Discover Debt Freedom!

Get Out of Debt and into Wealth

Archive for June, 2008

Greener Pastures Hosts the Carnival of Personal Finance #159

Written by admin on Jun 30th, 2008 | Filed under: blog carnivals

Thanks for Greener Pastures for hosting this week’s carnival.  Here are a few of the posts I liked!


6 Steps For Starting Short Term Savings

Written by Toi Williams on Jun 30th, 2008 | Filed under: mindset, saving

Short term savings are very important for life’s little hiccups, such as repairs to your home or medical bills for an unexpected illness, but many people are unprepared for these minor emergencies because they do not have any savings in the bank to use for these issues.  Unexpected expenses are a major cause of people falling into debt that they cannot get themselves out of or credit card bills that continue to mount each month because of the steep interest rates charged to the purchases made with the credit card.  With six simple steps and a little bit of time, you can remedy your situation and begin to build up your short term savings account.

1.  Add Up Your Monthly Expenses
Before beginning a savings program, you must first calculate how much you are spending each month on all of your normal expenses.  This should include both large expenses, such as your monthly mortgage or rent payment, and small everyday expenses, such as paying for gas to get back and forth to work.  It is important to be honest about the amount you are spending for each item in order for the calculation to be accurate.

2.  Multiply This Number By 6 
Multiplying the number reached in the previous calculation by six will give you the total amount of money needed to maintain your current lifestyle for six months.  This is the recommended amount of savings that every person should have in the bank according to many financial experts.

3.  Add Additional Funds For Unexpected Surprises And Upcoming Expenses
It is always a good idea to pad your short term savings account with a little extra just in case you’ve forgotten anything in your previous calculations.  If you know that your child will be needing braces in the next few years or that you will need to replace the water heater in your home, add the cost of these items into your short term savings calculation as well to ensure that the money will be available when it is needed.

4.  Comparison Shop For A Place To Stash Your Cash
Different banks and different banking products will often offer different interest rates for placing your money into a specific type of account.  Because your short term savings will (hopefully) remain in this account for a significant period of time, it is important to get the best return on the money being held in the account.  Shopping around for the best interest rate will help your money grow more quickly and give you an even larger cushion for unexpected life events.

5.  Begin Making Payments Into Your Short Term Savings Account
Once you have determined how much you will need to save and where the best place to put your money will be, it is time to begin an aggressive savings plan to reach your calculated savings goal.  Paying into your short term savings account should be treated like paying a monthly bill and money should go into the savings account before you begin spending money on entertainment or unnecessary luxury items.

6.  Don’t Touch The Account
The most important part of starting a savings account is actually saving it.  After your savings goal has been reached, your short term savings account should remain untouched unless there is an actual emergency, such as the loss of a job, an illness that prevents you from working, or emergency repairs that need to be completed quickly.  After all, that is what the money has been saved for.


Facing A Financial Disaster? Here Are Some Steps You Should Take

Written by Toi Williams on Jun 28th, 2008 | Filed under: mindset, Uncategorized

There will come a time in many people’s lives when no matter what they do to extract themselves from debt, the debt keeps piling up and they keep falling farther and farther behind.  They may find themselves facing hopelessness and do not know what steps they could be taking to make their situation any better.  Financial disasters can strike anywhere, but knowing what steps to take when a financial disaster hits can mean the difference between saving your financial situation and losing everything that you have worked so hard for.

Do Not Be Afraid To Ask For Help

If you are facing a financial disaster, the first thing that you should do is check your pride at the door and talk to someone about your financial situation.  This could include trusted family members, financially savvy friend, or a debt counselor.  It is important to get a new prospective on the issues that you are facing because what you have tried in the past has not worked for you.

If you are having trouble paying your bills because of a legitimate emergency, such as the loss of a job or medical emergency that leaves you unable to work, it is important that you contact your creditors about your situation as soon as possible before you become too far behind in your payments.  Many creditors will be willing to work with you if you have faced a genuine emergency and will talk with you about perhaps changing your payment plan or even suspending your payments for a period of time until you can regain your financial footing.

