Deuce
Well-Known Member
I found this article to be interesting. Check it out.
The Basics
A 24-hour debt-reduction plan
Tired of making big monthly payments on your self-indulgent ways? Here's how to crawl out from under your credit cards -- but it won't be easy.
By M.P. Dunleavey
I?m not just interested in getting out of debt. I want to get out of debt now, as in yesterday, as in last year.
Ever since I left college saddled with various student loans, carrying around several thousand dollars in consumer debt has been part of my adult life. I know I?m not alone -- Americans are swimming in debt, some $654 billion of it. But I can?t stand it anymore.
It?s like paying repeatedly for dinners I?ve already eaten, trips I?ve already taken and clothes I?ve already worn and given away. Those things are gone, but the debt remains, a monthly reminder that I am yet another self-indulgent, shortsighted and materialistic idiot. Until now.
I may not have the patience for what most financial planners would counsel me to do now: cut back on expenses, move home with my parents, sell a kidney and pay off my debt slowly and steadily until it, and I, are both retired. But I am determined: I will eliminate my debt -- take-no-prisoners-style -- by tomorrow, at the latest.
Sadly, the experts I consulted weren?t too bullish on that possibility. Debt, it seems, is a lot like a grease stain. When you finally notice it, it looks terrible, and in hindsight, you could have prevented it. Now there?s no quick way to make it disappear.
But I am nothing if not persistent. Here are six specific steps you (and I) can take in the next 24 hours to roll out the most aggressive debt-reduction strategy since Hitler invaded Europe.
Get the ball rolling
Michael Horwitz, a financial planner with Austin Asset Management, has a special fixation on getting clients debt-free. A particular peeve: carrying more than one credit card, often with small amounts owed on each. He can?t fathom why (and neither can I, since I always stick to large amounts). But one thing to do immediately is to identify the card you can pay off the fastest.
Put all your efforts toward paying down that card in, say, three to six months, he says, "and you?ll get a terrific psychological boost from eliminating one whole piece of debt. That feeling of momentum will feed itself."
Harness that momentum, plus the funds you used to vaporize Debt A, and you can quickly target and destroy Debt B, then C and so on, he says.
Formulate your plan
The average American household with at least one credit card last year carried an average of about $8,000 in credit-card debt. How quickly could the Average American eliminate that burden? How quickly could you or I? You won't know until you have a plan of action.
First, have a little t?te-?-t?te with your debt. Get to know it. How big is it? How much interest does this card carry versus that one? Then decide how quickly you want to pay it all back. Divide the amount you owe by the number of months from now in which you plan to be debtless. For example, I?d have to pay $333 per hour to banish my Average American $8,000 load under my ideal 24-hour plan. Or I could pay $444 a month for 18 months, whichever is easier. The point is, debt is like quicksand: Struggling and complaining won't get you anywhere, but a simple strategy will.
Don't fool yourself
The amount of pseudo-spiritual, so-called financial advice being tossed around these days is disheartening to those who labor in the debt trenches. ?You can?t get out of debt by positive talking, only by positive doing,? says David Bach, the Deepak Chopra of financial planners and best-selling author of ?Smart Women Finish Rich.?
Both Bach and Horwitz say that the fluffy thinking so prevalent in many financial self-help books (examining your ?relationship? to money, your parents? ?relationship? to money, etc.) is appealing precisely because fluffy thinking is probably what got you in this hole. The biggest sources of financial fog, Horwitz says, are these two bright ideas:
?I?ll make more money later, and I?ll pay for it then.?
?I can always cut back on my expenses.?
Typically, neither of these things ever happens. You may make more money ?later,? but by then your expenses will have increased. And cutting back is ?wishful thinking,? Horowitz says. The little-known Newtonian law of debt conservation states that money saved in one area will inevitably be spent in another.
Instead, adopt the Debt Reduction Mentality: The only way to truly get medieval on your debt is to spend less than you bring in. Period. Starting now.
Or, as Bach?s grandmother used to say, ?If you don?t have the money to buy it, don?t buy it.? That?s a major change from ?I can pay for this $1,200 suit once my promotion goes through,? and it's guaranteed to change your financial life.
Cut fixed expenses
It?s easy to say ?spend less than you bring in,? but few people really know what that means. Aside from the obvious (i.e. figuring out what you earn and spending less than that), what it means is cutting your fixed overhead. Cut cable. Give up the cell phone. Don?t eat out. Bring lunch. Horwitz takes it even further: He suggests that while you're in debt-reduction mode you should avoid TV, magazines and newspapers, so that you?re not tempted to make unnecessary purchases.
