Hello, I'm your host, Mr. Chuck, I retired accountant turn truck driver, I reduce my debt in a relatively short period of time, debt reduction to achieve financial freedom takes commitment, confidence, determination. This is a review of a debt reduction. If you done your personal finance plan that we talked about the last episode, man, you have credit card debt and you're trying to get your debt under control. Or maybe you're just trying to pay off all your debt, you need to have a debt reduction plan. And having some type of debt reduction plan is a must to get rid of credit card debt, and or Oh other debt. There are things to do that's gonna help you and things to avoid at all costs. In my article links, I have two articles that you probably should refer to. And that's what we're going to talk about today. By now, your Thanksgiving dinner is over its first of December . And it's a good time to go back and review your budget, if you have a budget, if you don't have a budget is a good time to set a budget up because you're going to be going into spending mode for Christmas. So it's gonna be nice to know how much money you have available to spend before you spend it. To get your keep your debt under control. But a debt reduction plan and this is my debt reduction plan was five things I'm going to review. Number one, quit creating new debt. That speaks for itself. Number two, make the minimum payment on all your debt no matter what, at your credit card, your loans, whatever, do not make any additional payments at this time. Number three, set up and create a budget, you got to know how much money is coming in, and how much money is going out before you can get your debt under control. And I'm saying a budget, I'm not talking about a budget to help you save money, I'm talking about creating a budget, so you know what is coming up, and what your monthly expenses are gone to beat. Once you get that figured out, and then you see what you're spending money on, you can identify the things you no longer need or no longer using and get rid of it and save some more money. Set up an emergency fund, an emergency fund is nothing but a savings account that you put money into. To help you when something comes up that you need to pay for. You can number one quit creating new debt, you have the cash, you have the money in an emergency fund to cover that emergency, he should start out if you don't have anything, shoot for $500. And then over time, build it to$1,000 and eventually build it up to three to six months worth of expenses that you're gonna have, in case you're going to lose a job. That's what an emergency fund is for. And then number five, pay additional money on your debt. And that's a cycle. You got to do all of these things at the same time, never ending consistently. And that if you're just getting started, it's gonna be a slow process, it's gonna take you maybe three to six months before he had that additional money to apply to some debt. Over time as your debt is decreased and your same, it's going to me coming up faster, it will speed up. It's a slow, long process, but you can do it. If you stay focused. It can be done. People do it all the time, and you can too. So that's a review, quit creating new debt. Make the minimum payment on all your debt. Set up a budget knowing the money's coming in money's going out, set up an emergency fund and build it up to at least $500 or$1,000. And then over time, increase it and number five, the additional monies that you have in your savings account can be applied to whatever debt you're trying to pay off first. Generally you'll be paying off the high rate Debt first, and then working your way down from there. But the common things people do when they start having credit card problems, the first thing is you might have a credit card with zero or very low balance, and they give you the option to transfer balances. And you can transfer balance, maybe$3,000 onto that card from another credit card, and they won't charge you interest for 12 months or 18 months, whatever their program is at that time, that's a 3% charge, you pay a fee of 3% of the amount of balance that you're transferring. And a lot of people do that. But that's number one, you're not you're still creating new debt, you're not getting rid of that you just moving it from one place to another. The second most common thing people do is a debt consolidation loan. Again, you're not, you're still creating new debt you're getting, you're borrowing money, maybe at a lower rate of interest. And for a longer term, to pay off credit card debt. Let's say the only problem with that his people don't have the willpower to quit using those credit cards. And next thing they know they got this loan, that they may be paying $300 a month on or more, and then their credit cards balance go back up again and their same place, but they're worse off because they got another loan that he had created more debt. So unless you had the willpower to quit using those credit cards and keep your credit cards under control, a debt consolidation loan may work for you or it may not. But these are the common things people do, then there's bankruptcy. If you just can't pay off all your debt within a five year period, or your debt is more than your annual income, you may be a candidate for bankruptcy, but you're gonna have to go to a debt counseling service in order to qualify to do a bankruptcy and a debt Counseling Service is they're gonna