How to Consolidate Debt

Many Americans are in debt and more are going into debt every day due to high cost of gas, food, clothing, utilities and housing. Many Americans don't have enough money to pay even basic necessities and have to resort to using a credit card to buy food and gas. This has caused many Americans to owe thousands of dollars in credit card debt. Luckily there are many options available to eliminate or reduce debt. One option that can be used to eliminate or reduce debt is debt consolidation. Debt Consolidation can be done on your own or by using a debt consolidation, debt management company or bank.

Debt Consolidation works by making one monthly payment to a debt consolidation company which is disbursed or divided among your creditors. This monthly payment is usually lower than the total of your individual creditor accounts.

Debt consolidation reduces the monthly bill, lowers your monthly interest rate and halts charging late fees. This can be done by: taking out a home equity loan, a home equity line of credit or a debt consolidation loan from your bank. There are other options for debt consolidation such as: refinance with cash out or refinancing your home for an amount greater than the amount you owe and using the extra cash to pay off debt.

Debt consolidation through a debt consolidation company usually requires payment of a setup fee and/or monthly fee. Using your home's equity will also require payment of fees for the home equity loan or home equity line of credit.

The benefits of using debt consolidation are: reduced monthly payments, reduced finance charges, elimination of harassing calls from creditors, convenience of sending in one monthly payment, pay debt down faster, and freedom from stress, worry, and anxiety causes by being in debt. Home equity loans can also provide tax benefits. However, use caution when consolidating debt.

The disadvantages of using debt consolidation are: the costs of the debt consolidation loan may not be less than what you are currently paying, you could get a higher interest rate if you have bad credit or no collateral to secure the loan, the debt consolidation will be listed on your credit report and may lower your credit score, your credit may become worse if you do business with a non-reputable company, you risk losing your home if you get a home equity loan and miss a payment or make late payments and you may have to pay points for taking out the home equity loan.

It is best to use cautious when considering debt consolidation. Comparison shop to find the best deal. Start with credit unions that have more favorable loans and terms and find the option that is right for you.

How to Repair Your Credit

Your credit is your financial identity - your financial DNA - your financial resume. Your credit is one of the most important aspects of your life and can help you or hurt you during the course of your life. Credit affects many aspects of your life such as applying for a job, applying for a home or apartment, or applying for a personal loan or credit. Don't be discouraged if you have bad credit. You can restore your credit and still achieve your financial goals.

The first step to repairing credit damage is by ordering a copy of your credit report from the three major credit bureaus, Experian, Equifax, and TransUnion. Review your credit reports with a fine tooth comb checking the following information for accuracy: name, address, phone number, SSN, date of birth, current and previous addresses, accounts, account numbers, open and closed dates, status of the account, owed amount, and payment history.

Once you have reviewed your credit report determine if you have any past due accounts. If you have bad credit due to the loss of a job, health issues, family issues or a disability let the creditor know right away. Call the creditor to setup a payment plan to pay back all debt owed. Determine the monthly amount you can afford, don't let the creditor determine the amount for you. If the creditor offers a settlement request that the credit list the account status as "paid" or "paid in full" instead of "settled" or "settled for less than full amount". If you account is listed as "settled" this will lower your credit score although the account was paid.

If you are currently unable to pay your debts due to unemployment and financial problems request a financial hardship and request a reduced monthly payment and reduced interest rate for a period of one year. During this time you will not be charged late fees and you be able to make your credit until your financial situation improves.

If you find errors on your credit report write a letter to the credit bureau that is reporting the error or request a dispute investigation online by visiting the credit bureau's website. Provide any supporting documentation to prove your claim. The credit bureau will respond to your letter within 30 days from the day of receipt. Keep copies of all correspondence sent and received in the event you need to reference it in the future. If you do not receive a response follow-up with a letter to the credit bureau to verify the updates were made. Order another copy of your credit report after 45 to 60 days have passed to verify the updates were made.

If you dispute an error and the credit bureau or company that listed the error refuses to update the information on your credit report you can write the credit bureau reporting the error and request that a one hundred word statement be added to your credit report for that account. This help increase your chances for approval in the future.

If you have an account that has a late payment history you can request that the company re-age the account once you have made consecutive payments on time for a period of 9 to 12 months. The delinquent (negative) payment history will be removed from your credit report which will increase your credit score.

