Welcome together, we're gonna explore our personal finances and figure out how to improve them. Whether you're just getting started in life on your finances, or you may already have a home and a car payment and you're struggling to get credit cards under control, are you getting a later start in life on saving for retirement, reducedebt increasewealth.com is a podcast to educate those to improve personal finances, whether it's eliminating debt, or making smart investments. So let's now get started. This week on a talk about the plan you should have in order to reduce your debt. And I have an interesting article that highlights a lot of things that I've already told you. So I'm going to go and read and read it and let you know what it is. It's from in charge debt solution.org. So it's a very good program. There's some things in there that I agree with and there's some things in there I don't quite agree with but let's go to the article now and get that started. This article is from InCharge Debt Solutions. That Do It Yourself debt management program, a template for debt relief. Are you a do it yourself person when it comes to broken windows or leaky faucets or credit repairs in your home? Credit repairs? Yes, fixing your finances could be as much as a DIY project as tackling window and Fifth faucet problems. Most people look to credit counseling agencies for help when credit card bills, medical bills and other unsecured debt are dragging them under credit counseling agencies offer recommend a structured debt management program. A three to five year plan eliminates that, in exchange for helping to secure lower interest rates and consolidating your debt payments. They collect their monthly fee typically around $50. Can I set up a debt management program myself? Yes, you can. It starts with calling your creditors and requesting commendations so you can get ahead of your debt. Some banks will take your call. Chase is committed to providing customers who are experiencing financial hardships with the right solutions based on their individual situation says Jake Chase Bank Media Relations Officer Lauren Francis. We encourage customers to call us to discuss options that may be available to them including but not limit To payment arrangements, payment programs and debt settlements, but at times research suggests that customers meet with reracked. reputable credit counseling agencies if their financial situations exceeds their ability to pay, how to set up a debt management program. To set up a debt management program on your own, follow these steps slowly, carefully and thoughtfully. To eliminate debt problems at home. One, create a plan using a debt reduction spreadsheet, download our free debt reduction spreadsheet to get started and put your expenses and a spreadsheet will help you calculate your repayments organize unsecured debts by name, balance due interest rate, monthly payment and due date. If you don't know who you owe, get a copy of your credit report from annual credit report calm and another area of spreadsheet Oregon's eyes, monthly expenses that need to be paid first, such as rent, utilities. Food, car payments, student loan payments, child care etc. List of all sources of monthly income, subtract monthly expenses from monthly income. What is less is how much you have available to pay off unsecured debt. Step two, negotiate your interest rates. Call your creditors and explain your dilemma. negotiate for lower interest rate and monthly payments based on the amount of money you have available. Go back to spreadsheet and note any concessions they made on interest rates, late fees etc. Keep negotiating at the math isn't comfortable for you. When you reach an agreement set up an automated payment system so you don't miss that payment. remembers counselors can cancel any concessions they make. If you miss out just one payment three boosts your income. Search for ways to increase your income. selling items on eBay, Craigslist or yard sale is a good start finding a second job for example. Delivery Man, bartender, waitress etc. as another option, use the extra income towards paying down the debt quicker or building in emergency fund. Step Four. Limit expenses. The best thing you can do is to put the credit card away something has to change. Otherwise, you'll be back where you started in a few months. start tracking your expenses with a budget downloading a budget app to your phone might make that whole lot easier. Use cash and put the cards away except for emergency and or very occasional. Use that management plan example, let's review a debt management plan example. Set a goal for help click quickly you'd like to pay off your debt. Let's go with five years or 60 months. Divide your current balances by 60 to calculate how much principle you must pay off each month. For example, if you have 12,000 in debt, you'll have to pay $200 a month in principle payments on loan to pay off your debt in 16 months. Now let's figure out how much you need to add in interest payments to achieve this goal for an individual credited creditor do the same. Consider that yo Bank of America 30 $500 the monthly principal payment to pay off your debt in five years would be $58 and 33 cents 3500 divided by 60. After negotiating your interest rate, multiply your new interest rate by the balance for your that creditor take this number and divide by 12. Let's say you Bank of America $3,500 and you can negotiate your interest rate down to 9.99%. The balance multiplied by the interest rate 3500. Multiply point 09 equals $315. Now divide this number by 12, 315 divided by 12 equals $26 25 cents and the priprical and interest together 58.33 plus 26.25 equals $84.58. Now keep in mind that the interest payment would decline each month as your balance declines. You can keep this amount the same to pay off your debt faster, or you can work with an amortization table to modify it each month. Compare