charge you a fee to take care of what you can do yourself for free. So why pay someone to do what you're gonna do, you still have to do everything to tell them. And that's gonna hurt your credit score, because they're going to tell you don't pay your creditors pay us directly. And then we'll take the money and pay to the different creditors based on our terms. And they want to get the money directly so they can take their fees out first, and then whatever is left to pay it towards your debt. So that's gonna hurt your credit score, and it could take 8 to 10 years to achieve anything. So do it yourself is my recommendation. If you do the five things, I'm Tanya, quit creating new debt, pay the minimum balance on all your debt, do a budget, knowing what's coming in and what's going out, set up an emergency fund because if you have the money in a savings account, and something comes up, you're not gonna create new debt, and five, when your emergency fund is at least a minimum amount plus a couple 1000. Take the extra money out of the savings account and apply it to your debt. Keep that in mind because that's what you got to do in and out no matter what. Now let's get to an article. Debt Relief, understand your options and consequences. Pretty much what I just talked about. When should you seek that relief? Consider bankruptcy debt management or a debt settlement. When either these are true. You have no hope of repaying unsecured debt, credit cards, medical bills personal loans within five years, even if you take extreme measures to cut spending. The total of your unpaid unsecured debt equals half or more of your gross income. So if you take extreme measures to cut spending, what is that? Well, that would be if you have two cars and you owe a loan on both cars, you get rid of one, sell it and pay off that loan. You just got rid of some debt, buy a used car and pay cash for it if you can, but most likely you're gonna have a bad credit score so it's going to be hard for you to borrow new monies. On the other hand, you could potentially repay your unsecured debt within five years. Consider a do it yourself plan. This is what I'm talking about. This should include a combination of debt consolidation, appeals to creditor and Stricker budgeting, beware debt relief can make things worth. Debt Relief industry includes scammers who are eagles, eager to take the little money you have. Many people who enter debt relief programs fail to complete them, you could end up with debts that are even bigger than when you started. Be sure you understand and verify these points before entering any agreement. What you need to qualify what fees you will pay, which creditors are being paid and how much if your debt is in collections. Make sure you understand who owns the debt. So payments go to the right agencies, and the tax implications. If you are using a credit bureau or somebody a counselor, and they reduce your debt for you, they get some debt relief and they remove some debt. There's a good possibility if you're not in bankruptcy, that that's going to be the gang get a 1099 at the first of the year saying you had some debt reduction and that becomes income to you. So that's the tax implications you got to look out for. And they will tell you though, just happen. That way relief through bankruptcy. Chapter seven is the most common. It won't erase taxes owed or child support obligation student loan debt is unlikely to be forgiving. Your credit score is going to go down and it because that bankruptcy is going to be on your record for 10 years. If you have used the cosigner your bankruptcy filing will make that cosigner solely responsible for the debt. If that continues to pile up, pile up, you can file another chapter seven bankruptcy for eight years. It's not for everybody. And that should be your last resort, a debt management program that settlement programs. Again, if you make a settlement on your debt, and you pay less than what you owe, you're gonna get some tax implications and you may owe income tax on the income the debt that was relieved. Do it yourself what not to do. Sometimes overwhelming debt comes with devastating swiftness, a health crisis unemployment or a natural disaster. Or maybe it came little time and now creditors and collection agencies are pressing you pay and you just can't. If you're feeling overwhelmed by debt, here are some things not to do. Don't pay us your current debt, like a car payment late in order to pay an unsecured one like a hospital bill or credit card. You could lose the collateral that occurs that that to your car, your car. So don't if you have secured debt, your home your automobile. Because the home is collateral, the automobile is collateral on the loan. pay those first. Don't avoid paying them in order to pay off a credit card or paid a credit card payments. don't borrow against the equity in your home, you're putting your home at risk of foreclosure. He may be turning unsecured that that could be wiped out in bankruptcy and she could that that can't. So don't use the equity in your home. Don't get a line of credit against your home in order to pay off your credit cards. don't withdraw money from your retirement savings in order to repay unsecured debt. This is financial suicide. think twice about borrow money from workplace retirement accounts as well. If you lose your job, the loan can be inadvertent withdrawals and trigger a tax bill, which is the last thing you need. Don't