August 13, 2023 • 25 mins
What it takes to pay off credit and tips and tricks to make the process easier. Do it yourself is the cheapest way to reduce debt but must be able to make tough decisions then carry thru with them.
Article Links:
https://finred.usalearning.gov/Money/DebtTraps
https://www.nerdwallet.com/article/finance/find-debt-relief By Bev O’Shea
https://www.consumerfinance.gov/about-us/blog/easy-remember-guidelines-help-people-reduce-credit-card-debt/ By Susan Kerbel
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Charles McDonald (00:04):
Hello, I'm your host, Mr. Chuck, I retired
accountant turned truck driver,I reduce my debt in a relatively
short period of time, debtreduction, to achieve financial
freedom takes commitment,confidence, determination.
(00:25):
reduce debt tips, what it takesto pay off credit and tips and
tricks to make the processeasier, do it yourself is the
cheapest way to reduce debt, butmust be able to make tough
decisions and then carry throughwith them. Other than do it
(00:45):
yourself, you can get a creditcounselor he can do. And they
can help you some of them arenonprofit, some for profit, but
then they gonna charge you a feeno matter what they are. So
doing it yourself is a good wayto get started. But the first
(01:06):
thing you must understand is thedebt trap cycle. What is the
debt trap cycle, there's twoways you can fall into this
trap. The first way is what Ithink a lot of people do. You
(01:26):
spend more than what you earn,and use your credit to make up
the difference. Thus, you'reusing your credit cards to buy
those things that you're buying,that you would not been able to
afford just solely based on yourincome. So in order to get out
of the debt trap, you have toquit using your credit cards.
(01:51):
The second way you can fall intoit, you have maybe one or two
credit cards, you pay them offevery month, you think you have
everything under control, thenall of a sudden, you have
balances on your credit cardsand you're struggling to pay
them down. And you're not makingany progress. And what happened?
(02:11):
Well, you didn't have a bigenough savings account,
emergency fund to cover an eventthat was unforeseen that
happened. So you had to use yourcredit cards, or use your credit
to pay for maybe your car brokedown, maybe an appliance in your
(02:34):
home broke down, maybe there wasan accident and somebody got
injured in your families, youhad medical bills, but you
didn't have sufficient savingsto cover it. And you had to use
your credit cards or your creditin order to pay for it. So what
is my debt reduction plan, thefirst thing you got to do one is
(02:58):
realize you have a problem. Sowe you're listening to this, you
already got that part down, thefirst thing you got to do is
quit using your credit cards,quit using credits. The second
thing you got to do is make theminimum payment on all your
debt, quit making extrapayments. And there's a reason
(03:22):
for that. And the reason isnumber three, create an
emergency fund, if you don'thave an a savings account, you
need to have at least a minimumof $1,000. So by making the
minimum payment on all yourdebt, that you free up some
money to start your savingsaccount. If you quit using your
(03:46):
credit, you're making theminimum payment, you're taking
money and you're putting asideand you're creating your
emergency fund. And you need tobuild that up to at least $1,000
to start with. Then once you hitthat $1,000 You continue putting
money in your savings accountuntil you have three to $4,000
(04:10):
above that $1,000. So what'sthat gonna do? Over the time it
takes you to build that up,you're gonna have a larger and
larger emergency fund, in casesome unforeseen event pops up,
keeping you out of the debttrap. Well, once you have that
(04:33):
three or 4000 and access, youtake that extra money and you
apply it to your debt, payingoff the highest interest debt
first, generally credit cards,personal loans, stuff like that.
Then you work your way down thecar loans, and eventually your
(04:53):
first mortgage. That is theproblem most people have is
Falling into the debt trap, andthinking they're able to get out
of it by consolidating theirloans. Again, a consolidation
loan to pay off your creditcards, but you still have the
same amount of debt, it may bemore manageable. But if they
(05:18):
company that gives you theconsolidation loan does not
require you to close down thosecredit cards, you may charge
them up again, and you're rightback to where you started. But
you're worse because now you gotan extra loan, plus all that
credit card debt on top of it.
