If you
are overcharging, overleasing and in denial about your debt, this program is for
you!
STEPS, CALCULATORS,
TOOLS AND MORE
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From how to pay off credit card bills to how much you
should spend every month based on your salary, our financial management
experts share their tips for getting out of debt. |
PHASE 1
Give yourself one month to complete these steps—you can do one a week!
Step
1: How much debt do you really have?
It's time to get real about your debt. Do you know how much living with debt is
costing you?
Part 1: Chart Your Debt
It's time to get real about your debt and answer the question: How much debt do you
have? Many people don't know—and even if they do know, often their spouses
don't. To get yourself on the road to repayment, expertsl agree that it is
crucial to know how much debt you're carrying and at what interest rates. Pull
out all your bills and print out the chart below to see how much debt you really
have. Once you know your total debt, you can start paying it down!
Part 2: Get Your Credit Score
You can get one free report each year from each of the three credit bureaus—so
three total. The smart thing to do is to get one every four months, that way you
can make sure (for free) that you haven't been a victim of ID theft.
It's very important to know your credit score. Once you start paying down your
debt, your credit score will rise. A higher credit score means lower interest
rates.
Part 3: Prioritizing Payment
Necessities first: These are the things that you absolutely need to live.
You need your house, so it's important to pay the mortgage or rent. You need it
to be warm in the winter and lit year-round, so it's key to pay the utility
company. You need a phone, so Ma Bell gets paid. You need transportation to
work, so you make the car payment. If you owe child support, it's a must to pay
not only because that's part of being a good parent, but because not paying can
get you thrown in jail. And finally, because getting in to see the doctor these
days—particularly if you have no health insurance—requires paying the bill
then and there, you take care of medical emergencies.
Uncle Sam second: If you have the money to pay your taxes immediately,
the IRS will generally work with you to come up with a schedule of payments. By
all means, though, file your taxes when they are due. Not filing can result in
penalties and interest of up to 25 percent of what you owe.
Most student loans are backed by the government. That means that, like back
taxes, the government is allowed to come after these loans in a way that other
creditors aren't. If you're delinquent in paying your back taxes or student
loans, the government can seize your tax refunds and garnish your wages and, in
some cases, your Social Security benefits. Fortunately, the government also has
a number of solutions for people who can't afford to make their student loan
payments, including putting those loans on hold if you're out of work or
stretching out (and thereby reducing) the amount owed.
Everything else third: All of your other debts—bank-card debt,
department store debts, payments for furniture and appliances—are back-burner
debts. That doesn't mean you shouldn't pay them. You borrowed the money; of
course, you should try to pay them. But if you're in a situation where you know
that not every creditor is going to get paid, these are the ones you put on
hold.
Step
2: Track your spending and find extra money to pay down debt
Time to cut back on the extras and find big savings where you least expect them!
It is time to start paying you.
Part 1: Find out
where your money is going?
Now that you know how much debt you have, you need to find out where your money
is going! If you put just $10 a day towards your debt rather than
spending it on fancy cups of coffee, cigarettes, bottled water or fast food, in
one year you could put $3600 towards your debt!
Part 2: Track down your daily expenses.
Every day, you may be needlessly spending money on little things that you could
be using to pay down your debt. Keep a diary everywhere you go tomorrow and
write down every penny you spend.
After you have tracked your expenses for a day, jot down them into the diary
to see how much money you could be putting towards paying down your debt if you
cut out the small stuff!
Step
3: Learn to play the credit card game
Think $10 a day won't make a big difference in your debt? Think again! With this
plan you can pay off $8,000 in credit card debt in just 3 years.
Part 1: Pay More than the Minimum Payments
There are many, many "games" that the credit card companies play that can affect you financially. All of these "games" are legal, which is why it's so important to know the rules of the game. Like it or not, if you have credit cards right now—you're in the game.Let's say you're the average American. You have a decent job, but you also have $8,000 in high-rate credit card debt. You have no savings to speak of. You worry about your money on a daily basis (in fact, it keeps you up at night), and you don't believe that $10 a day can dig you out if that hole. But it can, and in less time than you may think. If you get on this plan—and stick with it—in 3 years you'll be credit-card-debt-free.
