5 Mistakes You Make When Managing Your Debt

Good afternoon. Today, since we're all on holiday, and the typhoon Maring is bringing a lot of rain in Metro Manila, I thought of surfing the net. And I found this article from FoxBusiness by Allison Martin (Credit.com) on managing our debt. I would like to post it here for us to study and hopefully apply some of it's recommendations so that debts can be erased soon.

Not all debt is created equal. With that being said, there is no one-size-fits-all approach to managing your debt and avoiding excessive interest, fees and other penalties that could result if not handled properly.

Here are five mistakes consumers commonly make with their debt (and ways to avoid them).

1. Depleting Your Emergency Fund

If you have a substantial amount of cash in your savings account, allocating a vast majority of it to get out of debt may seem like the wise thing to do. However, the problem with this approach is that it fails to get to the root of the problem. The ultimate goal should be to get out of debt and stay out of debt, and not simply write a fat check to serve as a temporary patch. It is more sensible to jump-start your management efforts and cut costs elsewhere in your spending plan because emptying out your emergency fund can mean even greater debt if an emergency arises and you do not have an adequate amount of cash on-hand to cover the costs.

2. Having No Plan of Action

Taking a lax approach to your debt is a recipe for disaster. You may eventually achieve your goal, but the process may be lengthy and tedious. Just imagine a college student who randomly takes courses that appeal to them without ever looking at their transcript to see what’s needed to graduate.

Save yourself the headache and devise a detailed debt repayment plan that incorporates your financial goals.

3. Getting Caught in the Minimum-Payment Trap

Making the minimum payment each month may give you more flexibility in your budget, but you more than likely will never get out of debt. In most instances, particularly if the outstanding balance is high, the minimum payment may only cover interest (or not much more), leaving you with an untouched principal balance.

Instead of making this mistake, allocate as much money as possible toward your monthly payment, even if the amount is way more than the minimum, to ensure that your payment efforts are not in vain.

4. Robbing Peter to Pay Paul

Advancing cash from one debt source to another solely for the purpose of making your monthly payments may cause you to end up in a bigger financial crunch than you initially bargained for. If your financial situation is dire and you‘re robbing Peter to pay Paul just to make timely payments, reach out to the creditors and request that they grant you some sort of temporary relief until you are able to sort things out.

In addition, refrain from using any sort of financing to pay for purchases unless it is absolutely necessary.

5. Ignoring Statements and Credit Reports

Both your statements and credit reports paint a picture of where you stand in terms of your debt obligations. Ignoring these documents can be very costly and time-consuming down the road if inaccuracies exist because errors that are not promptly reported may be more difficult to dispute.

To avoid these issues, immediately review your statements each month when they arrive to verify their accuracy. If discrepancies exist, report them as soon as possible to the creditor so that the issue can be resolved before the inaccurate information is reported to the three credit bureaus. Also, review your credit report at least once every four months for mistakes – you can get them for free once a year through AnnualCreditReport.com. You can also monitor your credit once a month for free using the Credit Report Card.

Personally, I have applied Item # 2 and # 3 in dealing with my credit card debt. So far, I am now almost out of the rut and setting myself debt-free.

What's your plan?

To your debt-free life,
Jimmy

Read more: http://www.foxbusiness.com/personal-finance/2013/08/20/5-mistakes-make-when-managing-your-debt/#ixzz2caIWfRCz
Photo credit: http://money.howstuffworks.com/personal-finance/debt-management/debt3.htm

4 Things You Should Never Do With Your Credit Cards

I can identify with Susan McCarthy in all four areas when it comes to using my credit cards. I have experienced the worst that can happen to me like overblown balance due defaults on payments and sometimes paying only the "minimum payments", letters from the credit card company's lawyers demanding immediate payments in lieu of a court case, worries and nightmares. I am thankful for Susan for this article and I know it will help a lot when you do what she suggest. I did, and I am almost out of my credit card debt.