So you're not making anyprogress, necessarily, by doing
(05:40):
a consolidation loan, if youdon't have the willpower to quit
using your credit cards. If youquit using your credit card, and
you make the minimum payment onthat consolidation loan, over
time, you'll get things undercontrol. But if you're required
(06:02):
to close those credit cards andcancel them, that's gonna hurt
your credit score and the shortrun, but in the long term, it
should improve and come backfrom that. So you avoided your
debt trap is one have anemergency fund, don't spend more
than what you make. So a goodrule of thumb is have three to
(06:26):
six months of expenses saved upthis intention and advice is
sound. For instance, if ahousehold member loses your job,
you have three to six months ofincome saved up to ease
employment gaps. So maybe yougot in a debt trap because you
got laid off, or you quit yourjob for whatever reason, and
(06:46):
you're unemployed for a shortperiod of time. And then you got
another job, that doesn't matterwhat happened, you got into the
debt trap. Or maybe you justspend more than what you make.
So maybe you have a spendingproblem, which has to be
identified. And then you have tocontrol yourself to keep your
(07:09):
spending under control. I hadboth of those problems, I had my
credit cards under control, thenI thought well, I need to buy
this, this and this, my creditcard coming up, built up a
little bit, I was paying themdown. And then I had the car
broke down, I needed tires forthe car, or something happened.
(07:31):
And I had to replace something,I got a bigger bounce on my
credit card. And then it was astruggle to pay them down again,
because I wasn't following myown advice because I didn't know
what it was, at the time. Quitusing credit, specially credit
cards, make the minimumpayments, build up your
(07:52):
emergency fund, continuebuilding it up and then apply
the excess amount in youremergency fund to chosen debt.
Generally speaking, one with thehighest interest rate is you're
better off. But if you have onethat you can pay off, pay that
one off, and you have a you madesome progress. Now you got one
(08:18):
card, that was a zero balance,quit use a net, do not cancel it
because that would hurt yourcredit rating down the road, you
may want to use that if theysend you an offer. And here's a
tip, he may get an offer on thaton paid off credit card to
transfer balance from anothercredit card for three or 5%
(08:42):
transfer fee, but have 12 or 18months of no interest. So what I
did was I paid that 5% Itransferred two or 3000 over and
I made sure it was interestfree. I made the minimum payment
(09:04):
for a while because I had timeand I cut I worked on the higher
interest rate card or creditcard. And then when it came
within six months, I made surethat I got that interest free
one paid off in the six months.
(09:24):
And then a few months later,they send me the offer again.
And I was able to do that overand over. So I'm paying less
interest, which makes you ableto apply more to the principal,
which then you pay off your debtfaster. So that's a tip. Never
(09:44):
cancel a credit card when yougot it paid off, keep it open
and helps your credit rating andyou might get some good offers
in the mail where you can usethat to your advantage. So how
do you go aboutquit using your credit card,
especially if you had creditcards, that were paying some
monthly bills, maybe a gymmembership, maybe you had a
(10:08):
credit card, paying your phonebill, your cell phone bill, or
whatever may be in a streamingbill, where he got first of all,
you got any of those monthlysubscription, you're paying
through that credit card, yougot to get rid of them, either
cancel them and do away withthem if you can, or use your
debit card on your checkingaccount to pay it. We want to
(10:32):
start paying for the money thatwe have in our bank account to
pay our monthly expenses. Soeverything that we pay on the
regular basis, whether it'srent, mortgage, utilities, car
payments, all your credit cardpayments, you got to pay for
(10:53):
those items from your monthlyincome. So how do we quit using
credit cards? For me wasn't tootough. I just took them out my
wallet didn't have it. neverbought anything online. tried
not to use them, put them in adrawer. So I really had to
(11:16):
think, do I really want to dothis, I'm trying to get out of
debt, I'm making progress. Butif I use it, I'm gonna go
backwards. So I was determinednot to use them. So I made it
difficult. So what are someother ways you can help you quit
(11:37):
using credit cards, I have alink in my show notes that what
it's called Easy to rememberguideline help people reduce
credit card debt as the ConsumerFinancial Protection Bureau. And
they have a worksheet in andthis article that you can
(11:58):
download a link that will helpyou find areas where you might
use your credit cards lessoften. So now we know that we
cannot just stop using creditcards. So let's do it over a
period of through three to sixmonths. First thing want to do
(12:18):
is find things that you can useyour credit card less often.
