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1. Sure Fire Ways
To
Debt
Management
Do’s and Don’ts
Brought to you by:
DebtCovered.com
Sure Fire Ways to Debt Management – Do’s and Don’ts - Page 1

2. INTRODUCTION
Reducing your debt is something that can change your life. Today, people are
racked with debt and as a result it’s ruining families, creating stress, causing
health problems and shattering dreams.
There’s an epidemic with today’s debt ratio and more people than ever file
bankruptcy and the rate of repeat bankruptcy filings clearly demonstrates
that people are falling into the same traps time and again. This free report
can help you get started on your way to debt management so that you
reduce your debt and can get your finances in order so that you control them
instead of the other way around.
This report will tackle several areas of concern or advice:
• Tracking Your Expenses and Spending
• Organization
• Setting a budget
• Splitting your pay check
• Consolidating bad debt
• Debts To Avoid Like The Plague
• Refinancing
• Negotiating
• Benefits of Buying With Cash
• Paying Things Early
• Cutting Corners With Everyday Expenses
• Paying Yourself
• Splitting your pay check
• Making Sacrifices
• Treating Yourself
• Saving For A Rainy Day
• Credit Counselling
• When a loan is a good idea
• Goal setting for Success
• Avoiding Fees (late fees, bank fees)
• Sell stuff
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3. TRACKING YOUR SPENDING
The first step in debt reduction is knowing where your money is going. By
tracking your spending, you can figure out where money is going today and
that can help you figure out where things have gone wrong.
Keep all your receipts and count up what you spend in a month. Then go
through that list and figure out what was essential and what was not. Also
make a list of bill payments you have not made.
SETTING A BUDGET
Setting a budget is essential in being able to reduce your debt. A budget not
only tells you where your money needs to go but if you refer to it continually
you’ll be sure that’s where it goes. A budget is necessary for financial
management and debt reduction and by organizing your finances, you will be
able to not only live day to day but plan for long term and short term
financial goals.
How Do You Set a Budget?
In order to create a budget you need to know what you owe and what your
goals are. Set up a payment schedule for all your bills and know where the
money will come from. Many people organize their bills to be paid on their
payday so that the money is removed from their account right away. Direct
payment from your account through automatic withdrawal on your pay day is
a great way to make loan, mortgage or rent and utility payments whenever
possible.
Along with knowing what you have to pay, you should also have a debt
reduction and savings strategy in your budget. A good idea to do for debt
reduction is to make a list of your payemtns. Many suggest paying off the
highest interest payment first and then paying the others. Beyond making
minimum payments, top up the payments so that you are paying down more
of the principal.
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4. Don’t forget to set aside savings in your budget. Even if you cannot save a
lot right now, start with something. Once you’ve paid down some of your
debts you can allocate more to savings.
ORGANIZATION
Being organized will help you ensure that you can follow your budget. Too
many people don’t open their mail or simply stuff it into a box or folder
without bothering to organize it. Through organizing your receipts and your
bills you can see your finances at a glance.
Organizational Strategies
Set up a filing cabinet or accordion folder and have separate section for each
bill and receipt you have. As soon as bills come in, put them in a section of
“to be paid”. After the bill is paid, file it in its section.
Filing oldest bill to newest bill is simple and lets you see current bills at a
glance. You can also set up a big 3-ring binder with pockets or dividers.
Whatever system is easiest to follow is fine as long as you stay on top of it.
Either address bills each day or do so at least once per week. The more often
you think about your finances, the better you’ll be at managing them.
Consider allocating yourself a weekly budget for spending money and
withdrawing it from the bank. Using cash instead of credit or debit is the
most effective debt reduction strategy because you are only paying for an
item once instead of multiple times over with interest rats and you can only
buy it if you have the money to spend. The more organized you can be about
your money, the better your finances will begin to look.
