Evaluate wants versus needs to reduce debt

Are you facing a bucketload of debt? You aren't alone. CNN Money reports that the average consumers faced a debt load of $210,236 in 2011. That is a huge figure by the standards of most people. However, living with this much debt comes at a cost that can't be measured by dollars alone. The true cost of living under a financial burden is more than dollars and sense.

The excerpt below is the story of one person whose family is clawing their way out from under a pile of bills. It first appeared on the Yahoo Contributor Network and is republished here with permission...

Goodbye credit cards and loan payments

In just a few days we will say goodbye credit cards. Brass bands won't be playing in the background and the credit card company probably won't send a thank you note but I'll be doing a happy dance.

Our final payment on our finally credit card is less than $100. I had hoped to pay it off last month but my typing fingers couldn't quite get over the finish line. Comforting me is that we were able to get rid of a huge chunk of that debt and payoff a loan in March.

Choosing which to payoff wasn't easy. Paying one debt in full meant being about $150 short on the other. My goal of saying goodbye to the credit cards was within reach. I was ready to shout hooray but that's not what happened.

The numbers were clear. Paying off the loan early would save us more financially. We would still put a good sized payment on the last of our credit cards but we wouldn't quite wipe off the balance. An unexpected ghostwriting gig made me feel better by lowering the balance some more.

Our largest bills still lie ahead but I feel like we've rounded a curve. Even though I'm looking at a huge car repair, medicals and other big debts, a weight has been lifted from my shoulders. It's as though I'm breathing in fresh air for once and it feels really good.

(P.S. We've been saving for the car repair along with paying so much on the credit cards a getting rid of the loan. :- )

Getting help with bills

People who are drowning in debt sometimes need help with bill. Utilities, rent and other major expenses come due whether you have a job or not. Being in a bad financial position can happen for lots of reasons. Every email I get confirms that bad debts can happen to good people. Illness, the economy, fire, natural disaster or an accident can each put a family in jeopardy.

When you are in a crisis, it can be tough to find help. Almost every community has places that can help with some bills. The key to getting the help is to know where to start looking.

I am writing this article from the perspective of a nonprofit director who has helped people who were in crisis. Every community has a slightly different system and every agency requires different qualifications. This article is a general starting point for people who need help with bills.

If you are looking for help with bills, there are a couple of things to know.

Forget about asking for help with credit card payments or other types of revolving credit. Organizations that offer bill assistance will only help with emergency funding for necessities as funds are available. That credit card bill may be high on your list but it won't make the cut for their list.

Workers usually want to help but funds may not be available.

You may need to have proof of income, rent receipts and identification for every person living in the household and identification for yourself. The paperwork varies so calling an agency ahead of time can save you time and frustration. 

Utility assistance
Call your utility company to see what they will do. They may have programs that can help with bills. If not, the workers can usually suggest places that are in your community where you can look.

United Way
This organization does not typically provide assistance. However; they can be a good referral source and can often direct you to the right agency.

Help agencies
General help agencies in your community may be able to help with bills. A pantry may be able to provide you with a box of food. Obviously, this won't directly help with rent or utilities. What a food box can do is free up funds that can be used in other areas.

Churches
If you go to church, then start there. Talk with your pastor about your situation and see if your church can help. At the very least, your pastor can support you through the process and may be able to make referrals or fax agencies that can help.

Toys
Getting help with the bills at Christmas can mean that you need toys. There are people who can help. Your child's guidance counselor, pastor, day care or agency may be able to get you on an Angel Tree list. Be reasonable with your expectations. Families who are adopted from these trees are typically adopted by a small group of people like you and me. Leave the iPads, iPods and Xbox off of your child's Christmas list.

Think outside the box
Agencies run out of money too. Don't wait until you are in crisis to start getting help with bills. Being proactive can help you make a few dollars here and there. Taking cookies to work and asking for donations, eBay, holding a yard sale, collecting aluminum cans, raking leaves or shoveling snow off of driveways can help. It may not solve all of your problems but it may help buy some time.

