5 Simple Ways to Pay Off Debt

Many Americans have still not changed their mindset and financial behavior. Stock market volatility, administration changes and federal and state regulatory changes should make everyone improve their financial behavior. Many Americans allow fear to cause them to make hasty decisions. Don’t let fear lead you to make a decision you will regret in the future.

If you owe debt and have the money - pay it off. Forget about the rumors that others have said about keeping a balance on your accounts. Paying off debt will help you maintain a good relationship with your creditors, stop those harassing calls, increase your credit score and reduce financial stress.

To pay off debt you have change the way you think about money.  Money is a tool that can be used either to generate debt or to generate wealth. There are several ways to get out of debt. Use these five simple ways to pay off debt, increase your credit score and improve your financial life.

TRACK SPENDING

A budget helps you identify your total monthly income, how much you owe and how much you spending each month. A budget also quickly identifies areas where you may need to reduce spending. Use online banking or automatic paycheck deduction to pay bills. 

SPEND LESS

Buy needs vs. wants, control your spending, don't buy in excess or more than you need, keep debt (excluding mortgage or rent) at 15% of your total monthly income (after taxes). Keep rent/mortgage at 30% of your total monthly income. Reduce expenses by 30-50%. Delay purchases until you have the cash to purchase them.  

PAY IN FULL

Pay the balance in full each month prior to the due date or as soon as you receive the bill, which helps to avoid, paying finance charges. This also reduces your chances of going into debt and making late payments. 

PAY MORE THAN ONCE

Many consumers do not realize that they can send in payments for their debts multiple times a month.  Pay half of the bill balance with first paycheck of the month then pay the remaining balance with second paycheck of the month. Pay weekly instead of monthly or pay the minimum monthly payment the first week after you get the bill. Then each week pay as much as you can toward the monthly balance and repeat every month.  

PAY MORE THAN MINIMUM MONTHLY PAYMENT

If you pay the minimum monthly payment, you will end up paying 2 to 3 times what you actually purchased due to finance charges that accrue on your balance. Send more than the minimum monthly payment each month.

STOP CHARGING

Keep credit card balances at 20% or below the credit limit.  Having accounts with balances above the credit limit will decrease your credit score and may increase the chances of your credit limit being reduced or your credit card account may be closed.

11 Easy Ways to Get Out of Debt Today

April is National Financial Literacy Month. Many Americans are still struggling to get on track with their finances. Consumers are reliant on credit cards as a primary form of payment. However, credit card debt balances are steadily increasing and many consumers are one paycheck away from being homeless.

Many Americans are still recovering from the 2008 recession. Others are nearing bankruptcy, foreclosure, or experiencing a financial crisis.  This has resulted in delays in marriage, starting a family, filing for divorce, and attending or completing a college education. According to Experian credit bureau 73% of American die with an average of $61,554 in debt. There are several reasons Americans are in debt:

Healthcare

• Healthcare costs have increased 113% since 1999 and continue to climb. Premiums are expected to climb another 166% by 2019.
• Medical bills and expenses.

Cost of Living

• Since 2000, the Social Security Cost of Living Adjustment (COLA) has increased benefits 41% while senior expenses have increased 84%. According to SSA.gov, in 2014, 1.5%, in 2015, 1.7%, in 2016, 0%, in 2017, 0.3%.
• Living costs continue to increase for housing, rent, airfare, clothing, tobacco, food, gas and utilities according to usinflationcalculator.com.

·         The sandwich generation who are helping their children and parents financially are getting further in debt.

Children

• College tuition prices increased at a rate higher than inflation for the past 30 years.
• Couples with children or single parents have greater expenses and more debt than those who don’t have children.

·         Debt incurred by parents helping their children or family members who experienced a financial crisis.

What Can Consumers Do To Fix It

Review

• Get a copy of your credit report at least once a year.

Verify

·         Ask for a debt verification to verify you owe the debt.

Plan

·         Setup a payment plan you can afford to pay the debt.

Seek Professional Help

·         If you are able to negotiate or manage your debt on your own contact a credit counseling agency, credit counselor, financial coach, or financial planner for assistance.

Downsize or Downgrade

·         Downsize or downgrade your lifestyle. Reduce spending by 30-50%.   

Income

·         Earn extra income to pay down debt.

Live Like a College Student

While you were in college you did whatever you could to get a meal and make ends meet. That same philosophy can be applied to reduce your monthly expenses.

Pay More

• Pay more than the minimum monthly payment.

Crowd Funding

• Use crowd funding websites to raise money to pay down your debt such as Prosper, IndieGoGo and Kickstarter.

Valuable

·         Sell something online at Amazon, Etsy or eBay you believe is valuable such as: jewelry, art, furs, etc. and use that money to pay down debt.

Voluntary Simplicity Movement

• Buy nothing new other than food and basic necessities - donate existing possessions to charity. Focus on being needs versus wants.

March Madness and Your Finances

                                         

March Madness is always action packed and full of surprises. Everyone will be watching to see what teams are selected to play and the teams that advance to each round. With all this excitement about March Madness, consumers should use that same excitement to improve their financial situation. 

Some consumers go into debt watching March Madness: ordering cable sports packages, hosting game parties, going to sports bars to eat, drink and watch the games all day, buying tickets to live games, and buying sports memorabilia. All of these costs can add up and cause you to overspend.

The goal of basketball is getting the ball to go securely in the net to score points. 

The goal of improving your financial situation is getting out of debt, increasing your credit score and your liquidity.  If you are obsessed with watching March Madness you may be obsessed other things. This year use that obsession towards your finances. Use your tax refund to improve your financial situation. If you are spending more than you earn, living paycheck to paycheck or have little to no savings or retirement, here are 6 ways to improve your financial situation. 

1. Don’t hit an air ball – Many people file bankruptcy multiple times as an easy way to get out of debt. You should only file bankruptcy as a last resort. Filing for bankruptcy greatly lowers your credit score and remains on your credit report for 7-10 years.
2. Ball control – Manage your finances by reducing expenses and reducing debt. Taking control of your finances is key to developing good spending habits and reducing the change of having a financial crisis. The total amount of debt you owe contributes to 35% of your credit score.
3. Shoot for a basket – Set financial goals as part of your budget. Develop an action plan to achieve each goal. Creating a budget helps you live below your means, reducing your spending and reduces your chances of going into debt. Your total monthly debt excluding mortgage and car loan should be no more than 10% of your total monthly gross income. 
4. Don’t try to achieve a bury – A credit score or FICO score ranges from 300-850. Only a small percentage of Americans, less than 5% achieve a score in the 800’s. Focus on paying down debt, paying your bills on time and getting current on any late accounts. These actions will help increase your credit score. Don’t focus on getting a perfect credit score, focus on getting the best credit score you can.
5. Don’t stay cold – Many consumers have tried different methods on their own to get out of debt. If you are unable to improve your situation on your own, don’t stay cold – get professional help from a credit counselor, financial coach or financial planner.
6. Avoid disqualification – You can lose your job or get disqualified from a job by having bad credit. Bad credit can also prevent you from being approved for a loan or line or credit.