The key is to pay more than your minimum payment. By applying $10 a day against your $8,000 credit card debt (at an interest rate of 16%) you'll be debt-free in 33 months.
| Debt | Minimum Payment | Interest Rate | Years |
| $8,000 | $160 per month* ($5 per day) |
16% | 30 |
| $8,000 | $300 per month ($10 per day) |
16% | 3 |
* If minimum payment is 2% of balance
Part 2: Lower Your Interest Rates
Call your credit card companies, tell them you've got offers for cards at lower rates and ask them to lower your rate. If you've paid regularly, they are likely to negotiate. If the company says no, tell them that you will be closing your account this week and transferring your balance to a competitor who offers better rates. So there's no doubt about your seriousness, tell them the name of the competitor you have in mind. (It shouldn't be difficult to come up with a name, since you're probably constantly getting applications in the mail from credit card companies who want you to transfer your balances to them.) Ask to speak with a supervisor. Supervisors have the authority to give you a lower rate right then on the phone. In many cases, you can cut your rate in half simply by asking.
Not sure what to say? Follow this sample script:
"I have [name of card] with you and my interest rate is [X] percent. I received another offer in the mail from [other bank's name] for [X] percent, but before I take it, I want to see if you can lower my interest rate instead."
If the representative says they're not authorized to do that, you say:
"Look, you and I both know that if I transfer my balance today, next week your bank is going to send me an offer to come back at an even lower rate. Why don't you just save the bank the cost of that effort by giving me several points today?"
If the rep says it's not possible because your credit card is at a fixed interest rate, you say:
"Actually, that doesn't have anything to do with whether or not you have the ability to lower my interest rate. A fixed interest rate only means that my rate doesn't vary with fluctuations in the prime rate. In fact, the bank can raise it on my account at any time by just giving me 15 days written notice. And the bank can, if it chooses, lower the rate today."
If the rep still says they're not authorized to do that, you say:
"I'd like to speak to your supervisor."
Then speak to a supervisor and follow the above script again.
Part 3: Four Tricks of the Credit Card Companies
Interest Rates: Right now the average credit
card in America has an interest rate of about 13 percent. But the fact is that
credit cards today have interest rates ranging from zero percent to as high as
40 percent annually. Today pull out your credit cards and find out (by reading
your statement) exactly what your debt is costing you. Then go to a website like
www.lowermybills.com or www.bankrate.com to look at competitive offers. Before
you switch your debt to one of the low interest rate cards call your current
credit card company and ask to have your rate lowered using the tips in the
previous slide.
Late Fees: We've all been late on a credit card bill before. But today
it's big business. Late fees range from $15 to as high as $39. And on top of
that most credit card companies will up your interest rate on top of the late
fee. It's reported that nearly a third of the credit card business revenue today
comes from late fees. What many people don't know is that most credit card
companies will waive your late fees, if you call and ask them to do so. If you
know you may be late on a bill, call in advance and ask for a grace period. Ask
the person you speak with to "document" your record, so you have proof
you called in advance of the bill being late. If you really are late, call and
ask if they can give you a break and waive your late fee. No matter what, make
sure you ask for the customer service representative's name as well as their
badge number or ID number so you can document your own proof of the call.
Teaser Offers: As mentioned earlier there are droves of credit card
companies now offering "zero percent" credit cards. Many are offering
zero percent for six months, twelve months, and twenty-four months. Some will
offer zero percent on all debt that you move or consolidate to them. The secret
is to read the "fine print". All of these offers have to legally share
what the "catch" is. The catch on most of these offers is that if you
are late just one time the interest rate can jump as high as 20 percent. If
you're late two times it may jump up to 29 percent. So read the fine print
closely. Also many of these offers charge you a "transfer fee" for
debt that is moved (usually ranging from 1 percent to 3 percent with a variable
maximum) of the amount transferred.
Annual Fees: Credit card annual fees can range from nothing to as high as
$2500. Most credit card companies' annual fees range from $35 to $100 annually.
Depending on the card, you may be able to get these fees waived, by simply
calling and asking. Typically cards with frequent flyer programs or rebate
offers won't waive the fees. Regular cards with no special offers often will
waive the fees (especially if you're a customer in good standing).
Continued.......next page