Susan McCarthy, a financial adviser in Oklahoma City and author of The Value of Money, lists her top four credit card don'ts:

1. Don't make only the minimum payments. This stretches out your payment and, thanks to the interest, significantly increases your overall cost.

2. Don't carry too many cards. Multiple cards make it easier to rack up debt because it's harder to keep track of your spending. Having lots of cards isn't necessarily bad for your credit, but misusing them is. So limit your plastic to two national cards (store cards often carry higher interest rates) that you manage carefully.

3. Don't miss payment due dates. Not only will you be hit with a late fee-as high as $39 on some cards-but your interest rate could also jump. Sign up for online banking or pay over the phone if you're up against the deadline. (You may pay a processing fee, but it will probably be less than the late fee and the possible interest-rate hike.)

4. Don't take cash advances. These advances generally come with sky-high interest rates and service fees, making them a far too expensive way to get cash. Avoid at all costs.


To your debt-free life,
Jimmy


Source: http://shine.yahoo.com/channel/life/4-things-you-should-never-do-with-your-credit-cards-530910/

Getting serious in swimming out of debt

If you really want to get out of debt, you have to be serious, really serious about swimming out of it.
I paid my credit card debt today. While on my way to the bank to pay, I was flip-flopping whether to pay it full or just pay enough and use the rest of the money for my upcoming company-sponsored vacation in Boracay.

My idea of a vacation in Boracay next week

I tell you, it was tempting to settle for the less. But because I am determined to wipe out my debt, I went in that bank resolved to pay the balance in full.

If you notice in my statement, there are many charges with the plus (+) sign on it. The Finance Charge, Fees/Other Debits, and Late Charges. the only Negative (-) is the Payments/Other Credits. I want to be in the negative more often.

The figures with red circles are the plus (+) entries

The Plus (+) signs adds to my debts. I used to pay only the  minimal amount called "Minimum Payment", which the company normally suggest you do. With that act, I had and accumulated "entries" in the plus (+) boxes. Adding all the plus (+) amounts since I started using my card, I'd say it cost me a lot, lots of money.

There is really wisdom in paying the full amount and on time. It is a source of additional money that will help you swim out of debt. Be serious and stay focus.

To your debt-free life,
Jimmy

10 Reasons Why He is Cancelling His Credit Card

I came across this very good article, "10 Reasons I'm cancelling My Credit Card" by Brett Arends in Finance.Yahoo.com. I can't help but post it here. I made it a point to post only my own experience on being debt-free. However, I would like to give way to Brett's experience because I am sure we can all benefit from it.
Here are 10 reasons why:
1. I'll spend less. A variety of scientific studies, such as this one at the Massachusetts Institute of Technology, have found that people are simply willing to spend more when they use credit cards than they do when they use cash. It's common sense. No wonder our national obsession with shopping really took off when credit cards came on the scene. And I've found it personally. Last fall and winter, when I went for an extended period without carrying any plastic at all, my day-to-day spending rate absolutely collapsed.

2. The card bonuses aren't worth it. A lot of people use their credit cards for the frequent flyer miles or other bonuses. But many of these deals are getting less valuable. Airlines are cutting back on flyer programs. And how good were these programs anyway? Schwark Satyavolu, co-founder of BillShrink, says that if you are really smart, dedicated and targeted about getting and using your bonuses, you can sometimes get very good deals. But overall, he says, deals are getting less valuable, and are increasingly focused on cards with annual fees. Most of us are doing very well if we manage to get back 2% on our cards. Compared to the extra amount you spend, that's chicken feed.

3. Cash makes budgeting easy. Personal financial planners encourage clients to draw up budgets. It's great advice, in theory anyway. But I have a confession: I'm just not that organized. Nor, I suspect, are lots of people. But if I go to the bank once a week and draw out a certain amount of cash, it makes the budgeting automatic. Easy.