SPLITTING YOUR PAY CHECK
We become accustomed to living on a specific amount of money each week
or each payday, don’t we? That’s how overspending happens. If you talk to a
lot of people that are debt ridden, when they get a salary increase, their
lifestyle doesn’t necessarily change other than the fact that they spend more.
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5. Their debt ratio often stays the same, which is unfortunately, probably not
much more than two paydays away from financial ruin.
If you automatically allocate part of your pay to savings before you have a
chance to spend it, this is a great way to build a nest egg and rainy day fund.
Many employers who offer direct deposit into your bank account will allow
you to take a percentage of your pay and allocate it to a separate bank
account. It’s a good idea to do this because after a few paydays of receiving
the smaller amount, you will become more accustomed to your new
paycheck and not miss the amount.
If you choose paydays to allocate extra money to your creditors, the same
effect will result. Many successful people who worked hard to get out of debt
worked a second job and then took the entire pay check and put it directly
towards their debt. If you need to open several bank accounts to create silos
for your money, that can be a great way to manage it so you cover debt
reduction as well as investing and saving for the future as well as having
things like vacation funds and funds for home improvements. How wonderful
would it feel to go on holidays with a vacation fund and not come home to a
fear of opening your mailbox because you’re in serious panic about the state
of your upcoming credit card bills?
CONSOLIDATING BAD DEBT
Consolidation is a great way to reduce debt. It’s not as good as simply paying
off your debt but it can be good for several reasons. If you get a good
consolidation loan, it’ll be for a lot less interest each month.
Some people decide to consolidate or refinance debts to have lower monthly
payments. By doing this, you will relieve yourself of some stress and free up
more disposable income but you are just moving debts around instead of
removing them.
Instead of doing a debt consolidation for a lower monthly payment, why not
do it at the same amount of money you are paying today but with the benefit
of:
1. A lower interest rate
2. One date to pay it each month instead of several with multiple bills.
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6. A lower interest rate allows more of your payment to go towards the debt
itself.
Beware of the consolidation trap!
The consolidation trap happens to many good people who don’t take care and
caution with their finances. They consolidate all their credit cards and loan
payments into a single payment but instead of taking that opportunity to get
ahead of the game; they simply rack up more debt. They’re enamoured by
the sudden $0 balance on their credit card and instead of cutting up the card
or saving it for emergencies only, the begin the old cycle of spending money
they don’t have. Now, they’ve got a big consolidation loan and more debt on
top of that.
Use the consolidation or refinancing loan as a way to get ahead of the game
and pay off your debt instead of creating more debt.
DEBTS TO AVOID LIKE THE
PLAGUE
We know that there is more than one type of debt out there and you can
classify almost all debts into two categories, good debts and bad debts.
There are some grey areas but most debts will either get you something
good or create more debt. A good debt would be a mortgage because you
will have something after the debt is paid and that something will likely
appreciate in value. A bad debt lets you buy now but pay later under the
guise of convenience but with the startling reality that it will cost you more to
use the credit than to pay with cash.
Payday loans are the biggest offender in terms of bad debts. These types of
loans are short-term loans with big fat interest rates. They won’t do anything
to help your financial situation and you need to stop using these services.
Many of them charge hundreds of per cent in interest and because these
creditors offer a large portion of your paycheck to you in advance, it’s very
difficult to pay them back next payday without being tempted to simply carry
the loan on. The average payday loan place that offers you a $500 advance
will charge about $100 in interest. If you keep that loan going for exactly a
year, that initial $500 will cost you $2,900.00 to pay back. Pretty startling
numbers…Avoid these debts.
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7. Another bad debt to avoid is a deal that offers you deferred payments for a
long period of time. Most often, these deals are offered by furniture or
electronics stores. They lure you into paying more than average retail
pricing for a plan that defers the payment for a period of time. If you don’t
pay the balance in full on the due date, you start paying heavy-duty interest
charges for that item that was already overpriced to begin with. If you can’t
afford it today, save your money until you can.