Maybe remove all thosesubscriptions that are coming
out monthly, either cancel them,or put them over on your regular
debit card. If you don't havethe income to pay for them, why
(12:40):
are you paying for if you'restruggling to pay for your rent,
and utilities month a month, whythe hell are these things that's
being charged on your creditcards. So I would highly
recommend if you struggling toget out of debt to cancel
anything that you don'tabsolutely need. Now your cell
(13:02):
phone you probably need anystreaming services, cable TV,
get rid of those type of items.
Maybe you use your credit cardsevery morning when you go to get
your sell for a cup of coffee,words iced coffee or latte or
(13:24):
whatever and something to eat onyour way to work. That's
something you can identify thatyou can put in your budget. If
you have the money availableyour grocery budget, use cash
and stat or use your debit cardon your checking account
instead. And quit using it onthat credit card. Decide on a
(13:47):
goal for managing your creditcard use. Create a rule to live
by on how you want to use yourcredit cards. Make a commitment
to yourself to act on your goal.
So the rule you would make wouldbe I'm only gonna use my credit
card to pay for something thathas the unforeseen expanse that
(14:08):
my emergency fund can't 100% payfor. So let's say that your car
breaks down is $2,000. You knowyou have $1,000 in your
emergency fund, there's half,maybe you've been building it
up, maybe you have 1500. So youwould use that 1500 How your
(14:32):
savings and then an extra 500 ona credit card. So instead of
putting a 2000 on your creditcard, you put 500 So now it's a
smaller amount to be lessinterest and you'll be able to
pay it off faster. And now wehave to rebuild. your emergency
(14:53):
fund that's gone has slowed downyou're paying off your debt but
a debt only one up 500 insteadof 2000. Do that at that
unforeseen event and make acommitment and you stick to it.
Put your credit cards in yourdresser drawer or someplace
(15:15):
where it's hard to get to? Doyou really need to buy
something, he got to reallythink about it anything over
$100 Anything over $25 that yourwhatever rule you make, you
really need to see for you buyit is think about it. Do you
need it? Why do you need it? Canyou get by without it, if you
(15:39):
never had it before, apparently,you can get by without it. So
write down on a worksheet andthey have a worksheet in this
spreadsheet. So try to cut outthings that you use in your
credit card for reduce things.
And over a period of three,maybe four, six months, you
(16:01):
might see that you're no longerusing a credit card. So you have
one whole month without any newcharges. So that's a good thing.
Now, if you got three or four ofthem, you got to do across the
board for all of them. And youjust need to cut out those
(16:23):
things you don't absolutelyneed. If your goal is to get out
of debt, these are the thingsyou have to do. Avoid the debt
trap, stay get yourself out ofthe debt trap, by quit using
your credit, make the minimumpayment, build your emergency
(16:44):
fund, build it up, pass yourminimum amount, which in this
case is $1,000. Maybe over time,your emergency fund will grow to
2000. So now in the minimumamounts 2000. So you go up to
4000, you take 2000. And youapply it to one of your debt.
(17:05):
Curly, simple, but that's hardto get started. And it's hard to
stay focus, you have to stayfocus. That is how you do it.
I'll be back in one moment withmy final thoughts. If you're
interested in learning about anonline software that helped
(17:29):
myself get out of debt, it doestracking, budgeting, and keeps
track of all your assets and allyour debt. And even tells you
how much and when to transfermoney into your savings account.
And how much and when totransfer money to your debt and
which debts to pay off andorder. First. It's not cheap.
(17:54):
It's a one time payment. But itwill definitely be an
investment, something inyourself and an investment in
your personal financial life. Ifyou're interested, send me an
email at reduce debt increasewealth@gmail.com. And I'll send
(18:16):
you the information about thisonline software. That worked
great for me. Okay, the nextfinal thing I'd like to talk
about is what is debt relief andhow does it work? If you find
you're not making progress onyour debt, no matter how hard
you try, if that's the case, youmight be facing overwhelming
(18:36):
debt. So how does debt reliefwork? To break free of this
financial burden, look into yourdebt relief options. These tools
can change the terms or theamounts of your debt so you can
get back on your feet morequickly. Debt Relief and falls
and wiping the debt outaltogether and bankruptcy,
(18:57):
pending changes and yourinterest rate or payment
schedule the low your payment orpersuading creditors to agree to
accept less than the full amountOh, but debt relief programs are
not the right solution foreveryone. And it's important to
understand what the consequencesmight be. And then they start
talking about bankruptcy.