4. Less worry about identity theft. Do you worry about handing out your card or details every time you make a purchase? I do. The banks and online merchants work hard to maintain security, but the crooks are just as inventive. And there are plenty of them. People suffer identity theft all the time. Using cash cuts down on the risk.

5. Fewer impulse purchases. One way credit cards let us spend more is that they make it easier to buy things that we don't need, and may not even want, on the spur of the moment. And the stores are set up to encourage it they rely on sophisticated marketing science to manipulate you into reaching into your wallet. If you don't have the money on you, you can't splurge. If you really want the item in question, you can come back and buy it tomorrow. Chances are you won't.

6. I can still shop online. Just because I'm using cash doesn't bar me completely from getting online deals. Yes, I'll have to bend a principle, but I won't have to break it: I can buy a prepaid card in a store and charge it up with cash. Okay, so it's plastic, but I have to pay for it in advance, with cash, and it will have a limit. (On the same principle, I can also use a prepaid card as an emergency backup if I travel).

7. Say goodbye to debt. I pay my cards off in full every month, but a lot of people don't. They use their cards to borrow, and it's a financial disaster. We've seen what the overuse of debt has done to our economy. According to Bankrate.com, the average card charges you 14% interest. Many charge a lot more. And you're paying with after-tax dollars. As an illustration, you'd have to earn at least 16.5% on the stock market (before long-term capital gains tax of 15%) just to keep up. Good luck with that. Says New York University's Stern School of Business, since 1928, U.S. stocks have produced an average compound return of just 9.7%. And Bankrate calculates that someone who buys a $1,000 item on a credit card charging 14% interest, and merely pays 2% of the balance each month, will end up paying $1,750 for that item. It will take 110 months to pay off the bill.

8. Privacy. Credit cards are great for tracking people. They tell you exactly what you bought, where and when. (Throw in all the data tracked by your smartphone, your iPad and so on, and we're basically rats scurrying around in a Perspex cage while marketing strategists study our every move). I have to confess I hate it. And I love the privacy and anonymity of cash. Last week I meet my wife for lunch. But I stopped by my bank first to take out cash. It's none of American Express' business.

9. Cash rebuilds the link between what I earn and what I spend. I remember back when I got my first job: I started calculating how much everything I spent cost in terms of hours worked. That new CD cost two hours of my time, and so on. It was a good discipline. Credit cards weaken the link. It's no wonder that the rise in plastic has resulted in an explosion in the numbers living beyond their means. (Is it also a coincidence that the rise of the credit card has also coincided with the collapse in unions? Before VISA, if you wanted a fancier car or vacation next year, you needed a pay raise).

10. Cash helps people I want to help. The money goes to the merchant and his suppliers. When I go into my local credit union to cash a check, I'm keeping a couple of local tellers in work. Credit cards? I'm helping finance bank executives, marketing teams and call centers in India. I am sure they are all fine people, and I wish them well. But if I had to choose, and I do, I would rather help my local merchants and credit union staff.

I agree with Brett specially about his view that the banks and merchants are going towards accepting credit card payments ONLY and not cash. This makes the banking system mighty by having the ability to pore into every transaction we make using our credit card and therefore our personal lives are at stake too.

As for me, I will go the way that Brett is going... only cash!

To your debt-free life,

Jimmy

Source:http://finance.yahoo.com/banking-budgeting/article/113093/reasons-cancel-credit-cards-smartmoney?mod=bb-budgeting

Get out of Debt. All debt!

The Good book, the Bible, is right when it says that "the borrower is a slave to the lender" (Proverbs 22:7).
People in dire financial need usually resort to borrowing. If not checked, they become addicted to it. The only solution they see is to borrow from the lender. A piece of advice: shun borrowing like a plague!

