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Personal Finance From a Biblical Perspective

Extreme Ways to Clear Your Debt Quickly

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[The following is a guest post discussing a few extreme ways to pay off your debt.]

Skipping your morning Starbucks and quitting eating at restaurants won’t clear your hefty amount of debt. It is possible, even if you owe tens of thousands in debt repayments, to get out of debt within a year or two, but it will require some life-changing sacrifices.

Here are some of the most extreme yet effective things you can do if you’re serious about clearing your debt quickly.

Debt Extreme

Sell family heirlooms

If you’ve inherited valuable family heirlooms, such as jewelery, now is the time to cut your sentimental ties. It may be harsh and ruthless, but imagine what your late grandmother would make of your current financial situation.

She would probably advise you to sell that old jewelery box full of her past treasures and clear your debt so you and your family can live happy and stress-free lives.

Get rid of your second car

Or both cars, if you’re really serious. If you absolutely need a car, then sell yours for a model with a smaller engine so you can save on fuel and insurance. If you have two cars, then you should at the very least get rid of one. Seriously consider whether you really need them both. Are there ways you can get around having just one car, or not even owning one at all?

If you live in an area that’s well connected in terms of public transport, or has a lot of amenities within walking distance, now is the time to sell your car. It’ll take a huge chunk out of your debt and dramatically reduce the time it takes you to clear it, so it’s something you really need to consider.

Downsize your home

Moving house into something much smaller and cheaper is perhaps the most extreme step you can take towards getting out of debt. A quick sell will provide you with cash, so you can buy a much smaller house outright with money to spare. The spare money can be used to repay some of your debt, whilst the money you’ll save on monthly mortgage repayments will also contribute to paying it off.

If you’re not quite at the stage of desperation to consider these extreme methods, then you need to take steps to ensure your debt doesn’t spiral out of control to the extent that you end up having to implement our tips. To find out how you can start managing your debts, check out this website for some expert advice.

photo credit: Freedigitalphotos.net

Are You Preparing for the Next Recession?

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This is a bit of a depressing topic, isn’t it? After all, we’re in the middle of summer and it’s just about the peak of the high vacation season, right? Why try to throw cold water on everyone’s good times?

Three reasons:

  1. The economy is already showing signs of slowing,
  2. The presidential election will be over in three short months, and no matter who wins it’s anyone’s guess what will happen after that, or even
  3. I’m a mean person who’s trying to rain on everyone else’s summer fun.

I’m not sure that we ever really got out of the last recession, or if the last one wasn’t just an uglier continuation of the one before that, but the reality is that we have a downturn every few years. Since the last one officially ended sometime during 2009, 2013 seems like a good guess on the arrival of the next one. That gives us about a year to prepare, and that’s Reason #4 why I’m writing about this topic.

In the strange way that life works when we’re prepared for trouble, it never seems to happen! So how do we prepare for the next recession?

Coming Economic Recession

Avoid (or Tone Down) Major Purchases

Major purchases do two things that hurt us when the economy turns bad: 1) they drain savings, and/or 2) they put us in debt. I’m talking about cars, houses, furniture, boats—anything that has the potential to cost a couple thousand dollars or more.

Before making any major purchases, ask yourself the following questions:

  1. Do I actually need this item, or do I mostly just want it?
  2. Will this item put money in my pocket? (for example, a car for work, or a computer for business)
  3. Were I to lose my job six months from now, will I regret having made this purchase?
  4. Even if it’s something we truly need, do we have the ability to buy it without draining our savings or adding more debt?
  5. Would a decent second-hand model get the job done?

Major purchases can’t be easily undone—especially in recessions.

Find Income Sources Outside Your Job

For most of us, the biggest threat from recessions is the loss of a job. One of the best ways to deal with this (in advance) is by creating income sources outside your job. It’s not just a matter of adding more income, but also of exploring and developing other career directions. This is especially important if the business or industry you’re in is already wobbling.

{Learn how to honor God in the workplace}

Working outside your job will give you the experience and business contacts and references that might enable you to transform a side job to your next full time position. Get your foot in the door before the economy takes another slide.

Another option is to start a side business. You can start it and grow it while you’re still on your employer’s payroll, but if you lose your job you can ratchet the business up to full time.

Say NO to New Debt

The last thing you ever want to do is to create financial obligations during good times that you’ll have to pay for during not-to-good times. This is what drives foreclosures and car repossessions. If you want to avoid that fate, don’t add any new debt.

And while you’re at it, start working on paying off old debt. Debt is a big enough pain during good times, but its pure excess baggage you don’t need to be lugging around during the bad ones. If you lose your job, you can always cut expenses quickly, but debt takes time. You have that time right now.