your debt management program with nonprofit debt management. Find out if you qualify for a debt management program from a non profit credit counseling agency and get an estimate for accounts confer a consolidated monthly payment. How does it compare with what you're able to negotiate on your own? If your payments are higher than the estimates that may indicate that you're not able to get the same interest rate concessions as a professional agency? In this case, it might make financial sense for you to pay for a nonprofit agency to administer your debt management program. If your payments are lower. Congratulations, you did the work yourself and save some money that could be applied towards paying off your debt even faster. Do it yourself debt management, pros and cons. It's up to the consumer to weigh the pros and cons of their particular situation. On the pro side, you're learn more about your spending habits, some of which may surprise you, some of which will displease you and all of which is wisdom to be gained. There is money to be saved, sometimes considerable money. If you successfully negotiate with the banks, you might get interest rates reduce and eliminate fees. creditors and debt collection agencies will stop calling you once you start making regular payments. It will take a while but as long as you're making and not missing payments, your credit score will improve. Finally, there's a great deal of anxiety when debt hovers over you like a thunderstorm. There is a great deal of relief when it starts going away and even more when you're the one making it go away. There are considerable cons and starts with the fact you won't receive the free credit counseling offered by nonprofit agencies know you receive help budgeting your expenses properly, so there is in enough money to pay down the debt. Beyond that something make DIY DMP a questionable move. Are you familiar with how a debt management program works? If not, do you have time to teach yourself? Do you know where the credit credit report that lists everyone you owe? And how much? Do you know where to get a credit report that lists everyone you owe? And how much do you know all the decision making people and all the financial institutions you owe money to? Can you create a budget that takes care of the necessities like food, rent, utilities and transportation, but leaves room for an affordable monthly payment to eliminate your debt? What happens if your calculations how much you can afford to pay every month are inaccurate? What happens if unexpected Expected expense appears and your expenses suddenly shift much higher able to persist through what usually is a three to five year process. Will you look for for the cause of your problems and take corrective actions along the way? Will you be conscientious enough to make payments on time every month, creditors were cancelled that concessions they make an agreement to a payment program if you miss even one payment, credit counseling agencies do all that pro and con and, and through you have to pay them it's a phenomenal fee when you consider that time and work involved. As is the case in all DIY projects, be careful it will be this will be a time consuming project just like the DIY plumber who floods the house when the pipes he repaired a day earlier goes by burst, there is a chance that things won't work out. In this case mistakes can cause a major eruptions in your finances that drowned more debt. Each banks has a different policy and each case has to be considered on an individual basis, but customers might get a better answer if they go directly to the bank. nessa Fidesz, Deputy Chief Counsel for the American Bankers Association said, it depends on what kind of history they're had with the bank and the situation they're in. If this isn't a birth aberration, because they lost their job or went through a divorce, this is something they take into account. It's also positive if you have a checking account or taking out a car or a home loan. These are things that might work in your favor as far as getting a positive resolution. Okay, they aren't going to do it yourself. Debt Management Plan, which is basically what I've been talking about. There's if you go to their website in incharge.org I believe that was me check. Make sure it's Yeah, in charge. dot org. And then there's an article here, do it yourself debt management, that's the one I just got done reading, there is links in there for that they have a spreadsheet you can download to help you I highly recommend taking a look at that if you're struggling. Basically everything I've been telling you to do, list out what your payments are gonna be, you know, make the minimum that what they don't tell you is make the minimum payment of all your credit. They're, they're telling you to call your creditors and try to negotiate a lower interest rate. And my thoughts on that is you can give it a try, like they said deed Do you know the people that are the decision makers that can actually do that for you at you know, at the different banks and credit card companies and whoever I never done that. I my opinion is you have enough income to qualify for that much debt. Now if that's the case, Should have enough income to pay that debt black and white to me it seems like fairly simple you know if you don't have enough income Why did they give you that credit card? Why did you qualify for that much debt? So that's my point. So in with that thinking he should be able to recognize where you're overspending your money, make adjustments on that have enough income assuming your income didn't go down for some reason, have enough income to pay your debt and still get by now, that's not saying that you didn't over finance your home. Say you want with 60% of your monthly gross income is your house payment. You're gonna it's gonna things are be tighter. If that's the case, it should be somewhere between 15 to 35%. The lower