Bankruptcy is kind of a weirdthing. I from what I read, I've
(19:20):
never been through it. I'venever done it. You gotta go get
yourself a bankruptcy attorney.
And he's not going to tell youanything until he gets his first
some initial fee. And that firstinitial fee might be 500 or
$1,000. And what's he gonna tellyou? Well, before you pay, I'm
(19:42):
just gonna say well, I can filebankruptcy for you. Yeah, we can
do bankruptcy. But once she getsyour fee, he might say, Well,
before we file bankruptcy, youhave to prove that you can't pay
off your debt. So you have to goto a debt counselor and here's a
debt counselor that works withme, who happens to be a for
profit A debt counselor, andthey're in cahoots. And now you
(20:03):
got to pay that fee. And thenthe first thing they tell you is
quit making payments on yourcredit cards. Now you're all
your credit cards, even thoughyou've been making let you know
the minimum payment, and youhave a large amount, but now
they all go into fault. So yourcredit rating tanks, and yet you
still owe all that debt. So yougot all these people calling you
(20:26):
now, okay, now we got the debtcounselor trying to negotiate
better terms for you. Of course,they don't start doing anything
until they get their feet. Soyou've been paying fees that
could have been applied to yourdebt, that's my personal pin.
And then that through over time,they find out well, they were
(20:47):
low your interest rate 1% or 3%.
And it doesn't really make awhole lot of difference. So that
will really help you a lot. Andif they give you debt relief, if
they forgive you on the debt youowe, that becomes income to you.
And you'll get a 1099 for yourwhat it is, and the male, then,
you know, after the end of theyear that they do that, and now
(21:09):
that's gonna be income to you.
And you could owe more incometaxes to either the Feds and
state depending on where youlive. So it doesn't necessarily
solve a problem, and it probablymost likely is going to make the
problem worse. And that so yougot to be in bad shape. And then
(21:30):
you got to be aware of scams, adebt relief downside, there's
people out there that will scanyou and take your money and they
won't do anything for you, orvery little. So you need to
understand the points beforeentering in agreement. What do
you need to qualify? What feeswere you pay what credit which
(21:54):
creditors are being paid, andhow much is your debts and
collection, make sure youunderstand who owns the debt. So
the payments go to the rightedge agency. So make sure you
pay the agency that's collectingthat debt, and not directly to
the first creditor that soldyour debt. Because that screws
(22:15):
everything up, I went throughthat nightmare. So I got a show
notes from the nerd wallet thattalks about all this. But if you
follow my debt relief plan, quitusing credit, make the minimum
payment, get your emergency fundbuild up to a minimum of $1,000.
(22:37):
And then keep building it upuntil you have three to $4,000
Take the excess and apply it toa debt, I would recommend the
highest interest rate first, orif the very first one and the
one that you could possibly payoff. First time, do not cancel
(23:01):
any credit cards that you payoff, keep them open. Because if
you cancel them, that's gonnahurt your credit to income
ratio, because your credit wasgonna go down and it's gonna
hurt your rating down the road,you might get an offer to
transfer the use of balancetransfer or you have 12 or 18
(23:23):
months of interest free, they'renot going to charge you
interest, you just paid thethree to 5% transfer fee. And
then you can have that length oftime that they're offering to
pay that off with no interest,which gives you the opportunity
to apply more money to thehigher interest, credit card or
(23:48):
loan to get it down. So you thatoverall you're paying less
interest, more principal ingetting out of debt faster. That
is the name of the game is gonnabe slow at the beginning he
gonna be creeping along, you'regonna think you can't do it.
(24:10):
It's gonna look like you're notmaking process. Any progress for
six to nine months is gonna be astruggle. You need to reduce
your spending to the bareminimum. only pay for what you
absolutely need. That's thebiggest tip I can give you. If
(24:32):
you're truly want to get out ofdebt, whether it's paying off
your credit cards, or paying offall your debt. Once you get
started. You want to pay off allyour debt. Maybe your goal to
start with is to get your creditcards paid off, then maybe a
personal loan, maybe yourstudent loans, and then maybe a
(24:55):
car payment and then the secondcar payment and maybe your line
of credit on your home then yourforce more. Once you get going,
this becomes faster and faster.