For those who are in debt: get out of debt, all kinds of debt!
Here are five (5) strategies to free yourself from the lender:

1. Perform what David Ramsey calls "Plasictomy". Cutting your credit card and using cash only.

    There is no positive side to credit card use. I suggest you use Debit Card instead. It keeps you

    constantly aware of your financial condition and prevents you from buying impulsively and unnecessarily.

http://www.flickr.com/photos/434pics/3495447828/sizes/m/in/photostream/
2. Don't pay the "Minimum Amount" suggested by your credit card company
    Credit Card company are loan sharks! When you pay minimum amount you end up paying your
    debt in 32  years.

3. Pay credit card balance beginning with the one with the lowest balance. If you do, it feels like you're
    doing something to eliminate your debt. I did and I got rid of one credit card and it feels so good.

4. Negotiate. The credit card company is eager, so eager to have your business. In this regard, they are

    open to negotiating anything you put on the table like interest rates, annual membership fee, etc.

    I still have one credit card debt, which I am trying to manage and eliminate. Every year, I request my credit card company to reverse the annual membership fee they charge me

    and they gladly oblige. This year, I did the same and to my surprise, they told me that from this year on they will no longer bill me the annual membership fee. Just one of those fees you can deduct from your debt. It feels so good!

5. Talk to somebody, please. There's help. Share your burden with someone you can trust. Don't suffer alone about your debt situation.

To your debt-free life,
Jimmy

2 Things You Can Do With Debt

On my way to the office, I have breakfast at Burger King near the Rotunda in Quezon City. Why not? You see, almost daily, I bring my breakfast, which is prepared for me by my cousin. Do you want to know what my favorite breakfast is? 

My Morning Power Drink
Well, before we go there, I also want you to know that we follow a daily regimen of drinking a dose of Vitamin C, the natural way. Everyday I squeeze Twenty Eight (28) pieces of the local lemon called "Calamansi"in a glass and drink it. That's it! I learned this from Bo Sanchez in his 52 Healing Habits. My wife and I take 28 pieces of Calamansi (local lemon) each almost daily. This is our morning power drink! Uhmm, why did I tell you that? Why do we drink Calamansi? Well, Click this, and let Bo explain it to you better.

Breakfast
Back to my favorite breakfast, One (1) hour after drinking our morning power drink. My favorite breakfast is Fried DILIS (anchovies) with cut tomatoes and a cup of rice! Almost daily!!!!! 


Frugality
You see, I save a lot by bringing my favorite breakfast with me and eat it in my office. Savings is the issue here. If I eat at McDonalds or in this case at Burger King, it will cost me P125.00! Compared to my favorite Dilis (anchovies) breakfast which will cost me only less than P25.00! That's a lot of savings! Every centavo counts if we are serious in getting rid of our debts.


Treat for me
But that day, I can afford to treat myself for breakfast at BK. You see, in our budget, my wife and I allocated an amount for "Entertainment". The money put in this item can be used for treating ourselves or our friends. We can do this because there is a budget for it.


Two (2) Things you can do
Now back to my main issue about debt. Do you know that debt is a reality of life. If you are in debt, there are two things you can do: 
1. You can accept it
2. You can do something about it


If you accept it, you wallow in it and it becomes your lifestyle. You will have every reason why you are in debt and will be in debt. But the truth is, nobody wants to be a slave to debt and to a creditor. 


Another way is to do something about your debt. I recently had an exchange of ideas with Bradd Chaffee. I posed a question on how one can get rid of his debt if his income is not even enough to cover his expenses. He gave me a simple but practical answer: increase your income! Whoaaa! So simple yet we often miss it. 


The best way to get rid of debt, after doing all you can to reduce it, is to increase your potential to earn more money. How do we do that? SELL ANYTHING!

• Sell items that are stored in your house and have not been used for a long time
• Buy and sell item on Sulit.com.ph. I know people who makes money doing this on the internet. LAWAY lang and puhunan. Their capital is just their "Saliva".
• Recently, I attended a real estate seminar because I want to explore selling REAL ESTATE PROPERTIES. If you sell MILLIONS worth you get MILLIONS too.
• So SELL, SELL, SELL ANYTHING THAT WILL GET YOU INCREASE IN INCOME.