percentage of Your gross income that you make your home payment, the more leeway you're going to have on other things in life. So, don't over buy your home, don't over buy your car. So yeah, you got to keep your spending under control. And that's what the article is basically trying to tell you. You know, if you go then do it yourself, you're gonna know where you're spending your money is some things you may like some things you may dislike, but overall, the article stated you will gain wisdom and that so much truth to that. So that you know, check out your spreadsheet, it might be good, there's some other things in there that be useful tools for you. I think you can do it. I'm not a big person on credit counseling even the nonprofit's if they charge you $50 a month. And they say it's gonna last five years. That's $3,000 you paying them instead of reducing your debt, that's my point. And then maybe they'll make it eight years, because they're looking to make money. say they're nonprofit, but they still got bills to pay. So the longer they stretch it out for you, the more money they're gonna make. So are they really working in your best interest? At just my question, you know, I don't know, I would hope so. But you never know. So be leery and beware. And we talked about the debt cancellation services 15 to 20% of what they cancel at that gets pretty expensive because remember, you're trying to pay off debt, you're trying to reduce what you're spending money on. So by paying these counseling agencies to help you, you're not really achieving your goal that you're that you're you're striving for Now a quick word from my sponsor. isotonic. I said tonic is a vitamin. It's a way you take a vitamin. It's how your body is built to take vitamins with isotonic rapidly as soared by the body highly concentrated of vitamins and minerals and maximum results. I've been taken isotonic vitamins for the last six years and I rarely get sick. I highly recommend taking isotonic vitamins. With standard tablets you have minimal assumption and diluted nutrients. I take the daily essential kit which is all the daily essential vitamins that you need for your body on a daily basis. Go to my website, reduce that increase wealth.com upper right hand corner click on the heart go to the website. Let us show you the future of vitamins this article is from my debt relief plan.com avoidable mistakes everyone repaying debt makes there's no single way of repaying debt. Well, to an extent, there might not be a single right way of repaying debt. But there are plenty of wrong ways to go about the process. repaying debt is incredibly time consuming, requiring a huge amount of willpower often with no lead ups for months on end. If you're going to invest time into going through the repayment process, it follows that you should want to get it right below Calla gated together are the oh so avoidable mistakes that people tend to make when trying to pay off debt falling off the wagon and taking days if not weeks to climb back aboard. When paying off debt everyone literally every single person has ever tried to pay off their debts will have a moment where they can't resist a splurt. It might be big or small, but the key point Is that it's outside of your budget and you bought it anyway, to a large extent to slip is completely inevitable as the simple dollar calm points out that is inherently stressful and will make knocks on your self esteem. While you may able to cope with the mental impact of debt repayment some of the time occasionally you're just not going to be in the mood. If you stray from your budget, then just take a deep breath, put it behind you and hop right back on the wagon topping all usage of credit and thus severely damaging your credit score. as ridiculous as it sounds. choosing not to use credit can actually damage your credit score as credit repair calm notes, lenders want to know that you are a viable candidate to borrow money. They want to know you can manage your account and make repayments they're not going to be able to display this history if you do the classic. Paying off my debts move at cutting up all your credit cards, you need to show you're still a financially viable person so that your credit score doesn't tank. Keep one card open and use it to buy something small every month. You should then pay off the balance in full so you can avoid interest paying back too much and leaving your budget dangerously short for the month. It's generally a good thing if you're setting aside a portion of income so you can repay your creditors ever it becomes problematic. If you enjoy repaying debt so much and a lot of people do that you go a little overboard on your calculation. Yes retained repaying debt is important, but you still have to live try and always ensure you have money set aside for essentials a couple of fun entertainment nights and a contingency fund. If you have everything leftover from these accounts at the end of a month you can still use them to repay debt now you know that the common mistakes are you can avoid them and ensure that your debt repayment journey is as smooth as possible. Okay, avoidable mistakes, everybody makes a make some good points. I think I've covered them in over the past weeks, falling off the wagon, meaning just going out and spending money on things you really don't need at I guess that's what they mean about that you got to stay on your budget. But I don't say cut back, I just say under control. plan everything you're going to do. Don't you know, if you want to go out to eat dinner once a week, that's fine. Just put it in your budget. If you need to buy clothes or back to school stuff, once a year, put it in your budget. So you're not really falling off the wagon, you're just controlling the wagon. So if you you know, there's gonna be months where you get a little bit farther behind and they're gonna be months where you can get way far ahead, but