It's slow start. Very slowstart. As you get going, it's
gonna pick up some speed. Theless debt you have, the more you
can say, the faster your savingsand emergency fund is gonna
(25:20):
grow. Therefore, the more you'regonna have to apply the debt,
the debts gonna get smaller.
your emergency fund is going tokeep getting bigger. I think you
see where I'm going. He has tomake the decision. What can I do
without now so I can have morelater.
Hello, I'm your host, Mr. Chuck, I retired
accountant turned truck driver,I reduce my debt in a relatively
short period of time, debtreduction, to achieve financial
freedom takes commitment,confidence, determination.
(00:25):
reduce debt tips, what it takesto pay off credit and tips and
tricks to make the processeasier, do it yourself is the
cheapest way to reduce debt, butmust be able to make tough
decisions and then carry throughwith them. Other than do it
(00:45):
yourself, you can get a creditcounselor he can do. And they
can help you some of them arenonprofit, some for profit, but
then they gonna charge you a feeno matter what they are. So
doing it yourself is a good wayto get started. But the first
(01:06):
thing you must understand is thedebt trap cycle. What is the
debt trap cycle, there's twoways you can fall into this
trap. The first way is what Ithink a lot of people do. You
(01:26):
spend more than what you earn,and use your credit to make up
the difference. Thus, you'reusing your credit cards to buy
those things that you're buying,that you would not been able to
afford just solely based on yourincome. So in order to get out
of the debt trap, you have toquit using your credit cards.
(01:51):
The second way you can fall intoit, you have maybe one or two
credit cards, you pay them offevery month, you think you have
everything under control, thenall of a sudden, you have
balances on your credit cardsand you're struggling to pay
them down. And you're not makingany progress. And what happened?
(02:11):
Well, you didn't have a bigenough savings account,
emergency fund to cover an eventthat was unforeseen that
happened. So you had to use yourcredit cards, or use your credit
to pay for maybe your car brokedown, maybe an appliance in your
(02:34):
home broke down, maybe there wasan accident and somebody got
injured in your families, youhad medical bills, but you
didn't have sufficient savingsto cover it. And you had to use
your credit cards or your creditin order to pay for it. So what
is my debt reduction plan, thefirst thing you got to do one is
(02:58):
realize you have a problem. Sowe you're listening to this, you
already got that part down, thefirst thing you got to do is
quit using your credit cards,quit using credits. The second
thing you got to do is make theminimum payment on all your
debt, quit making extrapayments. And there's a reason
(03:22):
for that. And the reason isnumber three, create an
emergency fund, if you don'thave an a savings account, you
need to have at least a minimumof $1,000. So by making the
minimum payment on all yourdebt, that you free up some
money to start your savingsaccount. If you quit using your
(03:46):
credit, you're making theminimum payment, you're taking
money and you're putting asideand you're creating your
emergency fund. And you need tobuild that up to at least $1,000
to start with. Then once you hitthat $1,000 You continue putting
money in your savings accountuntil you have three to $4,000
(04:10):
above that $1,000. So what'sthat gonna do? Over the time it
takes you to build that up,you're gonna have a larger and
larger emergency fund, in casesome unforeseen event pops up,
keeping you out of the debttrap. Well, once you have that
(04:33):
three or 4000 and access, youtake that extra money and you
apply it to your debt, payingoff the highest interest debt
first, generally credit cards,personal loans, stuff like that.
Then you work your way down thecar loans, and eventually your
(04:53):
first mortgage. That is theproblem most people have is
Falling into the debt trap, andthinking they're able to get out
of it by consolidating theirloans. Again, a consolidation
loan to pay off your creditcards, but you still have the
same amount of debt, it may bemore manageable. But if they
(05:18):
company that gives you theconsolidation loan does not
require you to close down thosecredit cards, you may charge
them up again, and you're rightback to where you started. But
you're worse because now you gotan extra loan, plus all that
credit card debt on top of it.
So you're not making anyprogress, necessarily, by doing
(05:40):
a consolidation loan, if youdon't have the willpower to quit
using your credit cards. If youquit using your credit card, and
you make the minimum payment onthat consolidation loan, over
time, you'll get things undercontrol. But if you're required
(06:02):
to close those credit cards andcancel them, that's gonna hurt
your credit score and the shortrun, but in the long term, it
should improve and come backfrom that. So you avoided your
debt trap is one have anemergency fund, don't spend more
than what you make. So a goodrule of thumb is have three to
(06:26):
six months of expenses saved upthis intention and advice is
sound. For instance, if ahousehold member loses your job,
you have three to six months ofincome saved up to ease
employment gaps. So maybe yougot in a debt trap because you
got laid off, or you quit yourjob for whatever reason, and
(06:46):
you're unemployed for a shortperiod of time. And then you got
another job, that doesn't matterwhat happened, you got into the
debt trap. Or maybe you justspend more than what you make.
