You CAN Get Out of Debt On Your Own

There are many resources out there for those who are deep in debt. There are credit counselors and debt consolidation companies. There are lawyers offering to have your debt reduced for a fee, and in extreme cases, there is bankruptcy. With all of these choices, one might think that a person can’t get out of debt on his own.

The truth is that it IS possible to get out of debt on your own. Even those who think there is no room in their budget to pay down debt are often surprised. It takes willpower and determination, but you CAN get out of debt on your own.

So… how do you get out of debt on your own? Here are some tips:

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Smart Money Moves in a Tough Economy

With all the bad news in the economy lately, you may be feeling a bit helpless when it comes to your finances.

While you may not be able to make the market go back up, there are steps you can take to make your finances as strong as possible in these tough times:

1.  Fund your emergency fund.  It’s more important than ever to have an emergency fund, in case you lose your job, have unexpected medical expenses, or have a major house repair, so that you don’t have to sell investments (while they’re down), or rack up credit card debt.  The general rule of thumb is to have three to six months of living expenses set aside for emergencies.

2.  Pay off credit card debt.  If you have high interest credit card debt, the greatest return you can get right now is to pay off that debt.  Start by calling your credit card companies and asking for a lower interest rate (if you have a good credit score, you could get your rates down to 8-12%, which is much better than paying 20+ percent).  Then make the minimum payments on all of your credit cards except the highest interest rate card until paid off.

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Credit Resolutions for the New Year

One way to cut the sting of the post-holiday credit card bills is to set a new agenda when it comes to credit.  So consider the following ideas when setting your credit resolutions for 2009:

Set dates for getting your credit reports: Each year, you should check each of your credit reports from annualcreditreport.com directly.  You should spread out your requests, making requests quarterly so you can catch errors that might come up at different parts of the year and spot identity theft.

Get your credit score once a year: A credit score is a three-digit number that reflects the credit history detailed by a person’s credit report.  Go to www.myfico.com to retrieve your credit score once a year from one or all of the three credit bureaus.

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Instead of Saying “I Can’t Afford That…”

…why not ask “how can I afford that”?

While browsing the The Carnival of 20-Somethings Finance, I saw a post called Tori Spelling - Unsung Financial Hero? that caught my attention.

If you like reality shows (me, not so much, but I actually caught part of this episode on one of my ‘unable to sleep’ nights), you may be familiar with Tori and Dean - Home Sweet Hollywood.  On a recent episode, Tori and Dean were looking at new houses to buy, and they were looking at one that was twice their budget.

While that in itself isn’t very remarkable, what was remarkable was Tori’s response to her husband’s objections that they couldn’t afford the house.

Instead of saying “we can’t afford it”, Tori’s attitude was “how can we afford this house?”.  She was willing to start a business - or even two - to be able to afford this house, even while 9 months pregnant!

In my financial planning business I work with a lot of people who are in debt.  I’d like to take Tori’s “how can we afford this house?” attitude and challenge those of you who are in debt, to consider…

Instead of asking, “how can I get out of this debt hole I’ve dug for myself?”, ask yourself, “how can I make more money?”.

By focusing on how to make more money, you’ll have a more positive attitude towards your money, and you’ll probably pay your debts off much faster than if you took a negative approach and spent your time worrying all the time.

What do you think?

New Credit Card Rules Will Help Protect Consumers From Higher Rates

New rules for the credit card industry were adopted this week that will provide some relief for consumers.

One of the biggest rules is that credit card companies will not be allowed to raise interest rates on existing account balances.  They will be able to raise rates on future purchases, future advances and new accounts, but not current balances.  Having been a victim of increased rates on credit card balances in the past, I know this will be a big relief for people who carry credit card debt from month to month.

These new rules also prohibit credit card companies from allocating all payments to balances with lower interest rates when a borrower has balances with different rates.  This practice was done to ensure that the consumer paid on the highest interest balance for as long as possible.

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