Modest Needs
This organization may be able to help with small grants. They are not an emergency funding source and they do ask for documentation. If you are getting help with bills from any source, you almost always have to provide information.

H&R Block reduced our tax bill

We got some good news about our taxes. H&R Block was able to help us reduce our tax bill by over $1,000. It was such a relief! 

Like many other people, our taxes are complicated. A few years ago we used a tax volunteer who was trained by the IRS to file taxes but our success was mixed. The home based tax software we tried to use was complicated and confusing. We knew it was time to call in help we it said we owed over $3,100.  We weren't sure if using a pro would make a difference but we filed for an extension and took the chance. It was worth it.

Getting rid of our debt is a slow progress but what we're doing is working. Education is helping us move the process along a little faster.

The H&R tax preparation cost $500. The preparer explained what actions we need to take to lower the bill. Basically, it's all record keeping. The problem is that we didn't know what records to keep. The preparers information should help us save money in the future. 

Blogging my way out of debt; It's working

Here it is a new year and I'm still blogging my way out of debt. I'm very happy to say that it's working! On  the almost the last day of December we said good-bye to the payments on our camper. Writing helped me pay off the 18 month note in five months. 

There's more good news to share! Remember my beloved PT Cruiser that was due to be paid off in a few months? Blogging my way out of debt helped me earn extra to add onto the payments. Poof! That car payment is now gone. 

The bill that I am the happiest to be rid of is an old medical bill. Billing for this particular set of doctors has been a real pain from day one. It feels really good to move this debt into the paid stack.

I did go backwards in one area. At the end of December I ordered a Bloggie on credit. This will help me record my travels and tribulations. Best of all, it is already generating revenue to help pay for itself. 

Overall, I'm ecstatic to be able to make this report. When you're blogging your way out of debt there isn't any way to know what next month holds. The amount you may can vary wildly each month. All that I can say is bring on February!

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Credit card consolidation is the surefire way to boost your score – Is this true?

These days, with the record breaking statistics of the people going bankrupt, an increasingly large number of people are desperately looking for ways to eliminate their debt burden. If you’re over your head in credit card debt and you don’t know what to do in order to repay your debt obligations, you should hire a financial planner so that you may get out of debt with ease. The financial planner will ask you to take help of a credit card debt settlement or a credit card consolidation firm so that you can combine your debts and repay them without burning a hole in your wallet. But the question that is asked by most debtors is whether or not this will hurt their credit score in the long run. The answer is in the negative as the debtor ends up repaying the entire amount but in small and affordable monthly payments. Read on to know the effects of credit card consolidation on your credit score.

Cherokee Mountain trail

What happens when you take the decision of repaying through consolidation?

Just as you take the decision of enrolling yourself in a debt consolidation program or take out a consolidation loan, secured or unsecured, this is reported to the credit bureaus and they come to know that you’re not paying as agreed with your credit card company. This slightly hurts your credit score but the extent is something that can be easily avoided. There will be a temporary drip in your credit score for a certain period of time but as soon as you start making the payments on time, your credit score will be increased.

How to make payments through a credit card consolidation option

Whenever you enroll yourself within a credit card debt consolidation plan, you have to repay your entire debt in single affordable monthly payments. If you take out a loan, you’ll get lower interest rates than what you were paying and if you sign up with a program, your debt consultant will negotiate with your creditors in order to lower the interest rates. Then as the rates are lowered and terms are made favorable, you have to start making monthly payments to repay the entire debt amount. Just make sure that the payments are reported to your creditors so that it may boost your credit score.

Before you take resort to any of the credit card consolidation options, you should determine which one suits your needs in the best possible manner. Manage your finances to make the entire process successful as failure to make the monthly payments on time may discontinue the entire agreement and also trash your credit score.

This article has been posted by guest blogger Allen Smith. Follow him on Twitter today.

