prevent some of the faults in Car. Auto Maintenance is a could be good fun and a lot of learning experience.
There's no "best" car for everyone, but there is a best one for you, and you should choose it based on your needs.
Consider the following questions when choosing a car:
Q 1. Who's driving?
2. How old are the passengers?
3. How many passengers?
4. What's the primary use?
5. City or country car?
6. How much horsepower do you need?
7. Is economy important?
8. Is space important?
9. Will it fit in your garage?
10. Do you haul equipment?
11. Are you choosy about color?
12. How long will you own it?
Q Who's driving?
A Parents buying a car for a teenager should consider safety first. Usually, that quickly eliminates sports cars and SUVs. Kids drive differently when a bunch of others are in the car and they're trying to impress them. Young working adults probably are on a budget, so they should first consider an efficient, economy car. Older people may need small vehicles that are easy to maneuver.
Q How old are the passengers?
A Minivans are best if the primary passengers are small children because sliding doors make it much easier to position toddlers in car seats. Both the very young and the elderly can get in and out easily.
Q How many passengers?
A If you have three children, you might want to consider a minivan, station wagon or SUV that has third-row seating. If you buy a sedan that seats five, there's no room for company. An aunt or grandparent can't ride with the parents and children in the same car.
Q What's the primary use?
A If you're buying a car for commuting, gas mileage and comfort will be major considerations. Sit in a car before you buy and see if it supports your back. Check out the climate-control system. If you live in a cold climate, pick a cold day and drive a car before it's been warmed up. See how long it takes to get warm and how effectively it defrosts the windows.
Q City or country car?
A If you drive a lot in the city, you should consider small economy cars and minivans that are easy to maneuver and ideal for traffic and parking.
Q How much horsepower do you need?
A If you love performance driving, or have to accelerate rapidly onto crowded freeways, a four-cylinder car may disappoint you. If not, a four-cylinder car can give reliable performance while cutting fuel, maintenance and insurance costs.
Q Is economy important?
A Economy cars and hatchbacks usually get the best mileage, as do the new hybrid vehicles or one of the Volkswagen turbo diesel engines such as the Jetta or Golf, which get up to 40 miles per gallon.
Q Is space important?
A If you or your children participate in sports or have hobbies that need a lot of cargo space, you're going to need more than a car with a trunk. Look for a minivan, SUV, a wagon or a new crossover vehicle.
Q Will it fit in your garage?
A Some SUVs and vans are either too wide or too high for many garages. Measure before you buy.
Q Do you haul equipment?
A Need a vehicle capable of towing a boat or RV? Many small cars simply don't have the horsepower, transmission or chassis to handle those demands. Even some SUVs are not up to the task, so check on the vehicle's towing capacity.
Q Are you choosy about color?
A Naturally, you should pick a color you like, but keep in mind some unusual colors, such as yellow, can affect not only the car's resale value but also the cost to insure. Red generally costs the most because insurers associate red-car owners with being younger and more prone to get into accidents. White cars cost the least to insure.
Q How long will you own it?
A Look at car guides and check out Internet sites to see which vehicles hold their value. Every car drops in value, but some drop much less than others. The Mercedes Benz CLK class retains 64 percent of its value over a three-year period while a 2003 Chevy Tracker two-wheel drive retains only 17 percent.
Once you have narrowed your search, find comparable vehicles in that class. For instance, if you're interested in a Honda Accord, check out the Toyota Camry and the Ford Taurus to compare options, features, insurance rates and operating costs to find the best deal for you.
The allure of a new vehicle can be powerful, but three times as many used vehicles are sold each year in this country than new cars. Your budget and mindset -- some people just can't stand the idea of "buying someone else's trouble'' -- may determine which is right for you. If you're on the fence, here's a breakdown of benefits and drawbacks.
New-car benefits and drawbacks
It comes with a comprehensive manufacturer's warranty of at least three years or 36,000 miles that will cover almost any eventuality. Some go to 10 years or 100,000 miles.