Don’t be tempted to borrow from Peter to pay Paul. If you’re using one credit
card to pay another or a credit card to pay a utility bill, you need to
reorganize and re-budget so you can pay with cash and pay once instead of
over time with interest.
REFINANCING
Refinancing can be done to help you stretch payments or get extra money in
your pocket which isn’t going to reduce your debt but if you refinance to get
a better interest rate, that is a sure fire way to reduce your debt.
If you have a high interest rate mortgage that’s at an adjustable rate and a
new deal comes along that offers you reduced interest, go for it!
Refinancing things for a lower rate and without penalties (or without
penalties that surpass the savings, at least) are a great way to reduce your
debt and become debt free sooner while also saving you money now. Every
little bit helps!
NEGOTIATING
The art of negotiating can do a lot for your finances. Here are some helpful
tips for you:
• Haggle
When you want a big-ticket item, see if the sales clerk will drop the
price.
• Shop around
Comparison-shopping for everything from big-ticket items to car loans,
insurance policies, mortgages and credit cards will save you money
and result in less consumer debt.
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8. • Talk to your creditors
Negotiate a lower interest rate if possible. If you ask for a lower
interest rate and they don’t bite, it might be prudent to allude to the
fact that you’re considering refinancing elsewhere. It can’t hurt!
BENEFITS OF CASH
Not only is cash wise for spending your flexible expenses instead of buying
things on credit but it gives you buying power. The next time you want to
negotiate on a price, you might find that having cash in hand is more
powerful that pulling out your old plastic friend.
In terms of reducing your debt, using cash will help you see where you are
going with your spending and it will ensure that you don’t pay for something
repeatedly through high interest rates. If you buy it with cash, it really is
yours and no one can repossess it if times get lean and you won’t have to
worry about paying for it in 24 small and manageable instalments.
PAYING BILLS EARLY
Pay for things on time or early and get them out of the way. Paying early is
good for your credit rating as well as helping you avoid interest charges and
late fees in many cases.
Many companies charge late fees and interest charges on things that are
late. This can apply to things like your utility bills and your credit card bills. If
you are regularly late, you could be wasting hundreds of dollars per year on
late fees. That money could instead go to pay down your debt. Keep a
calendar with due dates and schedule payments to fall on payday whenever
possible.
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9. CUTTING CORNERS WITH
EVERYDAY EXPENSES
If you try, you can probably cut corners on every day expenses. It can
become fun and challenging to do this. For every bit of money you save, put
it into your debt reduction plan. This includes:
• Making your home more energy efficient to save money on utilities.
• Lowering your services on things like cable and Internet to lower
levels. If you don’t want to cancel services, see about bundling
services. Many companies offer bundled plans that save you a small
fortune every year.
• Talk to your bank to find out if you are using the best checking
account and savings accounts possible. You could reduce your monthly
charges and increase your interest earned.
• Talk to the telephone company to find out if you’re using the best long
distance plan for your usage levels.
• Talk to your cell phone company for the same reason as above.
• Clip coupons. Many families who regularly clip coupons can save $20
or more a week on groceries. That can translate to $100 a month off
your debt, which equates to $1200.00 a year.
• Bag your lunch instead of dining out. If you’re spending $5 a day on
lunch at work, this can save an average of $25 a week or $100 a
month. If you are married and your spouse also buys lunch, you could
save $200 a month or $2,400.00 a year.
• Get entertainment and holidays at off peak periods. For example, if
you want to see a movie, either go to a matinee or discount day or
rent it. If you want to travel, figure out when the low season is so you
can save money.
• Use loyalty programs. Loyalty programs can save you money and get
you free stuff. That money saved can help you with your variable
expenses. Many people cash in their points around 6-8 weeks before
holidays so they can use those rewards to take the edge of Christmas
spending.
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10. • Shop at the end of the season instead of the beginning to plan for next
year and subscribe to newsletters for online sites that advertise
warehouse outlet sales. This way you can get brand names at bargain
prices.
