Q. I’m determined to get my finances on track this year and would welcome a few pointers on where to start. There’s so much information out there that it becomes confusing. I’m tired of feeling like my debts are overwhelming and I have no money available at the end of each month. What’s bothering me the most is that I don’t really know where my money’s going.

A. Congratulations on your commitment to get your finances in order! The cynics believe that New Year’s resolutions are meant to be broken but it doesn’t have to be that way. The truth is that it’s important to have a plan of action in place that’s simple and easy to follow. Remember, it’s the baby steps that lead to giant results. Okay, let’s talk about these 5 STEPS to a financially healthy new year!

• Set realistic goals – unattainable goals are a surefire way to set you up for failure. I emphasize the word “realistic” as you will build your confidence when you start to see positive results.
• Track your spending – this may seem tedious but it’s the only way you’ll be able to see where you precious dollars are really going. Many people like to remain vague so they don’t have to confess to the miscellaneous expenditures that are eating up their hard earned cash and preventing them from reaching their goals and dreams.
• Envelop system for budgeting – this is all about getting back to basics. Create an envelope for every category within your budget and when you receive your paycheck, allocate a percentage into each category. Generations before us successfully used this system and, in my opinion, it’s still one of the most powerful ways to create and stick to a budget. Believe me, it’s empowering to know where your money’s being spent and it will allow you to make necessary adjustments over time. More so, once the cash in a particular envelope has been depleted, you know you’ve hit your spending limit. As they say, proof is in the pudding!
• Progress not perfection – it’s all too tempting to set lofty, unattainable goals. Unfortunately, that usually results in taking your commitment to that goal from excitment to overwhelm and defeat. I like to remind people that any journey is more about making progress versus striving for perfection. You will find that focusing on progress will take a lot of pressure off of the task at hand. It’s also important that you have some fun and be willing to laugh as you learn!
• Save before you spend – consistently allocating a portion from each paycheck into a savings account (no matter how small the amount) will go a long way to build your money confidence and give you a sense of freedom. Usually, the #1 excuse for not doing this is that there isn’t enough money from each paycheck to save. This is where the envelope and tracking systems come into play as they will both allow you to determine where you’re spending your money that you could cut back on. It doesn’t matter what amount you start with - $25, $50 per month – what matters most is that you start. As you see your savings account balance start to grow, you’ll be inspired to find ways to free up more cash to save.

Embarking on these steps requires you to make a commitment to yourself. You might also consider finding a friend who wants to take these steps with you. The best way to creating a healthy relationship with money is to connect with other like minded people who are on the same journey. Although there will be discomfort along the way, believe me, the rewards will be many!

For answers to your questions about credit, debt elimination methods and smart money management - please email me at coach@debtfreediva.com

In 1950, he issued the original Diners Club card. It was made of pasteboard with the customer’s name on one side and a list of twenty-seven restaurants that accepted it on the other. In 1955 the pasteboard card was replaced by one fabricated from plastic.

American Express began issuing cards in 1958 followed by The BankAmericard, issued by the Bank of America. Soon, smaller banks joined the BankAmericard system. In 1977 the card underwent a name change and became Visa.

By the 1990’s Visa was the largest credit card in use with nearly 400 million cards in circulation and more than 12 million businesses that accepted it. In 1967, City Bank of New York issued the Everything card. Eventually it took on the name that it has to this day, Mastercard.

Early credit cards were simply used as a convenience, in substitution of cash. You charged and consequently paid in full when the bill arrived. But during the 1960’s everything changed forever.

The credit card took hold of the American consumers wallet with a consumer empowerment never before experienced. The credit card allowed the consumer to use money that had not yet been earned. By doing this, the credit card took a firm hold of the user’s future. Now, instead of paying the bill at the end of the month, the bills began to come month, after month, after month.

In 1965, only 5 million cards were in circulation; by 1996, U.S. consumers had nearly 1.4 billion cards, which rang up approximately $991 billion in credit card charges annually.

I would argue that credit card companies and their marketing strategies are as cancerous to our society and our young, as the tobacco industry is to our overall health.
Now, I’m not going to tell you that all credit is bad. Nor am I going to tell you that all debt is bad. There is good debt and bad debt, just as there is good credit and bad credit. The key to mastering one’s finances lies in the ability to distinguish between the two and the adherence to a basic formula.