A loan consolidation would hurt my debt plan

Lately loan applications have been flooding my mailbox. It was nice of the USPS carrier to bring two more offers today. One of these raised the possibility of a loan consolidation and the other was from one of those payday loan companies.

According to the letters, these folks are willing to lend me thousands if I'll just sign on the dotted line. The advertisements make one monthly payment sound good. I was forced into a student loan consolidation a couple of months ago. After looking at my debt it doesn't sense for me to reach for a consolidation on anything else.

Anytime something sounds too good to be true it usually is. The same adage can apply to a loan consolidation. These companies are in the business of making money and they do a good job. That is the only way that they can make these finance offers.

Here's why it's not a good idea for me right now.

The author's piggy bank.

Other than student loans and taxes we only have three pieces of debt that accrue interest. Two of these will be gone next month. We boosted our withholding to hopefully take care of the taxes. (I'll know in April.) In the meantime we've worked out manageable payments to the IRS. 

The rest of the debt is interest free medical bills.

It is tempting to roll the medicals into a loan consolidation but that would really cost us in the long run. It would mean having to pay interest on the debt that I'm trying to get out of. The loan consolidation payments would be based on rolling of medical bills together with credit card debt. 

Rolling non-interest bearing debt into a consolidation that would accrue interest doesn't make sense. Therefore I'll pass on these opportunities just as I did on a credit card offer a few months ago. 

Hopefully the USPS carrier will continue to bring the loan consolidation offers to my door. They're all going into the trash but the lending company offers do have one bright side. The mailings are helping provide jobs to the postal workers.  

My student loan debt consolidation

My student loan debt consolidation paperwork went through. I thought this was done a few years ago when I applied for a lower interest rate on the student loan. Somehow one of my loans fell through the cracks. By the time this was I was in default. 

My options were to either come up with all of the money to pay off the second loan now (fat chance) or go through with a student loan debt consolidation. There really wasn't much choice but to fill out the paperwork. 

Notice arrived yesterday saying that the student loan consolidation is approved. If what I was told is correct then my monthly payment will remain about the same. That's the good news. However, there was some bad news that they did not tell me. The default and consolidation has been reported to my credit agencies where it will appear for the next seven years.

It was not a good moment when I opened the mail last night. It's funny the things that are never mentioned when you are working on a student loan debt consolidation. I also don't know what the final total is going to be yet. 

This is frustrating. We've been working hard to get things turned around. The best that I can find out is that the mark isn't good but the impact the consolidation will have is uncertain. Hopefully, getting out of all other debt and then knocking this out will help.  

We've been tightening our belt and working hard. My monthly balance doesn't look like it will be effected. More good news is that my other monthly bills are decreasing. The difference is in the length of the new student loan debt consolidation.  

Paying our other bills off will mean being able to eventually pay more on the student loans until they are gone. At this point my best option seems to be to stay the course. It's slow but it seems to be working.

Why don't you take donations to pay off debt

A reader wrote to ask why I haven't asked for donations to go toward getting out of debt. It's not my intention to offend her but the suggestion doesn't seem right for me. Yes, a lot of our bills are medical but a lot of other people face high medical bills every day. I don't feel right about asking people who are in a similar boat to bail me out when we're essentially in it together.

This doesn't mean that crowd based fundraising is a bad idea. It's just not one that will work for me. If I needed help for a mission trip or something, then that might be different. When you are in the nonprofit business, you're already asking for money a lot of the time. Friends that might give me money for the debt load are probably already supporting the charity.

There are many ways to earn online without asking for handouts. Here are a few methods that work for me.

Pay-per-click and other ads on this site are helping me make a few dollars. It's not much but it does help. My other two blogs are also monetized. These are You've Been Reviewed and Gayle Crabtree.com. Online writing on the Yahoo Voices, Examiner and Knoji also helps.

If someone really wants to help they can visit the online writing sites and share the links with others. That generates $2.00 per 1,500 page views or a little less depending on the site. Tweeting the links or otherwise sharing them helps me raise funds to get out of debt. By all means, please visit the sites frequently to read my work.