But many people are afraid to go into selling. Here's my recommendation: Be willing to be trained. Invest in yourself by training yourself how to get those deals that will give you increase in INCOME. I tell you, you will never be the same again.

To your debt-free life,

Jimmy

P.S. Recently, I enrolled in Jomar Hilario's Online Mentoring Club so I could learn how to blog. It's been almost six (6) months and I am getting better. This blog that you are reading is a product of what he is teaching me. I have not yet submitted this blog and monetize it through Google Adsense. Once I do that, I start earning passive income.


P.S.S. I plan to invest again in myself and plan to attend Jomar's Online Wealth Breakthrough Seminar to be held on June 28, 2011. You see I want to move to the next level and I need to be equipped to know how to SELL products through the internet. I want to bridge the gap between my skills in blogging and my GOALS, to earn extra income!!!!

The War of Debt is On!

The rate of consumer credit defaults in the Philippines is almost triple the average in Asia (Malaya (2008))

• ·         Consumer loans accounting for only about 10% of total bank lending and less than 5% of GDP.
• ·         Philippines is a consumer-driven economy, which creates strong demand for consumer loans, with personal expenditure making up 77% of GDP (Fitch Ratings (2006)
• ·         High delinquency rates have accompanied the growth of retail lending, especially unsecured lending, where overextension of credit to low-income earners has resulted in a non-performing loan (NPL) ratio of almost 20%.
• ·         Credit cards provided by the banking industry are an emerging source of household credit in the Philippines.
• ·         About 3% of the 5,000 sample household respondents have a credit card and around 4% expect that a household member will apply for a credit card within the next 12 months.
• ·         Total credit card receivables (CCRs) outstanding of universal/commercial banks and thrift banks, inclusive of credit card subsidiaries, reached PHP 116.1 billion at end-December 2007
• ·         Of the total CCRs, PHP 16.518 billion, or 14.2%, was past due as of December 2007, compared with 14.3% (PHP 15.199 billion) in the third quarter of 2007
• ·         The trend in past-due CCRs could mean that more credit cardholders are having difficulties making their payments on time.
• ·         The rate of consumer credit defaults in the Philippines is almost triple the average in Asia (Malaya (2008))
• ·         On average, consumers end up paying a 3.5% rate per month, or 42% per annum, including the basic interest rate, fees and charges. 
• 
  
• The way I see it, the Philippines is really a consumer market. We have been programmed to be consumer minded  rather than investor minded people. The way out of debt is to discipline ourselves in managing our finances well. We must be buying on cash basis from the savings made. Avoid using your credit card and free yourself from the 3.5% interest per month.

http://www.flickr.com/photos/niznoz/8402838/sizes/m/in/photostream/

Source: http://www.bis.org/publ/bppdf/bispap46m.pdf

The Modern day Slave

If you are in DEBT, you are a SLAVE, a modern day Slave!

In Israel, in the olden times, the Year of Jubilee was celebrated every seven years. People looked forward to this seventh year because it was the year when people were released and freed from the bondage of slavery. If they owe anything, their debts were cancelled. If they sold their land, it was returned to them. It was one of the most joyful time!

But why do they become slaves in the first place? When people owed something and couldn't pay, they become slaves to their creditor. Their creditor could sell or even kill them. Today, this still happens. Creditors could make your life miserable.

“Debt is a slavery of the free” Publilius Syrus

Today, many are still slaves to their creditors. They have allowed themselves to purchase items on credit hoping that when their paycheck comes, they can settle the debt. People buy appliances, cars, personal items and even groceries on credit. Unfortunately, the more they buy on credit, the more they wallow in debt until they can no longer free themselves from the slavery of debt and the tyranny of the creditor!

http://www.flickr.com/photos/orphanjones/762062828/sizes/z/in/photostream/

“The only man who sticks closer to you in adversity than a friend is a creditor.”
-Unknown

“Live within your means; never be in debt, and by husbanding your money you can always lay it out well. But when you get in debt you become a slave. Therefore I say to you never involve yourself in debt, and become no man's surety. If your friend is in distress, aid him if you have the means to spare. If he fails to be able to return it, it is only so much lost.” Andrew Jackson

There it is! Many times we miss the answer. We complicate things in life. The first step towards living a debt-free life is to follow the advice of Andrew Jackson, “live within your means”! I suggest that you take stock of all your debts and choose today to stop buying things on credit. Do not spend more than you earn. Live within your means.