Be Honest About Your Situation

Many people that find that they are facing a financial disaster are often in denial about their financial situation.  They lie to themselves and to others about their financial situation in order to save face or avoid facing the reality of the amount of trouble that they are in.  Avoiding the situation and pretending that the problems do not exist is the worst thing that you can do in your situation.

It is important to take a good hard look at your financial situation and start taking immediate action to resolve the situation as fast as possible.  Although it may be hard to cut your spending or give up things that you enjoy, these are actions that you may have to take to save yourself financially.  If you are facing a financial disaster, the first thing that you must do is stop compounding the damage by spending money on unnecessary items.

Solving The Problem

The steps that need to be taken to remedy your financial situation will depend on the circumstances surrounding the financial issue and how deeply you are in debt.  In some cases, professional help may be needed to assist you in extracting yourself from your financial situation, such as the help of a lawyer or a debt counselor.  These professionals are trained to help individuals extract themselves from debt and the advice that they give you will generally outline the best way to avoid financial disaster and begin repairing your finances for the future.


Money Merge Accounts: A Good Idea?

Written by Toi Williams on Jun 26th, 2008 | Filed under: Uncategorized

A money merge account is a special type of home equity credit line for your home.  Your paycheck is directly deposited into the account at the end of each pay period and the account determines the distribution of the money from your account.  The balance of the home equity account is paid first, with the remainder of the money deposited going towards the interest and principal of the person’s home mortgage.

The person holding the money merge account uses the home equity line to pay all of their bills and incidental purchases to ensure that they will be paid for once the paycheck is deposited into the account, but any extra money in the account is immediately applied to paying down the person’s mortgage as quickly as possible.  There are pros and cons to using a money merge account and people should understand what they are before making a decision on whether or not to open a money merge account.

The Pros

A money merge account is one of the fastest ways to pay down your mortgage and build equity in your home.  Any extra money from your paycheck is applied directly to your mortgage, effectively preventing you from spending the money on frivolous items that you probably do not need.  Because every purchase is going onto the home equity account, it encourages people to be frugal with their money and only spend on items that are really necessary to maintain their regular lifestyle.

The Cons

Money merge accounts do not do anything for a person that they could not do for themselves with some basic discipline.  If a person really wants to apply more of their money towards the interest and the principal on their home mortgage, all they have to do is write the check for their mortgage payment for the higher amount.  Money market accounts also add fees to the account for the privilege of using the account, routinely adding about $20 per payment depending on the balance of the loan.

Having the money from your paycheck automatically distributed by the money merge account can also cause problems in the event of an emergency.  If you need to send money to your parents or your children quickly to help them handle a financial emergency, it is a much greater hassle to try and obtain money from your money merge account than it is to go to a typical checking account and extract the money to send to your loved ones.  Whether or not to choose a money merge account depends on the situation of the mortgage holder, but in many cases, a money merge account is unnecessary if the person has financial discipline.


A Practical Method To Avoid Debt

Written by admin on Jun 25th, 2008 | Filed under: Uncategorized

Today there are millions of people who are trying to find ways to be released from the worry of uncontrollable debt. If you are one of the people questioning how to get out of debt or maybe even how to avoid the debt all together, there may be a way to help accomplish this goal. Many of those people who are worrying about their finances are currently in debt because of out of control credit card use or simply living extravagantly and above their means.

In this atmosphere of excessive debt, it is no surprise that there are so many “experts” who are offering to help you get out of debt and to manage your finances better. Each one of them is quick to sympathize with your struggles with debt and say that it is not your fault. They also claim to be the only system that truly works in a “fool-proof” manner. All of these money managers are in this type of business to provide you with a solid solution to your financial problems. It is their belief that they are the only ones who can present effective strategies to help those who are in deep debt by using services such as debt consolidation. It is, however, a firm fact that some of them will only serve to separate you and your money and entrench you more deeply.

It is a reality that there are many who are living from paycheck to paycheck and not making any headway toward accumulating any type of savings. Can this mean that there is a record of irresponsible spending or that they are just trying to live “within their means?”

If you are living within your means, it could mean that you are spending everything you make, but no more than that amount. If you are one who is living above your means then you are probably going to find that you are creating a pile of debt, because you won’t have enough income to cover your expenses. In this type of situation, there will be no chance to give a thought to having any savings.