Every page view helps! And, it works without anyone acquiring additional debt.

Changing our vacation plans to help resolve debt

Getting out of debt means making some difficult choices. Hubby and I have been trying to tighten our belts. At the same time we've been saving and planning on a Walt Disney World vacation. We booked this before our debts were added up. After looking at the bills we weren't sure if we were going to be able to make the trip. But, with some hard work and perseverance we are going to get to take the vacation.

Gayle and John Disney 2007

We've been working toward a WDW vacation for two years. There are three main reasons why we decided to keep it even though we're working on getting out of debt. One is that we really, really need to get away.

Another factor is that the package we have includes meals so it's an all inclusive trip. We're staying in a budget room. The cost per night for the room is less than I recently paid for a work related trip. The longer you stay at WDW the lower the tickets price is per day.

That all helps make it affordable but being able to pay for it meant making some adjustments. After looking at our bills we decided to shorten our stay by two days. Another cost cutting measure is to drive to Florida in one day. This saves the cost of one night out plus meals.

We wanted to take our time on the way back and do some extra sightseeing. This now means camping instead of using a motel. If we can figure out what to do with it when we're at the park the camper is going with us. Otherwise, we'll throw a tent and a few things in the car.


Combining trips to town, using coupons, skipping eating out and carrying drinks in the car are helpful ways that reduce our general costs.  By making these adjustments we were able to pay for the getaway and pay off a couple of smaller bills.

Another reason for keeping the getaway is to write. For me, this is now a working trip instead of a real vacation. I'm ok with that. The articles will help with gas and other expenses. If I'm lucky it may even pay for my portion of the vacation costs.

Getting out of debt is causing me to decide what's important and what isn't. Online writing has helped us cover the trip costs and still pay off a couple of other bills. We're making progress and learning to live within our means. It's not easy but it's worth it.

Organizing your bills will help reduce debt

We're finding that it's almost impossible to reduce debt if we can't see what we're working on. It helps us to keep a list. New bills are added as they come in. This helps us keep everything neat and orderly. We add the information for each but still keep the paper copies. That way, if we need to refer to something on the full bill we're able to do so.

My husband likes to use an Excel spreadsheet. I'm more of a visual person that sometimes finds Excel hard to work with. A plain old paper and pencil works fine for me. We review everything periodically together. This gives me a better feel for where we are. Seeing the totals come down also gives me the reassurance to believe that we can reduce our debt. That's always a good feeling.

Keeping the bills organized provides a road map for us to follow. It helps us see where we are going and makes it easier to plot how to get there. Who knew that something so small could make such a huge difference?

How do you celebrate debt reduction good news?

Don't you just love getting good news? I do. That's why I was so tickled to get the mail today. Inside was a receipt from where we paid off a bill earlier in the month. It's very validating to know that (so far) our plan to reduce our debt is working.

Staying motivated can be really tough. We sometimes feel so overwhelmed when the bills roll in that we don't celebrate the joys of getting anything paid. It's as is we approach it with the attitude of 'one down, tons more to go'.

I'm not sure that's productive. To change things up we're posting the paid bills on our refrigerator. Our very first one is the bill from this doctor. Sure, some people may feel like $158 isn't much. To us, it is a reason to be happy.

So, up on the fridge it goes. I can't wait to add more to it. How do you track your achievements? Let me know by posting a comment.

Happy bill paying!

Making those car payments

Making those car payments feels like a hamster in a wheel.  Signing that note seems like so very long ago. The length of the loan was for five and a half years. One daughter entered graduate school and the other graduates from college in May.

The current payoff date is for 2/12.  As of today, we still owe $3,100 on the car. We're going to be adding to our payments a little each month. The goal is an early pay off. Keep your fingers crossed. Making those higher car payments may be a rough ride but I'm convinced that we can do it.

$3,100 - April 2011