Those may seem like small savings, but they add up quickly. And when you start putting that money toward reducing what you owe, that satisfaction will more than compensate you for the loss of HBO. Trust me. I now live the cable-free life.
Negotiate, negotiate, negotiate
Rather than pay exorbitant credit-card interest rates -- which keep you in debt indefinitely -- you can make an immediate dent in your debt by calling your credit-card companies today, telling them that you?re planning to move your money to another company with a lower rate, and then let them woo you back with lower rates. ?Most customer service representatives are authorized to lower your interest rate significantly,? Bach says. ?Then, call back a month later and do it again.?
You can do the same with that annual, so-called membership fee, although cards that offer frequent-flier miles may not be as flexible.
Consolidate, consolidate, consolidate
There?s a stigma attached to credit counseling and debt consolidation services, but I?m over that -- and you should be, too. According to Misty, a customer service representative at Money Management International (who preferred not to use her last name), most people she talks to have modest amounts of debt that, like me, they just want to get rid of. Or they can?t get a mortgage and have been referred by a bank.
But debt consolidation is tricky. Putting all your credit-card debt onto one card with a seductively low rate sounds like a good idea, but you need to ask about hidden fees and how long that low, low rate will last. You don?t want to get stuck paying an even higher rate down the road.
Likewise, getting a consolidation loan can turn out to be more expensive than if you?d paid your debt yourself. And some services have been known to make late payments, thus hardly doing you a favor.
Nonprofit services like National Foundation for Consumer Credit or Consumer Credit Counseling Service tend to be more reliable. The advantage of these services goes beyond the organizational helping hand they extend. Bach says that making only one payment per month, as opposed to three or four or more, will save you those excess membership fees and the inevitable late payments that come from juggling too much. Will using these services show up on your credit report? In some cases it will, so make sure to ask.
These six steps may seem simple -- you can probably accomplish all of them during your lunch break -- but sometimes easy actually does it. Sure, it might also help to know that the day your dad forgot to give you your allowance when you were nine left you with a permanent sense of deprivation. Ultimately, though, you still have to stop spending and start paying back. Me, too.
The Basics
A 24-hour debt-reduction plan
Tired of making big monthly payments on your self-indulgent ways? Here's how to crawl out from under your credit cards -- but it won't be easy.
By M.P. Dunleavey
I?m not just interested in getting out of debt. I want to get out of debt now, as in yesterday, as in last year.
Ever since I left college saddled with various student loans, carrying around several thousand dollars in consumer debt has been part of my adult life. I know I?m not alone -- Americans are swimming in debt, some $654 billion of it. But I can?t stand it anymore.
It?s like paying repeatedly for dinners I?ve already eaten, trips I?ve already taken and clothes I?ve already worn and given away. Those things are gone, but the debt remains, a monthly reminder that I am yet another self-indulgent, shortsighted and materialistic idiot. Until now.
I may not have the patience for what most financial planners would counsel me to do now: cut back on expenses, move home with my parents, sell a kidney and pay off my debt slowly and steadily until it, and I, are both retired. But I am determined: I will eliminate my debt -- take-no-prisoners-style -- by tomorrow, at the latest.
Sadly, the experts I consulted weren?t too bullish on that possibility. Debt, it seems, is a lot like a grease stain. When you finally notice it, it looks terrible, and in hindsight, you could have prevented it. Now there?s no quick way to make it disappear.
But I am nothing if not persistent. Here are six specific steps you (and I) can take in the next 24 hours to roll out the most aggressive debt-reduction strategy since Hitler invaded Europe.
Get the ball rolling
Michael Horwitz, a financial planner with Austin Asset Management, has a special fixation on getting clients debt-free. A particular peeve: carrying more than one credit card, often with small amounts owed on each. He can?t fathom why (and neither can I, since I always stick to large amounts). But one thing to do immediately is to identify the card you can pay off the fastest.
Put all your efforts toward paying down that card in, say, three to six months, he says, "and you?ll get a terrific psychological boost from eliminating one whole piece of debt. That feeling of momentum will feed itself."
Harness that momentum, plus the funds you used to vaporize Debt A, and you can quickly target and destroy Debt B, then C and so on, he says.