Additional ways to repair damage to your credit are: keep your balances at 50% or below the credit limit, don’t open more than 1 new account in a 6 month period, don’t do business with “bad credit, no problem” companies, order your credit report each year, avoid foreclosure and bankruptcy, consolidate debt with caution, consult a professional, don't ignore past due bills and setup automatic bill payment to ensure bill are paid on time.

Protect your credit as your would your life, guard with care. "Money can generate wealth or generate debt, you make the choice."

Credit Card Blocking

Credit card blocking occurs when a business places a hold on your credit card sometimes for more than the total amount that is owed for a reservation such as a hotel or rental car. Some companies that use credit card blocking are Diners Club cards and Visa. When you use your credit card at registration for a hotel or to rent a car, the cashier will contact your credit card company and provide an estimated total of your bill. If the transaction is approved, then that amount is held in reserve. In addition to the actual cost of staying in the hotel or renting a car the clerk may add on reasonable "incidental" costs for items such as food or gasoline.

Some experts believe that credit card blocking is helpful because it makes sure you don't exceed your credit limit before checking out or returning a car. Using credit card blocking means that the company you receive these services from can be assured that your bill will be paid. If your balance is far enough below your limit you usually will not have a problem. Unfortunately, if your balance is near the credit limit, it may be an inconvenience by tying up credit that you may need and can cause a denied transaction for an item that is purchased after the block is placed.

If you pay the bill with the same credit card used when you checked in or returned the car, the purchase will replace the block usually in one or two days. However, if you pay using a different credit card or with cash the block may be held for up to 15 days after you've checked out. This happens because your credit card company was not notified that you used another form of payment and assumed they had to continue to hold that amount in reserve on your credit card. This can be avoided by asking the merchant to notify your credit card company and remove their block promptly. Here are 7 ways to protect yourself against credit card blocking:

1. Pay for a hotel or rental car with the same card you used at check-in.
2. Ask the merchant the amount that will be blocked, how they determined the amount blocked and the time period the block will be held.
3. Use two credit cards, one to make a reservation and one to pay the final bill.
4. Pay with cash.
5. If you pay using another method, ask the clerk to call the credit company and have the block removed. Get the clerk's name and ask for proof that the block was removed if possible. Also contact your credit card company to ensure the block was removed.
6. Pay for hotel reservations in full prior to check-in so that a block is not placed on your credit card. However, if a block is placed after arrival it will only be for a small amount to cover incidentals.
7. Complain to your state Congressman regarding credit card blocking.

Credit card blocking is not illegal as long as the amount blocked isn't above what the customer is likely to pay at the end of the transaction. Most consumers are not aware that it happens at all because the blocked amounts may not come close to their credit limits. Some businesses will remove a block at the consumer's request if they see the bill has been paid.

Credit card blocking ensures the business will get paid if the consumer does not pay the final bill and prevents the consumer from exceeding the credit limit before checking out of a hotel, returning a rental car or making another type of purchase.

To prevent credit card blocking: use the same credit card the reservation was made, pay down your credit card to allow room for extra items that you may need to purchase in addition to the reservation costs, ensure the block is removed from your credit card after the reservation amount is paid in full. For more information write to: Credit Card Blocking, Correspondence Branch, Federal Trade Commission, Washington, DC 20580.

Why You Need to Save

Many Americans today don't have a savings account or emergency fund. I heard on the news on recently that the Commerce Department reported that Americans spend all the money they have and personal savings rates reached the lowest level since the Great Depression.

Start you creating an emergency fund. Your emergency fund is your safety net, in case you get sick or lose your job you can use your emergency savings to hold you for a few months until you can find a new job.

Your emergency account should be separate from your checking or savings accounts and should only be used for emergencies such as an unexpected expense, unemployment, medical bills, etc.

An emergency fund should be enough savings to pay your bills for at least 3 to 6 months. Money for an emergency fund should be readily accessible and stored in a checking or savings account, preferably a high interest savings account such as Emigrant Direct or ING or a money market account where you can make money while saving money.

To determine how much money is needed to pay 3 to 6 months worth of your bills do an inventory and write down all your bills and expenses and the monthly amount spent for each. Calculate the total. Use this amount and multiple by 3 or 6 to determine the total amount you need to save in your emergency fund.

Make sure you do some comparison shopping before opening an account for your emergency fund to ensure that they are no minimum or other fees for accessing your account. A good source to use is Bankrate.com.

You can start off by contributing small amounts to your emergency fund until you are able to contribute more. Start off with a contribution of at least $20 a month to your emergency fund. Once you are able to contribute more to the fund do so. Make several short-term goals for your emergency fund. Once you have saved enough money to pay one bill pat yourself on the back. Then keep saving until you have enough to pay three bills and so on until you have enough saved to pay your bills and expenses for 3 to 6 months.