Another term that may not be so familiar could be living below your means, which will provide the opportunity to set aside a little savings without dipping into your funds for your normal living expenses. This could just be the right way to help you get out of debt and continue to avoid any further uncontrolled debt. If you like to live a rather frugal lifestyle and search for bargains in food, clothing, and most of the other necessities of life then you have a head start in living below your means. By avoiding the extravagances of the consumer oriented life that so many do exist in today then it will be possible for you to save a little money and avoid having to seek debt relief from third parties.

The secret to accumulating real wealth may be the ability to live a frugal lifestyle. Many millionaires say that after making the decision to live a cheap and simple life they invested their savings to receive a big profit.

Living below your means will employ a strategy of decisions on whether you want to spend all your income or put some away for savings. The more savings you can accumulate, the more you will have to get you through the rough times. When you spend less for necessities, you will have more to save to spend on some needed object without going into debt.


Convenience Charges: Another Hidden Fee That Can Cost You Big

Written by Toi Williams on Jun 25th, 2008 | Filed under: Uncategorized

In recent years, a number of different companies have decided to allow their customers to pay their bills using means other than the traditional mailing in a check.  Many companies will now allow a person to pay their bill online through their website or over the telephone with a customer service representative to ensure that their bill is paid on time.  What many people do not know is that paying your bill by using one of these methods can cost you more money than you may think.

Some of the companies that will allow you to pay your bill by using other methods will charge you an additional fee for using the service.  Often billed as a convenience fee, these companies charge you for the convenience of paying your bill by any method other than mailing in a check to their accounting department.  Although paying your bill online means less work for the employees in the accounts receivable department, these companies have decided that charging people a fee for using this service is a good way to extract more money from the gullible and those that do not read terms and conditions before they make a decision.

The Fee And How To Avoid It

The fees charged by these companies will vary from company to company.  The average cost of paying your bill by a method other than regular mail is generally $5 or $10 dollars per occurrence, meaning that if you pay your monthly bill online for an entire year, it will cost you an additional $60 to $120 in fees.  Some companies will only charge for payments that are made over the phone while some other companies will only charge for payments that are made online.

To avoid these ridiculous fees, it is important to always read the terms and conditions for an account.  If a fee is charged for the actions of an account holder, it must be disclosed to the account holder in some way so that they are aware of the fee and why it is being charged.  Sometimes the fee will be disclosed when the person attempts to submit the payment information online or at the end of the conversation with the customer service representative.  If there is still enough time to get the payment to the company by mail on time, do not be afraid to hang up the phone or log out of the website and make the payment by mail to avoid the fee.


Expired Debt: How To Stop The Harassment

Written by Toi Williams on Jun 24th, 2008 | Filed under: Uncategorized

In today’s debt ridden society, many individuals have experienced the call of a debt collector telling them that they must pay a debt that they owe.  Many debt collectors are trustworthy and respectful of the individuals that they are contacting, but some companies try tricks to get people to pay debts that they are not legally obligated to pay, such as expired debts.

What Are Expired Debts?

Expired debts are debts that are more than seven years old that have had no activity on the account for that time period.  Legally, a person is not required to pay these debts because they are past the statute of limitations for collections.  This law was put into effect to stop the debt collection agencies from harassing individuals for debts that were so long ago that there is virtually no way of validating the debt.

Although attempting to collect a debt that is past the statute of limitations is against the law, some unscrupulous debt collection agencies attempt to collect on these debts anyway.  These companies are depending on the person’s ignorance of the law to get away with charging them for the expired debt.  Since these debt collection agencies have nothing but time invested in the account, each expired account that they get people to pay is pure profit for the debt collection agency.  Many of the debt collection techniques that are used to attempt to collect an expired debt are more aggressive than when trying to collect a legitimate debt because the collection agency is trying to scare the person into paying the debt quickly.

What Can You Do About It?

Federal law states that a person has no obligation to pay a debt that is more than 7 years old if there has been no activity on the account.  If a debt collector attempts to collect a debt that you know is past the statute of limitations for collection, inform the debt collector that you know the debt they are trying to collect is no longer valid and if they continue to contact you about the expired debt, you will report them under the Fair Debt Collection Practices Act.