Build Up Those Savings

At a minimum, a fattened bank account can give you breathing room to deal with a sudden job loss or other financial calamity. It enables you to face problems without having to borrow from banks, or beg from family. Start working on increasing your savings now.

Remember those major purchases I recommended that you not make? You can add to your bank balance with the money that you didn’t spend on them. And the extra income from your side job or side business can go right in the bank too. A year from now you could have a few months living expenses sitting in the bank, and that’ll feel good.

Get In Shape

This reads like my most ridiculous preparation, but actually it isn’t. In fact, it’s far from it. Exercising, dieting and improving your overall physical condition are always important, but never more than when hard times hit.

Consider:

  • If you’ll be in the job hunt sometime next year, you’ll be glad lost a few pounds and toned up a bit. When jobs are hard to get, they often go to those who look the most capable of doing them.
  • In the event you have to juggle two or three income sources, you’ll need the increased stamina getting in shape can bring.
  • The healthier you are, the less you’ll need to spend on healthcare, and the less time you’ll lose from work.
  • Concentrating on your health could be the significant distraction you need that will boost your mental and emotional state at a time when finances are getting difficult.

A recession will come whether or not you’re prepared. But if you are prepared, there’s a good chance it won’t be your recession! And if it doesn’t come, you’ll be better prepared for what ever else you want to do in your life. Like that run for financial independence you may have been putting off for a few years.

photo credit: Freedigitalphotos.net

Keys To Finding The Right Debt Consolidation Company

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If you’re struggling with debt, you may be able to dig yourself out of the hole by self-discipline and paying off debt with every free dollar you have.

However, if you’re carrying a lot of debt, professional debt consolidation help may be the fastest and cheapest way to resolve your debt.  When considering professional help you want to find the best type of debt consolidation for your situation  and the best debt consolidation companies to work with.

It’s also very important to remember that even if you find a good solution for getting out of debt, unless you address the reasons you accumulated debts, you’re likely to find yourself running up debt again.

The right way for you to resolve your debt depends on:

  • The assets you own
  • How much you owe
  • What you can afford to pay toward your debt each month
  • Your credit rating

Good Credit Debt Consolidation

If you have equity in a home and your credit is strong, look into:

1.   Cash-out Refinance: Consolidating debt through a cash-out refinance can be a great solution. Interest rates are at historic lows, so a cash-out refi will lower your rate on most any debt you have.

2.   Unsecured Personal Loan: Interest rates are higher, in general, for a loan that has no collateral. If your credit is excellent and the debt you wish to consolidate is high, however, you should check with banks, credit unions, and peer-to-peer lenders.

Bad Credit Debt Consolidation

On the other hand, if you don’t have a valuable asset to use as collateral and you don’t have strong credit, then you have to look for another solution.

The following two options don’t really consolidate your debt, they consolidate your payment. Unlike the debt consolidation loans mentioned above, where your creditors are paid off and you have a new lender, in these programs you still owe your original creditors until you complete the program.

  • Consumer Credit Counseling: Credit counseling works in two parts. First, your overall finances are analyzed and your budget is reviewed. If you don’t have a budget, your credit counselor will work with you to establish one. If high interest rates are one of your main problems or if you need a slight reduction in the size of your monthly debt payments, the program’s Debt Management Plan could benefit you greatly. Your one monthly program payment will speed up the time it takes to be debt free.
  • Debt Settlement: Debt Settlement is a more aggressive form of “debt consolidation,”designed for people in a serious financial hardship. In a debt settlement program, you choose to stop making monthly payments to your creditors, to reach reduced, lump-sum settlements with them. Because you’re not making a monthly payment, your credit rating/score takes a big hit. However, debt settlement has lower costs than credit counseling. It gets you out of debt faster and at a lower cost than any way other than bankruptcy.

Choosing the Best Debt Consolidation Company

The steps you need to take to find a reputable firm to help are similar, whether you’re consolidating debt from a strong position or a weak position. However, you need to exercise a higher degree of caution, when you are in a weak position. Unfortunately, predators come out to take advantage of those who need the most help. They know that a desperate person is likelier to let down his guard.

To protect yourself and to find the best debt consolidation company, follow these six basic tips:

1.   Look for accreditation-  If you are looking at credit counseling, choose a firm that is a member of the National Federation of Credit Counseling (NFCC ). The best debt settlement companies are members of the American Fair Credit Council (AFCC).

2.   Find out how long they’ve been business– Scammers tend to be fly-by-night firms. They are here today and gone tomorrow. it is a good sign when firms last a number of years. It also gives you a longer track-record on which to judge their performance.