It will likely have the latest safety, comfort and convenience features available.
There are no surprises. You are the first owner and there are no doubts about previous mechanical problems or accidents.
It will cost significantly more than a three-year-old used car.
Comprehensive and theft insurance costs could be significantly higher than buying used, although insurers offer discounts for newer safety features.
It will lose 25 to 40 percent of its value the moment you buy it, likely locking you in to long-term ownership.
Right off the bat, this is where the great majority of car buyers go wrong. After budgeting for an auto purchase, this is the very next thing you should do.
But most people leave it to the very end: Once they've decided on a car, driven it around the block and hammered out a price with the salesman and his manager, only then do they apply for credit and find out what their credit score is.
Do it the smart way: Check your credit up front, before you set foot in a dealer's showroom. Start this process months before you plan to purchase, if possible, because if you have incorrect or outdated information that's lowering your score -- and therefore raising the interest rate you'll have to pay -- it can removed, but it takes at least 60 to 90 days.
Get your credit report
There are three national credit reporting agencies, Equifax & Experian. You will need to get your report from all three agencies. You can get them by paying a nominal fee, usually less than $10. Better yet, thanks to the 2003 Fair and Accurate Credit Transactions Act, every American is entitled to a free report from each agency every 12 months. You may also qualify for a free report under certain circumstances -- being turned down for credit or if you suspect frau, for example. If you're married, make sure to get one on your spouse as well.
First, check to see what your FICO score is. Named after Fair Isaac Corp., the firm that developed the scoring model back in the 1950s, FICO compares the information in your credit report to what's on the credit reports of thousands of other customers.
FICO scores range from about 300 to 900. The higher your score, the better a credit risk you will be considered. It's very difficult to say what's a "good" or "bad'' score, though, since lenders have different standards for how much risk they will accept.
A used car lot that boasts it will finance anyone likely will not care if your FICO score is 500. That's because they will have jacked up the price on their cars and their interest rates to cover their costs of repossessing the vehicles they sell to high-risk customers who default.
How is credit score determined?
Your credit score is based on five factors: past payment history
how long you've had credit
how much new credit you've sought recently
the types of credit you have
Using your credit report -- or your general knowledge of your credit situation -- you can estimate your FICO score by clicking on this free FICO Score estimator. The vast majority of people fall into the 600 to 700 range, and the best auto financing rates are generally available only to those who score above 700.
Next, check the report for misinformation, such as accounts that don't belong to you, accounts that have been closed but still show as open, billing disputes that were resolved, incorrect credit limits or balances. Look for outdated information. As a general rule, a negative report stays on your record for seven years; a bankruptcy for 10 years. The credit reporting company has to support the information it has on you. No support -- no black mark. So ask to see it. If the support is erroneous, write to the company with which you originally did business. Send it copies of any documents you have supporting your position, and request that it send corrected information to the credit bureaus it reports to.
You have the right to include a statement of as many as 100 words in your report to explain your version of the disputed item. This will be included in reports provided in the future.
The credit reporting companies make mistakes -- oodles of them. So many, in fact, that there is a 50/50 chance that there's a mistake on yours. The Fair Credit Reporting Act gives you the right to challenge the reports, and have them corrected if they're wrong.
The Federal Trade Commission's Web site presents a concise summary of your rights under the act, written in language that's easy to understand.
Recheck your score -- it could be worth it
Once you have corrected mistakes, check your FICO score again in 30 to 60 days to see how much, if any, it has changed. How important is, say, a 50 point swing in your score? It could mean the difference in getting approved for a zero percent loan offer or paying 7 percent.
Is it worth the wait? Let's say you were financing $20,000 for five years. A zero-percent loan would give you payments of $333.33 and, naturally, zero dollars of total interest over the life of the loan. A loan at 3.9 percent would mean monthly payments of $367.43 and total interest of $2,045.71. A 7.9 percent loan would mean payments of $404.57 per month and $4,274.28 in total interest, or $71 a month more than the zero-percent financing.