our goal overall goal is to pay down debt. So if you can stop Using your credit cards or, stop using credit and pay for things from your monthly income and still have money left over to pay down debt you're going to be better off and stopping all the usage of credit. I told you before in the past, you know, episodes that you don't want to cancel your credit cards. Once you get them paid off, you want to leave them open, and they just said cutting up your cards. But if you quit using your cards for too long of a period of time, I think it's two or three years it may be longer I don't know if he the credit card or the bank might cancel that card on yet which could affect your credit score. hopefully by then you'll have enough debt pay down your credit score is going up and it won't hurt you too bad. So not necessarily use them every month but maybe once a year. Maybe Every couple times a year and pay them off right away. So if you got them down to a zero balance, you want to keep a zero balance. So only use those cards was a zero balance, the ones you're still making payments on, they're not gonna cancel you, if you owe them money, they're, you know, so there's no problem there. And then yes, paying back too much. And that was a big mistake that I always made before I had my plan that I shared with you set up an emergency fund, put all your money into the emergency fund. And once you have enough in there, then keep putting money in there and then maybe once a quarter or whenever you got 2,3,4 thousand build up because as you're building up that money, it's still available for you to use as an emergency fund if something would happened, because our main goal is quit using debt. So if you Or what I used to do is Oh, I got an extra 200 bucks on this pay this credit card, extra 200 bucks, then I was scrimping and saving and cutting back on everything else because I needed that $200 because I forgot there was something else that I owed on and then I had to pay it and I didn't have enough money. And that's probably what they are referring to and are calling it a contingency fund. I call it an emergency fund and you're going to use that savings account one you're going to leave a minimum balance in there for your emergency fund and never goes below. You're going to didn't build it up until you have a whole bunch of money and then you can make a large lump sum payment on one of your credit accounts to pay it down fastest possible. And I know that doesn't seem to make sense, but boy, it works really good because, you know, as I gave you my numbers the other day, you know, I I reduced my interest as well. I've paid an interest by over 30,000 in three years, that's about 10,000 a year probably more in the early years and later, in the later years because way interest is calculated on the unpaid principal and the unpaid principal being lower, you pay less interest. So So that said, you know, the D Do It Yourself plan, if you can call your credit cards and get them to reduce to rate, go for it. I am not for or against using a debt Counseling Service, but they're a member, they're going to charge you a fee. And that same money can be used to pay down your debt. Instead, if you just have the wisdom to look over your finances and keep things under control, you should be able to do it on your own. One of the ways you can get your debt paid down is to either have more disposable income, you can increase your earnings. maybe find a new job that pays more or a second job. But then I just found this article that in the same as before and me see it's my debt relief plan com. Use couponing. If you don't use coupons to buy stuff, you're just throwing money away. I mean, it's 10,20 cents, maybe, if it's something that you are going to buy anyway, don't use a coupon to buy something that you're not going to normally buy. So if you can find coupons for normal stuff that you buy on a regular basis, but by all means use them because that's just reducing what you're spending. Also, if you work in a big city and you drive to work and you pay for parking, I just didn't think of this until now. take public transportation if you can, if you go back and forth to work five days a week and your work the same hours and you don't need your car during the work day to do a work related activity, you should be taking public transportation. I did that for years and I rode my motorcycle in the summer, so that I could get out of the pay for my monthly parking which, where I live, it wasn't a lot, but it was, you know, 35, 40 bucks a month that I could keep instead. And you know, then if you don't drive your car as much your gasoline and your other related, you know, your gas in your maintenance bills or go down also because you won't be using as much. And then a mention to transfer the balance if you have a credit card was a zero balance and they offer you a 12 or 18 month transfer option where you transfer a balance from another card and they charge us a three to 5% for the transfer, then no interest for 12 to 18 months. do that but beware you want to do it and be able to pay that amount off within that time period. So it's a no interest free loan almost so it's fairly cheap. And he can also switch your energy supplier for your home to get better rates and stuff. That's one of the things you can do. Just like change in your phone service, you can change your gas supplier for the home your electric supply, and nowadays because it's all been deregulated, that's the end of another episode. I hope you found it useful. And if you'd like to share this episode with your friends, please do so. I'm open for any suggestions for improvement, or for information that you would like to talk about in future episodes. You can go to my Facebook page and leave me a message more than glad to comply. To find my Facebook page go to reducedebtincreasewealth.comand click on the Facebook icon to go to my Facebook website.