3.   Read your paperwork– It seems pretty obvious you should carefully read any agreement you might sign. Sadly, however, it is not uncommon for people to skip this important step, either due to the complex legalese used in agreements or out of sheer laziness.

4.   Avoid advanced fees– Although professional debt consolidation will have fees associated with it, your fees should not be charged up-front. It is illegal for debt settlement firms that telemarket to charge fees upfront.

5.   Avoid high-pressure sales tactics- Salespeople who employ high-pressure sales techniques do so because they are effective with some customers. Don’t be one of them. It is a red flag if signing up for the program is more important to the salesperson than it is to you.

6.   Shop Around– No matter the product or industry, shopping around is smart. There is no better way for you to find the best fit for your goals than to speak to multiple companies. Not only can you compare costs, but hearing more than one presentation allows you to judge whether you’re receiving consistent information or if one company is over-promising.

photo credit: FreeDigitalPhotos.net

Considering Bankruptcy To Pay Off Your Debt? Here Are Some Other Options

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The topics of debt and bankruptcy are often highly debated issues, with “experts” on both ends of the spectrum. Some will tell you that if you ever have a small amount of trouble paying off debt, then bankruptcy is your answer! On the other hand, there are some who say that bankruptcy is equivalent to theft and should never be allowed.

As with most things, the answer lies somewhere in between. However, there are plenty of things that one can do before choosing to file for bankruptcy…

Cut Out All Unnecessary Expenses

If you are contemplating bankruptcy, the first thing that you need to do is evaluate your expenses. I have talked to many people over the years who are thinking about filing for bankruptcy, while at the same time enjoying many of the luxuries of life.

If you are in such a desperate situation that you are willing to turn your back on the agreements that you have made in the past, then you should first be willing to strip all of the extras out of your life.

To have a $200/month cable bill, $350/month dining out, paying tons of money for your kids to learn every instrument and sport known to man, and new(ish) cars for everyone in the household, and then claim to be too broke to make minimum payments is a joke!

Cut your budget down to the bare essentials and then attack your debt with everything that you have. This method takes sacrifice, but it will also help you to see what is really important in your life.

Sell Your Assets

If you are in a situation where your debts are growing, and it seems like you have no way out, take a financial inventory. When you want to know how to pay off debt fast, you need to look at all avenues!

Check to see if there are any accounts which you can liquidate – you may want to include your emergency fund in that analysis as well. Also, if you own property or other things of value, you may consider selling them in order to pay off a huge chunk of debt at one time.

It may be hard to sell your home or other treasured possessions, but this may provide the shot in the arm that your debt repayment plan desperately needs. Of course, if your asset is serving as collateral for a loan, you have to see how much you will get after paying off this obligation.

Earn More Money

This is another weapon in your debt repayment arsenal, which is often overlooked. You can first try to earn more money on your current job. Ask for a raise, or try to work overtime. If those options don’t work, then it may be time to search for a higher paying job!

Also, try to use your skills, hobbies, and passions to make money. You can sell the things that you design (I know several people who make good money by designing and selling jewelry), give lessons, or even start a website/blog devoted to your passions!

Talk to Your Creditors

In many cases your creditors would rather get some of the money that you owe them, rather than nothing! Therefore, they are usually willing to work out an agreement with you in order to get your debt paid. This normally happens in one of two ways.

Debt Settlement

This is an option where your creditors agree to accept a reduced amount – this can sometimes be 50% or less of the original amount due. If there is no chance that, given your current financial situation, that you can pay off the full amount that is due, this may be a viable option for both parties, then debt and bankruptcy will be a thing of the past.

Hardship Program

Many creditors have some sort of “hardship program”, which they offer to consumers who are facing financial difficulties. If, based on your overall financial situation, you can pay off your debt – but you just need a temporary break – your creditor may choose to lower your minimum payments and/or your interest rate for a certain amount of time.

For installment loans, sometimes the bank will take a few of the payments that are currently due (or due over the next few months), and add them to the end of the loan period. If you are behind on your payments at the time, this will allow you to be current in their system. Sometimes, they will actually structure these payments so that you are given a couple of months of breathing room.

These temporary hardship programs – if offered by each creditor – may be enough to allow you to take control of your finances and avoid bankruptcy.

Bankruptcy As A Last Resort

After considering and trying all of these methods, you may still be in a position where it is impossible to pay off your debts. Many times this is due to the debt that remains after a series of medical emergencies, or even when an irresponsible spouse leaves their partner with hundreds of thousands of dollars in debt! In these cases, bankruptcy may be the only way to have a normal life.

Unfortunately, it is impossible to make general statements on an issue this important and complex. Therefore, you must consider your specific financial situation with an expert before making any decisions.

photo by digitalart

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