For every bit you save, make a list and challenge yourself to increase your
savings amount next month. If you reach specific goals, make plans to
reward yourself with a treat.
PAYING YOURSELF
If you do all work and no play, you’ll be a pretty unfulfilled person. Debt
reduction is important but don’t forget to have fun. As mentioned above,
when you reach goals, reward yourself. It’s also important that you are
saving money for emergencies and for the future. Assign some of your
income for your savings and specific funds. For example, if you want to
reward yourself with a new electronic device, budget it in. It may take a few
months before the funds are available in your budget but you can do it if you
set your mind to it and you’ll be proud of yourself for doing it with cash.
GETTING MONEY FAST
If you want to get hold of money fast, here are some tips:
1. Sell stuff
Have a yard sale or estate sale to raise funds. You can also dabble in
online auctions.
2. Get a part time job
If your income is not enough to help you bring in funds, get another
job on a part-time or work at home basis.
3. Make some sacrifices
You might need to give something up in order to free up some money.
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11. MAKING SACRIFICES
A lot of these tips sound really good but you need self-discipline to get
started. Making sacrifices can be difficult but when you do your budget and
make your debt reduction plans you might realize that there are sacrifices
you need to make such as moving to a cheaper home, selling an expensive
car or giving up shopping habits.
Rest assured that these sacrifices will increase your quality of life in a very
short time because you will be less stressed about money, your credit report
will improve which will give you the ability to do more with your financial
future and you’ll have money for the things you need and want. The
difference is that when you find something you need or want, you’ll be able
to afford it and won’t have to feel buyer’s remorse when you’re still paying
for it in a year from now.
SAVING FOR A RAINY DAY
Grandma had the right idea when she put together her rainy day fund. You
need to put money away for things like car repairs, home repairs, and
medical expenses and if you suddenly lose your income, you don’t want to be
struggling.
In your budget, aim that as soon as you get debt free you put away enough
money for at least three months of expenses. This money can be in a high
interest bearing account so it gets working for you but make it accessible
unlike some locked in investments.
Tip: Don’t make it accessible enough to become a temptation! Don’t put it in
an account with a debit card, for instance.
CREDIT COUNSELLING
If you’re in over your head today and need help to get a handle on your
finances and set a budget, ask for help. If you don’t have anyone in your life
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12. that can help you make sense of really messy finances, you can seek credit
counselling from a non-profit agency who will help you make a plan.
Your employer might offer an EAP (Employee Assistance Program) to help
you obtain these types of services free of charge.
WHEN A LOAN IS A GOOD IDEA
All loans is bad debt, right? Wrong! As mentioned, when borrowing will result
in your getting more than you paid for, it can be a good investment. For
instance, investing in a program that will yield you 10% profit in a year but
only cost you 4% in bank interest from a loan is a good idea.
When looking at refinancing or consolidation, a loan with a lower interest rate
is a good idea.
CONCLUSION:
GOAL SETTING FOR SUCCESS
Goal setting is an important part of debt reduction. Not only should you make
long term goals but short term as well. Today your goal might be to get rid of
a loan or credit card. Tomorrow’s goal might be to save for a down payment
on your first home.
Set financial goals for yourself and review your situation regularly to see if
you are on track or need to tweak your goals or tweak your spending habits.
It’s a great idea to write your goals down in a diary or calendar and check
regularly to see if your goals are met. For instance, savings goals, debt
reduction goals and materialistic goals can all be tracked this way. It’s a good
reminder of what you want in life and can help you get back on track if you
are veering off.
Good luck with your debt reduction plan! Your life will be richer and happier
when you are in control of your finances and your financial future.
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13. DISCLAIMER
This report contains subjective material provided for informational purposes
and does not guarantee that advice or information described in this book will
cause or create financial gain or financial loss. The information contained in
this book may or may not help you in your own finances.
The publisher of this book will not be held responsible or liable for any
financial gain or loss resulting from information contained in this e-book.
Always invest and borrow responsibly.
http://www.debtcovered.com
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