So maybe you have a spendingproblem, which has to be
identified. And then you have tocontrol yourself to keep your
(07:09):
spending under control. I hadboth of those problems, I had my
credit cards under control, thenI thought well, I need to buy
this, this and this, my creditcard coming up, built up a
little bit, I was paying themdown. And then I had the car
broke down, I needed tires forthe car, or something happened.
(07:31):
And I had to replace something,I got a bigger bounce on my
credit card. And then it was astruggle to pay them down again,
because I wasn't following myown advice because I didn't know
what it was, at the time. Quitusing credit, specially credit
cards, make the minimumpayments, build up your
(07:52):
emergency fund, continuebuilding it up and then apply
the excess amount in youremergency fund to chosen debt.
Generally speaking, one with thehighest interest rate is you're
better off. But if you have onethat you can pay off, pay that
one off, and you have a you madesome progress. Now you got one
(08:18):
card, that was a zero balance,quit use a net, do not cancel it
because that would hurt yourcredit rating down the road, you
may want to use that if theysend you an offer. And here's a
tip, he may get an offer on thaton paid off credit card to
transfer balance from anothercredit card for three or 5%
(08:42):
transfer fee, but have 12 or 18months of no interest. So what I
did was I paid that 5% Itransferred two or 3000 over and
I made sure it was interestfree. I made the minimum payment
(09:04):
for a while because I had timeand I cut I worked on the higher
interest rate card or creditcard. And then when it came
within six months, I made surethat I got that interest free
one paid off in the six months.
(09:24):
And then a few months later,they send me the offer again.
And I was able to do that overand over. So I'm paying less
interest, which makes you ableto apply more to the principal,
which then you pay off your debtfaster. So that's a tip. Never
(09:44):
cancel a credit card when yougot it paid off, keep it open
and helps your credit rating andyou might get some good offers
in the mail where you can usethat to your advantage. So how
do you go aboutquit using your credit card,
especially if you had creditcards, that were paying some
monthly bills, maybe a gymmembership, maybe you had a
(10:08):
credit card, paying your phonebill, your cell phone bill, or
whatever may be in a streamingbill, where he got first of all,
you got any of those monthlysubscription, you're paying
through that credit card, yougot to get rid of them, either
cancel them and do away withthem if you can, or use your
debit card on your checkingaccount to pay it. We want to
(10:32):
start paying for the money thatwe have in our bank account to
pay our monthly expenses. Soeverything that we pay on the
regular basis, whether it'srent, mortgage, utilities, car
payments, all your credit cardpayments, you got to pay for
(10:53):
those items from your monthlyincome. So how do we quit using
credit cards? For me wasn't tootough. I just took them out my
wallet didn't have it. neverbought anything online. tried
not to use them, put them in adrawer. So I really had to
(11:16):
think, do I really want to dothis, I'm trying to get out of
debt, I'm making progress. Butif I use it, I'm gonna go
backwards. So I was determinednot to use them. So I made it
difficult. So what are someother ways you can help you quit
(11:37):
using credit cards, I have alink in my show notes that what
it's called Easy to rememberguideline help people reduce
credit card debt as the ConsumerFinancial Protection Bureau. And
they have a worksheet in andthis article that you can
(11:58):
download a link that will helpyou find areas where you might
use your credit cards lessoften. So now we know that we
cannot just stop using creditcards. So let's do it over a
period of through three to sixmonths. First thing want to do
(12:18):
is find things that you can useyour credit card less often.
Maybe remove all thosesubscriptions that are coming
out monthly, either cancel them,or put them over on your regular
debit card. If you don't havethe income to pay for them, why
(12:40):
are you paying for if you'restruggling to pay for your rent,
and utilities month a month, whythe hell are these things that's
being charged on your creditcards. So I would highly
recommend if you struggling toget out of debt to cancel
anything that you don'tabsolutely need. Now your cell
(13:02):
phone you probably need anystreaming services, cable TV,
get rid of those type of items.