Formulate your plan
The average American household with at least one credit card last year carried an average of about $8,000 in credit-card debt. How quickly could the Average American eliminate that burden? How quickly could you or I? You won't know until you have a plan of action.
First, have a little t?te-?-t?te with your debt. Get to know it. How big is it? How much interest does this card carry versus that one? Then decide how quickly you want to pay it all back. Divide the amount you owe by the number of months from now in which you plan to be debtless. For example, I?d have to pay $333 per hour to banish my Average American $8,000 load under my ideal 24-hour plan. Or I could pay $444 a month for 18 months, whichever is easier. The point is, debt is like quicksand: Struggling and complaining won't get you anywhere, but a simple strategy will.
Don't fool yourself
The amount of pseudo-spiritual, so-called financial advice being tossed around these days is disheartening to those who labor in the debt trenches. ?You can?t get out of debt by positive talking, only by positive doing,? says David Bach, the Deepak Chopra of financial planners and best-selling author of ?Smart Women Finish Rich.?
Both Bach and Horwitz say that the fluffy thinking so prevalent in many financial self-help books (examining your ?relationship? to money, your parents? ?relationship? to money, etc.) is appealing precisely because fluffy thinking is probably what got you in this hole. The biggest sources of financial fog, Horwitz says, are these two bright ideas:
?I?ll make more money later, and I?ll pay for it then.?
?I can always cut back on my expenses.?
Typically, neither of these things ever happens. You may make more money ?later,? but by then your expenses will have increased. And cutting back is ?wishful thinking,? Horowitz says. The little-known Newtonian law of debt conservation states that money saved in one area will inevitably be spent in another.
Instead, adopt the Debt Reduction Mentality: The only way to truly get medieval on your debt is to spend less than you bring in. Period. Starting now.
Or, as Bach?s grandmother used to say, ?If you don?t have the money to buy it, don?t buy it.? That?s a major change from ?I can pay for this $1,200 suit once my promotion goes through,? and it's guaranteed to change your financial life.
Cut fixed expenses
It?s easy to say ?spend less than you bring in,? but few people really know what that means. Aside from the obvious (i.e. figuring out what you earn and spending less than that), what it means is cutting your fixed overhead. Cut cable. Give up the cell phone. Don?t eat out. Bring lunch. Horwitz takes it even further: He suggests that while you're in debt-reduction mode you should avoid TV, magazines and newspapers, so that you?re not tempted to make unnecessary purchases.
Those may seem like small savings, but they add up quickly. And when you start putting that money toward reducing what you owe, that satisfaction will more than compensate you for the loss of HBO. Trust me. I now live the cable-free life.
Negotiate, negotiate, negotiate
Rather than pay exorbitant credit-card interest rates -- which keep you in debt indefinitely -- you can make an immediate dent in your debt by calling your credit-card companies today, telling them that you?re planning to move your money to another company with a lower rate, and then let them woo you back with lower rates. ?Most customer service representatives are authorized to lower your interest rate significantly,? Bach says. ?Then, call back a month later and do it again.?
You can do the same with that annual, so-called membership fee, although cards that offer frequent-flier miles may not be as flexible.
Consolidate, consolidate, consolidate
There?s a stigma attached to credit counseling and debt consolidation services, but I?m over that -- and you should be, too. According to Misty, a customer service representative at Money Management International (who preferred not to use her last name), most people she talks to have modest amounts of debt that, like me, they just want to get rid of. Or they can?t get a mortgage and have been referred by a bank.
But debt consolidation is tricky. Putting all your credit-card debt onto one card with a seductively low rate sounds like a good idea, but you need to ask about hidden fees and how long that low, low rate will last. You don?t want to get stuck paying an even higher rate down the road.
Likewise, getting a consolidation loan can turn out to be more expensive than if you?d paid your debt yourself. And some services have been known to make late payments, thus hardly doing you a favor.
Nonprofit services like National Foundation for Consumer Credit or Consumer Credit Counseling Service tend to be more reliable. The advantage of these services goes beyond the organizational helping hand they extend. Bach says that making only one payment per month, as opposed to three or four or more, will save you those excess membership fees and the inevitable late payments that come from juggling too much. Will using these services show up on your credit report? In some cases it will, so make sure to ask.
These six steps may seem simple -- you can probably accomplish all of them during your lunch break -- but sometimes easy actually does it. Sure, it might also help to know that the day your dad forgot to give you your allowance when you were nine left you with a permanent sense of deprivation. Ultimately, though, you still have to stop spending and start paying back. Me, too.