Debt Doesn’t Have to be a Four Letter Word

Jennifer — Thu, 01 Nov 2007 12:31:26 +0000

(ARA) – For the average American, debt is a fact of life. But not all debt should be considered detrimental. Buying a house or a car, or funding your education can be positive, wealth-building steps even though they often require incurring some debt. The key, then, is not to avoid taking on debt at all costs, but to only take on specific, well-considered debts, and manage them wisely so that you control the debt, rather than letting the debt control you.

No matter what kind of debt you are thinking of taking on, there are some basic steps you can take to manage it.

* First, make sure you are getting the best deal, and therefore taking on the least debt, by comparison shopping before you buy. “Whether shopping for a car or a cell phone plan, consumers should do their homework,” suggests Stephen Semprevivo, president of LowerMyBills.com. “A few minutes of research could add up to big savings.”

* Think about making a sizeable down payment. Financing as little as possible will help ensure that you are able to pay the debt off in a timely manner.

* Look for room to negotiate. Many companies — yes, even credit card companies — may be willing to negotiate in order to win and keep your business. Always negotiate whenever possible.

Hopefully, if you take steps to manage the expense, you may be able to comfortably take on those necessary, and often beneficial, debts that many of us incur without putting your financial stability in potential jeopardy.

Of course, there are many consumers for whom debt has already become a burden. If this is your situation, take steps to alleviate the problem and get yourself back on the track to sound financial management.

* If you carry a large balance on your credit card, start making bigger payments. If the calculated minimum payment is only on the accrued interest, then you would need to make a larger payment to hit the principal of the debt. By finally hitting the principal, and discontinuing use of the card for purchases, you should see the balance begin to drop.

* If you own your home, consider refinancing to potentially achieve a better rate or terms on the mortgage, or to use equity to pay off other high-interest debt. “Interest rates are still low,” notes Semprevivo. “Refinancing to a lower rate may free up money each month that can be used to pay down unsecured debt such as credit card debt.” Web sites like LowerMyBills.com can help you evaluate your refinancing options.

* If you’re in over your head, don’t be afraid to ask for help. Debt counseling may help you if you are feeling overwhelmed by assisting with possible ways to help prevent you from defaulting on your debt. The Internet has made it easier than ever to find help. Sites like LowerMyBills.com can help you find the right debt solution for your needs.

*Finally, remember that it’s always a good idea to check with your personal financial and legal advisors for additional information.

Once you’ve taken control of your debt, you can keep on top of things by spending responsibly and living within your means. That way, when the time comes to incur some positive debt, you’ll be ready to make the most of the opportunity.

For more information on how to save money on your monthly bills, visit www.LowerMyBills.com.

Courtesy of ARAcontent

Debt Handling: Developing A Budget Can Increase Income

Jennifer — Fri, 15 Jun 2007 21:15:07 +0000

It might seem that developing a budget should be an elementary task. But many people are simply not inclined to use spreadsheets, balance checkbooks or lay out a formal budget. Whether by nature, or as a result of a reaction to public school mathematics training, some people just aren’t ‘number people’.

But everyone will find it in their self-interest to make the effort to outline their expenses against income even if it requires getting someone else to help undertake the task. The budget should include monthly income and outgo, projections of expected increases and decreases and some buffer for the unexpected.

If you feel uncomfortable using spreadsheet software – which is available for free these days either through Open Office (http://www.openoffice.org/) or Google Docs & Spreadsheets (http://docs.google.com/ – at least jot down some figures on a legal-sized pad.

Divide the spreadsheet or page into two columns. In one, list income, in the other write down all monthly costs. In the costs column include all major regular bills, groceries, gasoline, etc. Then add at least 10% for unexpected expenses, if you can.

Now, for an important add-on task that too few undertake: project different scenarios. Make another budget (an imaginary one) that shows monthly costs, income and the difference between the two… except:

Exclude monthly credit card interest amounts. Exclude auto loan interest. Exclude 25% of any ‘impulse buy’ amounts. Then sum the total of those three.

These three represent the amount you could conceivably avoid paying every month. If the total is even as low as 10% of your monthly expenses (and for some it’s higher), you are paying a substantial amount of your income to charges that could be avoided.

No one but you, being as realistic as possible, can decide whether that 10% overhead you pay is worth what you get in return – having certain items earlier than you would by saving for them. But, consider this: saving that 10% APR paid on $2,000 for one year is: $110. And many people pay only the minimum monthly payment, which amounts to much more. That’s $110 you are paying solely to have something costing $2,000 a year earlier.

Only you can decide which is worth more to you, but developing a budget will help you make those decisions rationally.

Money Savvy » Budgeting

Debt Doesn’t Have to be a Four Letter Word

Debt Handling: Developing A Budget Can Increase Income