Now For Some Great Advice
This advice will benefit those who are not yet at the stage where a drastic Debt Elimination plan is required and want to be sure their situation gets back on track before it gets worse. The first step to gaining control of your financial situation is to eliminate Credit Card debts and then to prepare a Budget that works and keeps your debt from creeping up.
To Pay off those Credit Cards and Stay Out of Debt
COMPLETELY ELIMINATE YOUR CREDIT CARD DEBT
Don’t wait until you are too deep into a financial problem before you decide to take control of you financial future. If you still have the luxury of time to solve a looming financial problem (still managing the minimum payments and able to devote a little more each month) then roll up your sleeves and take charge. Start by tackling your Credit Card Debts. You may even consider finding another source of income while on a planned and structured Debt Reduction program.
Note: The following strategy may only be effective for accounts not currently in arrears or collection and where your household has sufficient income to increase monthly payments beyond “Minimum” payments
By following the Debt Reduction Pyramid Strategy, anyone can take control of and completely eliminate credit card debt.
Credit card debt is the most cunning adversary to securing your financial future. Unfortunately, many people obtain credit cards while still in school. Credit card companies use enticing promotions to lure consumers by increasing credit limits and offering pre-approval. All of these strategies attempt to install the habit of spending now and paying later.
Many people don’t realize how destructive this habit is, until their credit card payments become the largest part of their monthly budget. Credit card debt, as a percentage of income, has been on the rise for the past two decades. It may be difficult to break the habit of using credit cards; however, the reward is worth the effort. A debt-reduction strategy called The Debt Reduction Pyramid. Will enable you to completely pay off your credit card balances.
The Debt Reduction Pyramid is designed to help you pay off your balances quickly and painlessly. This strategy is the same as if you tear down a pyramid. If you did this, where would you start? The most logical place is the tip, since the foundation is so enormous. You would begin at the top, removing one brick at a time until the entire pyramid is torn down. Thus, you will pay off your balances, one payment at a time. There are four simple steps to follow. These steps include:
STEP ONE:
The first step of this strategy involves writing down all outstanding credit card balances in ascending order (smallest to largest). This is referred to as the Debt Pyramid.
STEP TWO:
The second step of the strategy is to concentrate on completely paying off the lowest balance. By paying off the lowest credit card balance, the top of the debt pyramid is eliminated. In addition to the minimum monthly requirement, you should pay as much as possible over and above the minimum. For example, if the minimum monthly payment is $40 on the smallest balance, a check could be written for $75. ($40 minimum required plus an additional $35) Pay this extra amount every month until the entire balance of the first card is paid off.
STEP THREE:
Once the lowest card is completely paid off, concentrate on the second position. After the credit card balance at the tip of the pyramid is paid off, add the minimum monthly payment of the first card to the minimum monthly payment of the second smallest credit card. For example, if the minimum payment on the first position was $40 and the payment for the second card is $55, then your monthly payment to the second credit card would be $95 ($40 +$55 = $95). The benefit of using this step is that the minimum payments are already allocated into your budget. Thus, no additional money is reallocated to pay off outstanding debt.
STEP FOUR:
Continue using this strategy until all credit cards are completely paid off.
IDEA FOR HOW TO STOP USING CREDIT CARDS
Once you begin conquering your credit card balances, the worst thing to do is to begin using them again. Here are four ideas to follow to stop using plastic:
Lock Up or Cut Up Any Credit Cards:
One of the best ways to stop using credit cards is to not carry them. However, everyone should have access to at least one card in case of an emergency. There may be times when a large amount of money is needed immediately. For example: to purchase an airline ticket in a family emergency or rent a car. An innovative way to remind yourself of this is tape a piece a paper on each card with the words: “FOR EMERGENCY USE ONLY”.
Write Checks: Get in the habit of writing checks:
This offers two advantages: The first benefit is you can’t make a purchase unless the money is in the account. This may eliminate frivolous spending. The other advantage is it will wean you out of the credit card habit.
Use Debit Cards:
A debit card is similar to a credit card with one distinct difference. Whenever you make a purchase, money is subtracted from your account. You cannot spend more than what is in your account.
Put a Reward System in Place:
Every time a credit card is paid off, treat yourself to a long walk on the beach or a dinner out, but not a shopping spree to put you in more debt.
By following the Debt Reduction Pyramid Strategy, anyone can take control of and completely eliminate credit card debt. Note: This strategy may only be effective for accounts not currently in arrears or collection and where your household has sufficient income to increase monthly payments beyond “Minimum” payments
To Stay out of Debt
Develop a Budget: The first step toward taking control of your financial situation is to do a realistic assessment of how much money comes in and how much money you spend. Start by listing your income from all sources. Then, list your "fixed" expenses — those that are the same each month — such as your mortgage payments or your rent, car payments, or insurance premiums. Next, list the expenses that vary, such as entertainment, recreation, or clothing. Writing down all your expenses — even those that seem insignificant — is a helpful way to track your spending patterns, identify the expenses that are necessary, and prioritize the rest. The goal is to make sure you can make ends meet on the basics: housing, food, health care, insurance, and education.
Your public library has information about budgeting and money management techniques. Low cost budget counseling services that can help you analyze your income and expenses and develop budget and spending plans also are available in most communities. Check your Yellow Pages or contact your local bank or consumer protection office for information about them. In addition, many universities, military bases, credit unions, and housing authorities operate nonprofit counseling programs.
You should Review Your Credit Report
You are entitled, in Canada and most States, to a free copy once a year; if it's not free, the charge is only up to $8 and well worth the expense. You are also entitled to a free report if if you have been denied credit because of negative information in your credit report. However, you must apply within 60 days of the denial. In addition, you are entitled to one free report if (1) you are unemployed and plan to seek employment within 60 days; (2) you are on welfare, or (3) your report is inaccurate due to fraud.
Your credit report usually includes personal information, employment information, a list of creditors, payment history, any bankruptcies or lawsuits, and any inquiries made about your credit history. If you find an error or any mistakes in your report you can take the following steps.
1. List all inaccurate information on a request for investigation form enclosed with your credit report. If you have no form, a letter will suffice. The letter should explain which information is incorrect, and what the correct information is. Enclose any documents that may support your claim. The credit bureau should respond within 30 days.
2. If the credit bureau does not respond within 30 days, send a follow up letter.
3. If the information is incorrect, but was verified by the original creditor, contact the creditor directly and request documentation of the debt.
4. You have the right to add a 100- word statement to your credit report explaining a particular entry. Be concise! The statement could be edited by the credit bureau if it is too wordy.
If any deletion or notation is made regarding the information, you may request that the new information be sent to any employer who has received a credit report during the past two years and, in addition, anyone else who has requested credit information in the previous six months.
To order copies of your credit reports, list the following information:
Full name, including any maiden names
Daytime and Evening phone #'s
Current address
Previous address (if needed for five-year credit history)
Date of birth
Marital status
Birth name
Social Security Number or Social Insurance Number
Sign the bottom of your request and enclose a copy of your driver's license, utility bill or government identification, showing your current address. Send a copy of this to each of the following national credit bureaus:
Equifax Credit Information Services
PO Box 740241
Atlanta, GA 30374-0241
800-997-2493
Trans Union Corporation
Consumer Relations Division
PO Box 390
Springfield, PA 19064-0390
800-916-8800
Experian (Formerly TRW)
PO Box 949
Allen, TX 75013
888-397-3742