Once you have reached your emergency fund goal it is time to start developing some long-term goals such as an additional savings account and to start planning for retirement. A great site to learn about retirement planning is Morningstar.com and look under the Personal Finance section.

Having an emergency fund will ensure that you are on the road to becoming financially secure and will prevent you from going into debt when an unexpected tragedy happens or unexpected expenses arises. An emergency fund is the first step to getting out of and staying out of debt.

There are many organizations that provide emergency services for people such as the American Red Cross Emergency Assistance, Salvation Army Emergency Assistance Program and the United Way. The utility companies provide funds for people in need. You can use these funds to pay necessities and use money from your part-time job to pay other bills.

According to MSNBC.com, the savings rate of Americans declined to -5% in 2005, -1% in 2006 but has not risen to .6 in the second quarter of 2007. Consumers are spending over half of what they earn. The other 40% is spent on health insurance.

We no longer live in a society that promotes longevity and encourages stability. You must prepare for the future and a critical component of that is having a savings account. You may not know what the future holds but if you prepare your finances now, it will ease the burden of what tomorrow holds.

Instant Grati Syndrome

As a baby when you cried your mother or father came running to take care of you. As a toddler when you cried your parents hugged or talked to you until you stopped. As a teenager when you wanted something you talked really nice and sweet to your parents to get it. Throughout your life you may have received gratification instantly so as an adult it is only natural for you to believe that you should continue to receive this treatment. Unfortunately, this attitude affects every aspect of your life even your spending habits.

It can be difficult to resist the temptation of the instant gratification culture of America which I call the "instant grati factor". Advertisers make consumers believe everything can be obtained instantly by creating instant cereal, instant coffee, instant meals, instant messaging, instant credit card approval and online shopping. I have labeled this behavior as the "instant gratification syndrome" or "instant grati syndrome". To determine if you are a victim of "instant grati syndrome" ask yourself the following questions:

1. If you see an item online or in the store do you buy it immediately?
2. Do you buy an item even if you don't need the item or the item is not in your size?
3. Do you buy an item with your credit card even though you know you don't have the money to pay the bill when it arrives?
4. Do you get upset or defensive when someone questions your poor spending habits?
5. Do you rationalize your poor spending habits by saying things like "I work hard I deserve it", "Why can't I have it", "You are not my father, I can buy whatever I want", "I just had to have it", "I don't have to answer to you", "I want it now", or "I can buy it with my credit card"?
6. Is your home filled with unused items you purchased or items that still have the tags on them?
7. Do you go shopping with money already set aside to pay a bill?
8. Do you hide items you have purchased from your spouse, children or significant other?
9. Do you buy a new outfit every time you go to an event or gathering?

If you answered yes to any of these questions you are a victim of the "instant grati syndrome". Here are 6 ways to avoid the "Instant Grati Syndrome:"

1. Make being debt free your ultimate goal
2. Stop listening to the instant gratification messages
3. Live your life like an investor
4. Surround yourself with people who are investors or people who are in a better financial situation
5. Enjoy the little things in life
6. Stop being depressed

This behavior is difficult to change but it can be changed. Don't buy on impulse - think before you buy and determine if the item is a want or a need. Embrace the old values of working hard and saving your money to buy something. So the next time you buy something with a credit card ask yourself, am I a victim of the "instant grati" syndrome?

Instant Grati Factor and Instant Grati Syndrome Copyright © 2008 H.E. Freeman Enterprises

7 Ways for Journalists To Save Money

Being a journalist can involve a lot of travel to do interviews for newspapers, television or radio and can rack up many expenses that can occur at the last minute that may not be covered by your job. These expenses can make it difficult to make ends meet. To save money create a budget and look for ways to reduce expenses. Here are 7 ways for journalists to save money:

1. Travel Discounts. Comparison shop for discounts on parking or air, hotel and rental cars or buy as packages. Some companies that provide discount fares LongTermParking, HotDeals, SideStep, and Kayak. Sign up for online alerts with airlines to learn about their weekly specials. Search for fares early in the morning or on weekends. Check to see if they accept discounts for membership to Diner's Clubs, AAA, AARP, etc. This can save you $30 to $175 per transaction.