If representatives from the debt collection agency continue to contact you about the expired debt, or you find that they have changed the date for the last activity on the account to extend the time period that the debt is valid, make good on your threat and report them under the Fair Debt Collection Practices Act.  You can even take the debt collection agency to small claims court to force them to stop contacting you about the debt, make them remove the debt from your credit report, and pay damages to you for harassing you about a debt that was not valid for collection.


Carnival of Personal Finance #158

Written by admin on Jun 23rd, 2008 | Filed under: blog carnivals

Mrs. Micah hosted the Carnival of Personal Finance #158 . Thanks Mrs. Micah for featuring our post about 4 budget killers.


Looking For Life Insurance? Better Learn The Language

Written by Toi Williams on Jun 22nd, 2008 | Filed under: Uncategorized

People that are looking for life insurance to protect their family in the event of the unthinkable often find that they cannot understand the common terms used in the life insurance industry.  Without being able to understand the terms that are being used by the industry to sell you on a particular policy, you will not be able to make an informed decision about which life insurance products are best for your needs.  Below are some common life insurance terms and their meanings.

Term Life Insurance

These life insurance policies are valid for a particular time period, generally 10 or 20 years, and then expire if the policy is not renewed or a new policy is not purchased.  During the term that the insurance policy is in effect, the person is protected in the event of an accidental death or a death from natural causes, but the policy is generally invalidated if the person dies from their own actions, such as a suicide or alcohol related accident.

Group Life Insurance

Group life insurance policies are aptly named because they cover a group of individuals, generally the employees of a company.  The premiums for these insurance policies are often lower because of the large pool of people paying into the life insurance policy.  The premiums paid by the people who are younger generally offset the benefits paid out for the deaths of the older individuals covered by the policy.  For additional coverage, the people covered by the group life insurance policy can purchase individual insurance policies without jeopardizing their coverage under the group life insurance policy.

Joint Life Insurance

A joint life insurance policy is a life insurance policy that covers two people at the same time, generally a husband and wife, and pays out the benefits upon the death of the first person.  These policies are helpful to spouses that desire coverage but to not want to have two life insurance policies, but can be difficult in the event of a divorce.  Joint life insurance policies can be purchased as either a term or permanent life insurance policy.

Life Insurance Riders

Life insurance riders are the additional insurance products that are added to the life insurance policy at the time that the life insurance policy is issued.  Some of the most common life insurance riders include a premium waiver that allows the covered individual to stop paying the premium on the life insurance policy if they become disabled and an accidental death rider that pays double the benefit if the person dies in an accident.


Compare and Save When Refinancing Your Mortage

Written by admin on Jun 22nd, 2008 | Filed under: Uncategorized

If you set out to go find a mortgage for a refinance, you are going to be hit with dozens of different options in lenders, interest refinance rates, loan types, and the like. You have to choose between fixed and variable, 15 and 30 year, and find the lender that will give you the best rate. Typical refinance advice is to simply visit three different lenders and see what interest rates that you can get from them, but in the information age, there are much better options.

There are a number of sites, such as RefinanceGuide.com, that have arisen which will help you filter out through some of the white noise, and get the cold hard facts as to which lender will be able to give you the best interest rate. These sites will let you search across dozens of different lenders for both mortgages and other types of loans. Instead of just visiting 2 or 3 lenders yourself, their directory will allow you to search through dozens of different lenders in half the time.

It’s absolutely critical to get the best interest rate on your mortgage. The amount of interest you pay over the course of a thirty year loan will vary dramatically even if the interest rate is just a quarter of a point lower. For example, the difference a 6.00% APR and a 6.25% APR on a $200,000 loan over the course of 30 years is a whopping $17,461 over the course of a loan. That could buy you a new car!

Always make sure that you get the best deal when shopping for a loan. Pay cash in every circumstance that you can, but we know that’s not always possible, especially when it comes to real estate. So if you do have to get a loan, make sure that you get the best deal you possibly can by searching on one of the many loan comparison websites online.