P.S. There is a way out of this predicament. One thing you need to do is educate yourself and learn from those who have been there and have overcome their debt problems.

As they say, don’t go to a drowning man for swimming lessons. Never again will I be a slave to my credit card. I have learned my lesson, the hard way. Today, I am privileged to help people put their financial house in order. You too, will be set free from debt. Decide today to be debt-free. You can!

To your debt-free life,

Jimmy

MOUNTING CREDIT CARD DEBT

The first time I applied for a credit card, I went through a rigid process called “credit investigation”. During those days, the credit card company will make sure that you are capable of paying them. So, they ask you a lot of things regarding your income, your billing statements, the house you live in and many more. And do you know what? The process takes time, so you have to wait for their approval. Credit cards in those days were precious commodities. When approved, you feel like you’ve won in a lottery.

Today, with so much competition, the credit card companies are giving away the credit cards. They just mail it to you and all you have to do is receive it, sign it and you’re in. Others set up a booth in malls and offer their cards to anyone who especially if you’re an existing card user. So easy!

                                          http://www.flickr.com/photos/23327787@N08/3027534098

So, here you are with your new credit card and you start using it. The problem comes when the bill starts arriving every month. Today, many use the card as if that is their money. They forget that credit cards are used for convenience purposes. It means you have money but instead of paying cash you use your card so you won’t have to carry cash anymore. You pay on time when the bills come.

Do you know that the credit card companies don’t like it when you pay on time? They love it when you default on your payments because they earn from the interest charges and late payment penalties. They also have the “minimum amount due”, which means you can pay the "suggested" amount and worry about the principal later. So you end up with mounting debts! And here’s the thing, the interest is compounded monthly!

If you’re in this rut, let me tell you there’s a solution to your problem.

I came across Sha Nacino, through Trace Trajano. I’ve joined his Buy Your First real Estate Deal club. Trace co-authored a book with Sha that will help you get out of debt. Sha used to be in debt from using her credit card. The good thing was she saw the problem and she made a decision to do something about it, thus the book.

Here’s the nice thing about it. They are giving you a FREE chapter on how to pay-off our debts in one year or less. Wow, isn’t that good news?

To your debt-free life,
Jimmy Ching

P.S.What are you waiting for? Its time to do something about your debt. Click on this link NOW and change your life to a DEBT-FREE LIFE!

Eliminating Debt

Face the fear. Attack the debt. Be free.

Is debt overwhelming you,
or are you overwhelming it?

If you think about it, the cover of this package could illustrate both scenarios – a life vulnerable to a mounting flood of debt, or a life rising above it toward a stronger financial position. Which best describes your current situation?

There’s no denying that debt takes a toll on us financially, emotionally, relationally, and spiritually. That’s why this study is so crucial! In less that two hours, the Eliminating Debt video study will help you create a plan to attack your debt and be free from the dangers of debt dependence.

Main topics covered:

• Five reasons why people dive too deep into debt
• Steady, practical ways to eliminating debt
• How to address special issues like credit scores, dealing with creditors, and bankruptcy

I believe we can really benefit from this study material from the Crown Ministries. They are reliable. They are now here in the Philippines doing studies and mentoring through the ministry of Christ's Commission Fellowship. It is worth looking into if you are serious in eliminating debt in your life. Live a debt-free life!

Article source:http://www.crown.org/debtplan/Main.aspx?aid=SCHOM