Maybe you use your credit cardsevery morning when you go to get
your sell for a cup of coffee,words iced coffee or latte or
(13:24):
whatever and something to eat onyour way to work. That's
something you can identify thatyou can put in your budget. If
you have the money availableyour grocery budget, use cash
and stat or use your debit cardon your checking account
instead. And quit using it onthat credit card. Decide on a
(13:47):
goal for managing your creditcard use. Create a rule to live
by on how you want to use yourcredit cards. Make a commitment
to yourself to act on your goal.
So the rule you would make wouldbe I'm only gonna use my credit
card to pay for something thathas the unforeseen expanse that
(14:08):
my emergency fund can't 100% payfor. So let's say that your car
breaks down is $2,000. You knowyou have $1,000 in your
emergency fund, there's half,maybe you've been building it
up, maybe you have 1500. So youwould use that 1500 How your
(14:32):
savings and then an extra 500 ona credit card. So instead of
putting a 2000 on your creditcard, you put 500 So now it's a
smaller amount to be lessinterest and you'll be able to
pay it off faster. And now wehave to rebuild. your emergency
(14:53):
fund that's gone has slowed downyou're paying off your debt but
a debt only one up 500 insteadof 2000. Do that at that
unforeseen event and make acommitment and you stick to it.
Put your credit cards in yourdresser drawer or someplace
(15:15):
where it's hard to get to? Doyou really need to buy
something, he got to reallythink about it anything over
$100 Anything over $25 that yourwhatever rule you make, you
really need to see for you buyit is think about it. Do you
need it? Why do you need it? Canyou get by without it, if you
(15:39):
never had it before, apparently,you can get by without it. So
write down on a worksheet andthey have a worksheet in this
spreadsheet. So try to cut outthings that you use in your
credit card for reduce things.
And over a period of three,maybe four, six months, you
(16:01):
might see that you're no longerusing a credit card. So you have
one whole month without any newcharges. So that's a good thing.
Now, if you got three or four ofthem, you got to do across the
board for all of them. And youjust need to cut out those
(16:23):
things you don't absolutelyneed. If your goal is to get out
of debt, these are the thingsyou have to do. Avoid the debt
trap, stay get yourself out ofthe debt trap, by quit using
your credit, make the minimumpayment, build your emergency
(16:44):
fund, build it up, pass yourminimum amount, which in this
case is $1,000. Maybe over time,your emergency fund will grow to
2000. So now in the minimumamounts 2000. So you go up to
4000, you take 2000. And youapply it to one of your debt.
(17:05):
Curly, simple, but that's hardto get started. And it's hard to
stay focus, you have to stayfocus. That is how you do it.
I'll be back in one moment withmy final thoughts. If you're
interested in learning about anonline software that helped
(17:29):
myself get out of debt, it doestracking, budgeting, and keeps
track of all your assets and allyour debt. And even tells you
how much and when to transfermoney into your savings account.
And how much and when totransfer money to your debt and
which debts to pay off andorder. First. It's not cheap.
(17:54):
It's a one time payment. But itwill definitely be an
investment, something inyourself and an investment in
your personal financial life. Ifyou're interested, send me an
email at reduce debt increasewealth@gmail.com. And I'll send
(18:16):
you the information about thisonline software. That worked
great for me. Okay, the nextfinal thing I'd like to talk
about is what is debt relief andhow does it work? If you find
you're not making progress onyour debt, no matter how hard
you try, if that's the case, youmight be facing overwhelming
(18:36):
debt. So how does debt reliefwork? To break free of this
financial burden, look into yourdebt relief options. These tools
can change the terms or theamounts of your debt so you can
get back on your feet morequickly. Debt Relief and falls
and wiping the debt outaltogether and bankruptcy,
(18:57):
pending changes and yourinterest rate or payment
schedule the low your payment orpersuading creditors to agree to
accept less than the full amountOh, but debt relief programs are
not the right solution foreveryone. And it's important to
understand what the consequencesmight be. And then they start
talking about bankruptcy.
Bankruptcy is kind of a weirdthing. I from what I read, I've
(19:20):
never been through it. I'venever done it. You gotta go get
yourself a bankruptcy attorney.