2. Supplies and Expenses. Shop for office supplies at Costco or online sites such as Amazon. Consider setting up a home office. You can write off a portion of your mortgage, and utility bills. If you do not have space for a home office consider using a telecommuting or telework center at companies such as Virtual Office Center, Regus or the World Environmental Organization and search for telecommuting sites. This can save you $50 to $100 per week in supplies, wear and tear on your car and gas.

3. Food. Pack you own drinks such as water and juice along with your favorite snacks. Search online for coupons to your favorite restaurants. Sign up for a free newsletter from restaurants to receive coupons. This can save you $30 to $200 per month.

4. Car Maintenance. Perform regular maintenance on your car by keeping your tires properly inflated and balanced which improves mileage. Save money on gas by using the lowest octane which is usually 87. Fill up your gas tank before going to work or in the evening when it is cool. This can save you $.05 to $.30 per gallon.

5. Insurance. Make sure you have health and disability insurance. If you need to see a doctor you won't have to worry about paying medical bills. If you become sick for an extended period of time you won't have to worry about how you will pay your bills. Contact eHealthInsurance for health insurance quotes. If you need disability insurance contact the Assurity company. This can save you $20 to $200 per month.

6. Use coupons. Use coupons to save money when shopping. Search for online coupons at sites such as Visit MyCoupons, CoolSavings, and CouponSurfer. This can save you $20 to $250 per month on your grocery bills and other household costs.

7. Go green. Try eco-friendly ways to save money. Visit sites such as Bankrate and search for ways to save money going green. This can save you $20 to $500 a month.

9 Reasons to Treat Your Household Finances Like a Business

There are many similarities between running a business and maintaining household finances. Both require constant updates and monitoring and both can leave you out in the cold and broke. Here are

1. Comparison Shop. (Get the Right Price) Shop around for the best price for the product or services you require to maintain your household. This increases your monthly household income and reduces expenses.

2. Reduce Expenses. Find ways to reduce expenses. Reducing expenses frees up money to pay for other items. Use coupons or shop at wholesales stores, have a yard sale or donate unused items to charity and write the amount off on your taxes.

3. Go above Break Even. Strive to go above the break even point. At the break even point your total monthly income equals your total monthly expenses including debt. Strive to rise above your break even point to eliminate debt and achieve your financial goals.

4. Create a Budget. (Personal Profit and Loss). Write a list of all of your monthly expenses and your monthly debts and write down you monthly net income. If you have any money left over use that to pay down your debts.

5. Take Action. Once you have identified the areas where you need to reduce expenses develop a plan to begin reducing them. This can be done by making small adjustments to your budget. Revise your budget after each major life change or event.

6. Pay Your Bills On Time. You will save money on late fees and improve your credit rating. It will also help you get approved for a loan. You can save a lot by paying your bills early. An early payment reduces your average daily balance and your finance charge. Always pay more than the monthly minimum payment.

7. Verify Statements. (Reconcile Statements) Verify all financial and creditor monthly statements to check for errors. Report errors immediately to reduce the impact to your account.

8. Monitor household supplies (Office Supplies) If your household supplies seem to need replacing often set limits on how much can be used or ration out supplies to change usage habits.

9. Create an Emergency Fund. (Petty Cash Fund) Use an emergency fund to buy small purchases or pay for unexpected expenses. By tracking small or unexpected expenses you will have greater control over all your expenses which can quickly add up.

6 Ways to Change Your Perspective to Get Out of Debt

I have visited several countries and states during my life. Visiting different states and countries has given me a greater perspective on my life and reminded me how grateful I am for what I have. If you are living above your means you need to change your perspective about your life. Changing your perspective will not get you out of debt overnight but will help you put things into perspective so you can see the value in eliminating your debt, managing your finances to plan for your future and restructuring your priorities in life. Many times we so get busy with life we sometimes lose our focus. One way to get out of debt is to change our focus. Here are 6 tips to change your personal finance perspective:

1. Visit another state (at least 2 or 3 states from where you currently live) and compare with your current state or city the cost of living, job salaries, health care, poverty levels, literacy levels, educational system, etc.
2. Volunteer at a foster home, senior citizen home, children's hospital, or a hospital with terminally ill patients. Talk to them and find out the things that are most important to them.
3. Make a financial contribution to a charity at least once a year.
4. Become a mentor.
5. Examine the reasons why you are living above your means and write down ways to correct your actions.
6. Set at least 3 long-term financial goals for yourself or your family, i.e. plan for retirement, setup a college fund for your children, start a business, etc. Set a date and develop an action plan to achieve those goals.


Copyright © 2008 H.E. Freeman Enterprises