make a decision based on creditors are pressuring you the most. That may lead to actions that aren't in your best interest. Instead, take time to research your options and choose the best one for your situation. So if you have creditors that are medical providers, and hospitals, etc. You can set up payment plans with them and pay very little on a monthly basis. Don't pay your hospital or medical bills with a credit card. That was an article in the second article is Federal Trade Commission. consumer information coping with that Their first one was from the nerd wallet I believe. The first article is from the nerd wallet calm. That relief, understand your options, Federal Trade consent coping with that they're basically telling you self help develop a budget, know what money is coming in and what monies is going out. And you can answer you get the budget set up, you can identify things that you are spending money on that you can maybe either call them up and try to get a reduced plan or a lower cost plan. They have specials all the time, especially if it's a cell phone, cable TV, he shouldn't be paying for cable TV, you should go to streaming, and only have one or two streaming services that you're paying for. Get your spending under control is a first step on getting your debt under control, contact your creditors tell him you're having troubles and give them the reason maybe you're unemployed, maybe you are sick and in the hospital, and then you became unemployed because you couldn't go to work, then you lost your hospitalization because you didn't have the job. And it's a vicious cycle. I know I've been through it, done it dealing with debt collectors, and they can only call you after 8am in the morning and no later than 9pm at night. And if you give them a written request, then they can stop hassling you on the phone, he just got to send it in writing. Whenever they call me when I was having some problems. I just said cease and desist or I'm going to report you to the Federal Trade people. It seemed to work. It was an idle threat, but it worked. Managing your home and auto loans. Make sure you make the minimum payments on your auto and home loan because you don't want to lose them. You need your home to live in and you need your auto to get back and forth to work or if you're ill back and forth to the doctors. If you fall behind in your mortgage, contact your lender immediately to avoid foreclosures. Most lenders are willing to work with you if they believe you're acting in good faith. And this situation is temporary. So let them know what's going on in your life and you're going to be better off for it. If you're struggling with siffin, significant credit card debt, then there's Debt Relief Services. And they can't work out a repayment plan with your creditors on your own consider contacting a debt relief or like a credit counseling or debt settlement. Depending on the type of service, you might be able to get advice on how to deal with your mounting bills, or create a plan for repaying your creditors. If you do what I said it can be done, quickly creating new debt. Make the minimum payments on everything timely, so important. Create a budget, know the incomes and expenses going out and then try to reduce your spending as much as you can or increase your income. If that's possible. Get emergency fund set up and build up. And then once that minimum balance is your emergency fund is there. Keep saving money until you get a two or $3,000 excess because then you just have a bigger emergency fund. Then take that excess money over the amount emergency fund you want to have on time all the time and apply it to your debt. five steps early, easy over and over and over. Slow to get started as I said before, but it will build up over time. That management plans that settlement plans course a debt settlement has risks. These programs often require that you deposit money and a special savings account for 36 months or more. Before all your debts will be settled. Many people have trouble making these payments long enough to get all even some other debts settled and end up dropping out of the program as a result. Before you sign up for a debt settlement program. We view your budget carefully to make sure you're financially capable of setting aside the required monthly amounts for the full length of the program to your creditors have no obligation to agree to a negotiated settlement for them. Aren't you Oh, so there is a possibility that your debt settlement company will not be able to settle some of your debts, even if you set aside the monthly amounts required by the program. Also debt settlement companies often tried to negotiate smaller debts first, leaving interest and fees on laws, large debts to continue to mount. Because debt settlement programs often ask or encourage you to stop sending money directly to your creditors, they will have a negative impact on your credit report and other serious consequences. For example, your debts may continue to accrue late fees and penalties that can put you further in the hole. He may get calls from your creditors or debt collection owners, debt collectors requesting repayment, he could even be sued for repayment. In some instances that creditors when they lawsuit, they have a right to garnish your wages or put a lien on your home. And if there's a lien on your home, you can't sell that home until that's paid off. And if you're trying to sell the home to pay off