This can be initiated by setting up a budget and projecting future costs. From there, it’s a simple matter of controlling your spending (easier said than done for most). It does, however, require discipline and in most of our cases, change. This is where it gets complicated. In order to change your situation, you must change your behavior patterns. Again, this is no easy task as it is something that you have been doing “or have been conditioned to do” your whole life.

Traditionally, people do not like change. Usually, a person will not change unless forced to. As you begin down that road to becoming debt free, remember to “force yourself” into the necessary changes in your spending behavior. You owe it to your spouse, your children and, most importantly, you owe it to yourself.

And none of this can change as long as we continue to crave instant gratification, have the availability to obtain credit easily, (at much higher available lines of credit than we should be entitled to) or as long as we continue not to make finances an integral part of our children’s overall education (as well as our own).

Responsible financial planning is every bit as important as other academic pursuits but old habits cannot be broken without the desire to change and the willingness to adhere to take action.

To learn more about your options and managing you debt, log onto www.debtreliefoptions.com.

Jon Noble
Staff writer
Debt Relief Options
asktheexperts@debtreliefoptions.com

First, tax refunds are not “found” money, but a return of money YOU overpaid into the tax system! The average refund check is somewhere around $2,200 and $2,400.

One of the first things that you should do, if you had no abnormal deductions for the year and anticipate that those deductions will remain the same in the future, is to change your withholdings so you don’t overpay in 2006. I have no idea why you would want to give someone (even the government) money to hold onto for a year with no interest being made off of that money.

An easy way to calculate this adjustment is to take your refund amount, divide it by twelve and adjust your withholdings accordingly. Your company’s payroll department can assist you in this process. By doing this, it could give you several hundred dollars a month of additional money that you could use to get out of debt (pay off credit cards, auto loans, student loans, etc.) or assist you in your wealth building process.

Now that you have made your adjustments for the future, let’s get back to what you should do with that tax refund you will have coming in!

If you have credit card debt, PAY IT OFF! A $2,400 balance on a credit card at 17.9% interest with minimum payments being made, will take between 14 and 33 years to pay off. Now, let’s use debtors’ logic for a minute. You take the refund and spend it on something other than eliminating your debt or at least reducing it. Let’s say that you invest it telling yourself that you are going to start to add additional payments to your credit cards based upon the return you get from that $2,400 investment.

Fine, if you take the equivalent return needed, which is the after-tax return you would need to get if you invested the money in a traditional investment to generate enough money each month to make the minimum monthly payment on your credit card debt, it would be around 24% to 36%. If you find an investment opportunity with a guaranteed 24-36% after-tax return, please share it with all of us.

However, if you would take the money that get back from yourself (your overpayment of tax) and pay off that $2,400 credit card debt, then take the monthly payments that you had been wasting on your minimum payments and invested it each month during the same period (14 and 33 years), it would have grown to about $136,000 to $177,000.

Now obviously I know that the vast majority of us have more that $2,400 in credit card debt. We also have car payments, student loans, etc. Once you have made your adjustment on the amount of taxes withheld from your paycheck, use that “found” money to get out of debt first. Then you can invest, set up additional funds in your emergency reserves, etc.

If you do feel a bit overwhelmed by your debt and even your tax refund isn’t making a dent to make ends meet, seek some professional guidance. Be it either a credit counseling or debt elimination program, debt consolidation, whatever. There are always places and options you have available, but you must take the action to make it happen.

To learn more about your options and managing you debt, log onto www.debtreliefoptions.com.

Jon Noble
Staff writer
Debt Relief Options
asktheexperts@debtreliefoptions.com

Q. I need help ASAP. I don’t really know where to begin. I am about $30,000 in credit card debt. It’s becoming increasingly difficult to keep up with the minimum payments. I would like to know where I can go to get help without going the bankruptcy route because I really do not want to do that. Thank you.

A. I applaud you for having the courage to face your debt. Always remember that you are not your debt for that will free you to make conscious financial choices from this day forward. If your credit is in good standing and you have equity in your home, you can explore a debt consolidation loan by way of a refinance on your first mortgage or a home equity line of credit. The other options available to you are working with a consumer credit counseling organization or, a debt settlement company. The former will assist you in lowering the interest rates on your credit cards and consolidating your monthly obligations into one payment. Your outstanding balances will remain the same. The latter will counsel you and assist you in negotiating with creditors to reduce your balances to a certain percentage of where they’re currently at. It’s important that you understand the difference between the two types of services and, that you do your research when selecting which company to work with. Make sure that they’re trustworthy and reputable.