And he's not going to tell youanything until he gets his first
some initial fee. And that firstinitial fee might be 500 or
$1,000. And what's he gonna tellyou? Well, before you pay, I'm
(19:42):
just gonna say well, I can filebankruptcy for you. Yeah, we can
do bankruptcy. But once she getsyour fee, he might say, Well,
before we file bankruptcy, youhave to prove that you can't pay
off your debt. So you have to goto a debt counselor and here's a
debt counselor that works withme, who happens to be a for
profit A debt counselor, andthey're in cahoots. And now you
(20:03):
got to pay that fee. And thenthe first thing they tell you is
quit making payments on yourcredit cards. Now you're all
your credit cards, even thoughyou've been making let you know
the minimum payment, and youhave a large amount, but now
they all go into fault. So yourcredit rating tanks, and yet you
still owe all that debt. So yougot all these people calling you
(20:26):
now, okay, now we got the debtcounselor trying to negotiate
better terms for you. Of course,they don't start doing anything
until they get their feet. Soyou've been paying fees that
could have been applied to yourdebt, that's my personal pin.
And then that through over time,they find out well, they were
(20:47):
low your interest rate 1% or 3%.
And it doesn't really make awhole lot of difference. So that
will really help you a lot. Andif they give you debt relief, if
they forgive you on the debt youowe, that becomes income to you.
And you'll get a 1099 for yourwhat it is, and the male, then,
you know, after the end of theyear that they do that, and now
(21:09):
that's gonna be income to you.
And you could owe more incometaxes to either the Feds and
state depending on where youlive. So it doesn't necessarily
solve a problem, and it probablymost likely is going to make the
problem worse. And that so yougot to be in bad shape. And then
(21:30):
you got to be aware of scams, adebt relief downside, there's
people out there that will scanyou and take your money and they
won't do anything for you, orvery little. So you need to
understand the points beforeentering in agreement. What do
you need to qualify? What feeswere you pay what credit which
(21:54):
creditors are being paid, andhow much is your debts and
collection, make sure youunderstand who owns the debt. So
the payments go to the rightedge agency. So make sure you
pay the agency that's collectingthat debt, and not directly to
the first creditor that soldyour debt. Because that screws
(22:15):
everything up, I went throughthat nightmare. So I got a show
notes from the nerd wallet thattalks about all this. But if you
follow my debt relief plan, quitusing credit, make the minimum
payment, get your emergency fundbuild up to a minimum of $1,000.
(22:37):
And then keep building it upuntil you have three to $4,000
Take the excess and apply it toa debt, I would recommend the
highest interest rate first, orif the very first one and the
one that you could possibly payoff. First time, do not cancel
(23:01):
any credit cards that you payoff, keep them open. Because if
you cancel them, that's gonnahurt your credit to income
ratio, because your credit wasgonna go down and it's gonna
hurt your rating down the road,you might get an offer to
transfer the use of balancetransfer or you have 12 or 18
(23:23):
months of interest free, they'renot going to charge you
interest, you just paid thethree to 5% transfer fee. And
then you can have that length oftime that they're offering to
pay that off with no interest,which gives you the opportunity
to apply more money to thehigher interest, credit card or
(23:48):
loan to get it down. So you thatoverall you're paying less
interest, more principal ingetting out of debt faster. That
is the name of the game is gonnabe slow at the beginning he
gonna be creeping along, you'regonna think you can't do it.
(24:10):
It's gonna look like you're notmaking process. Any progress for
six to nine months is gonna be astruggle. You need to reduce
your spending to the bareminimum. only pay for what you
absolutely need. That's thebiggest tip I can give you. If
(24:32):
you're truly want to get out ofdebt, whether it's paying off
your credit cards, or paying offall your debt. Once you get
started. You want to pay off allyour debt. Maybe your goal to
start with is to get your creditcards paid off, then maybe a
personal loan, maybe yourstudent loans, and then maybe a
(24:55):
car payment and then the secondcar payment and maybe your line
of credit on your home then yourforce more. Once you get going,
this becomes faster and faster.
It's slow start. Very slowstart. As you get going, it's
gonna pick up some speed. Theless debt you have, the more you
can say, the faster your savingsand emergency fund is gonna
(25:20):
grow. Therefore, the more you'regonna have to apply the debt,
the debts gonna get smaller.
your emergency fund is going tokeep getting bigger. I think you
see where I'm going. He has tomake the decision. What can I do
without now so I can have morelater.
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