your debt, you got to pay off the debt first. So you don't want that to happen. So why use a service to do what you can do yourself. You know the emergency fund, and you can make the minimum payments so everybody's happy got nobody on you. You're not continually paying late fees. Any savings you get from Debt Relief Services can be sitter income and taxable. credit card companies and others may report settlement that to the IRS, which the IRS considers income unless you are insolvent. And solvency is when your total debts are more than the fair market value your total assets and solvency can be complex to determine talk to a tax professional, if they're not sure whether you qualify for this exemption. If you're in bankruptcy, then there's no tax consequences because you're already proved you're insolvent. I'm gonna say most tax preparers are not going to want to deal with that. I could be wrong. They're going to charge you. Use caution when shopping for debt relief service avoid any debt relief organization whether it's a credit counseling, debt settlement or any other server that is charges any fee before it settles your debt or enters you into a debt management plan. pressures you to take voluntary contributions which is really another name for fees. town a new government crowd program to bail out personal credit card debt guarantees you can make your unsecured debt go away. There's no guarantees in life so don't believe them tells you to stop communicating with your creditors but doesn't explain the serious consequences tells you it can stop all debt collection calls and lawsuits guarantees that your unsecured debts can be paid off for pennies on the dollar. Not true. won't send you free information about the service providers without requiring you to provide personal financial information like your credit card account numbers and balances. Don't give them any personal information until you've signed up. tries to enroll you in a debt relief program without reviewing your financial situation with you. And attorneys are the same way. You're gonna go in and talk to an attorney about filing bankruptcy. What's he gonna do? Oh yeah, you can do it pay me first. So beware of that demands that you make payments into the debt management program before your creditors have accepted you into the program. So there is the proper order in which to do things I've never been through that process but your creditors has got to agree to it but they don't have to bankruptcy that scams on and on. And this is the Federal Trade Commission that's from your federal government that you pay your taxes to to help you and they have other articles in here and more detail. I'll be back in one moment with my final thoughts. If you listen to this podcast reduce that increase well on an Apple device. Scroll through all the episodes towards the bottom and you can select write a review and leave your comments and you can rate this podcast I appreciate all feedback. And I thank you for your time in doing so. Now may be a good time to review your Christmas gift giving policies. This because you've done it that same way your whole life doesn't mean it can't be changed. If you're having credit card debt problems, and struggling to pay off your debt, or you're struggling to meet your monthly bills, now's the time to review your gift giving policies and teach the younger children in your family, they may not always get what they want. It may be tough now, but in the long run, you'll be happy you did so that reduction is a long term commitment that you've got to make in order to achieve your goals. Remember, number one, quit creating new debt. That includes Christmas, make the minimum payment on all your debt, set up a budget, know how much money is coming in, and the bills that are gonna be paid every month, every quarter semi annual or annually. He got him know about the money going out. Increase your emergency fund. If you don't have one set one up. Emergency Fund is nothing but a savings account that you park your money in to accumulate so that later you can use it. If need be. Once you have a minimum amount that you set up for your emergency fund, then you continue accumulating your money until you have two or $3,000 over that amount you set. You use that to pay down your debt. But don't use it to make your minimum payment. Make your minimum payment for the month. And then some time after that, pay the additional amount that you want to apply that way 100% of it is applied to principal. He don't want to use that money to pay interest by making the minimum monthly payment. You're paying that interest upfront, every month, way at setup, and then repeat and do that. You got to look at your budget, figure out ways to reduce your spending. That way you can increase your savings rate. But don't forget, do not take money out of a retirement account to pay off debt. Try not to use a debt counseling service and for everything you can do to avoid bankruptcy. Well, that may be the end case for some people. You got yourself into this debt, which tells me that you had a good credit rating and you had the ability to borrow the money, which means you should have the ability to pay it back. Unless you want through some type of medical issue, unemployment or a natural disaster that wiped out your home for something else. You should be able to pay that debt back on your own. So keep at it. Stay focused, and before you know it, your debt will be zero