I’ve always maintained that what you think about, you will ultimately bring about in your life. It is the power of our thoughts that have the ability to shape our results. Therefore, it’s important that you take a close look at what your belief system is around money.
• Do you think it’s scarce and unavailable to you?
• Has carrying this debt load become a familiar, if not welcome comfort zone?
• Does spending give you immediate gratification?
• Do you believe that you can climb out of this mountain of debt or do you feel that it’s a hopeless situation?

We have approximately 45,000 thoughts that cross our minds each day and it’s important that we be in charge of the quality of these thoughts. When you take the time to look at what behaviors created your spending habits and your burdensome debt load, you can then create new, positive behaviors that will support you in becoming debt free. Many people who manage to get debt free often find themselves back at debts doorstep because they didn’t know how to change their emotional relationship to money.

Simply put, you can’t repeat the same behaviors and expect different results. Above all, know that this will take some time, so be patient and you will become debt free. You’re worth it!

For more information, visit www.debtfreediva.com

Dee Dee Sung
Founder, Debt Free Divas
From Self Worth to Net Worth
coach@debtfreediva.com

Debt Settlement is a debt relief option designed to prevent someone from having to decalre bankruptcy at all. For those of you who don’t fully understand, here’s how debt settlement works:

1. In essence, debt settlement can help you get out of debt for the least amount of money in the shortest amount of time without filing for bankruptcy.

2. The debt settlement/negotiation company will establish a monthly savings plan that fits your budget based on your total amount of your debt. In addition, the company will negotiate a settlement amount with your creditors, which is often a fraction of the original loan amounts.

3. When you save enough money to completely settle your debt, you write the check and your account is cleared.

4. Enrollment in a debt settlement program does not show up on your credit report however, anytime a creditor goes unpaid, there will be negative marks on your credit report to reflect late or lack of payments.

5. Once your debts are settled, your accounts will show as settled or paid, placing you in a position to rehabilitate and reestablish your credit, remove any errors from your credit report and take the next steps to your financial freedom.

Debt Settlement is often confused with Debt Management aka Consumer Credit Counseling. It’s important to know that the 2 are not the same - Debt Management organizations work closely with credit card companies and consumers to lower the interest rates and consolidate a monthly payment that the consumer makes to the debt management company to disburse amongst the creditors on their behalf.

You must do your due diligence on the debt settlement company you ultimately select. As with everything in life, there are the reputable debt settlement companies as well as the unscrupulous ones. Unfortunately, bad news travels fast and you’re more likely to hear about the negatives of debt settlement than you are of the positives! My choice of Debt Settlement companies is DebtXS and if you’re in the selection of a debt settlement company to work with, be sure to research DebtXS as well as have them be the last call you make in order to arrive at an educated decision. What I like about DebtXS is that they emphasize financial education and teach their clients how to save. This is important as people who come into a debt settlement program inevitably have developed some extremely unworkable and negative money and spending habits that need to be changed.

It’s time for the public to be aware that Debt Settlement is an extremely viable debt relief solution. Is it for you? You will best determine that when you’ve researched your options - just don’t rule it out because you don’t understand it!

Feel free to contact me with your questions at coach@debtfreediva.com
To you becoming DEBT FREE!

Dee Dee Sung
Founder, Debt Free Divas, Inc.
www.debtfreediva.com

It will take you about 2 hours so; set some time aside undisturbed, and get it done. You don’t have to do the information gathering all at once, start at the beginning of the month. Take a few moments out of each day and start gathering up the materials. Remind yourself that this is the year that I am going to become debt free. I’m going to eliminate my debt and invest in my future.

Treat yourself like a company. Get into the habit of looking at your own personal financial life as you would run a company. Manage your debt and expenses as well as the income coming in correctly and you will reap the rewards as a good CEO or fail as a bad one.

Once you have all of your information, commit to a day at the end of the month that you will put all of it to good use and set up that budget!

Here is what you will need:

1. Review you last 12 months of checks that you have written. You can review your monthly bank statements (I like these because it will also show me ATM purchases and withdrawals, any additional monthly service fees, etc.) Remember, you need to know where all you money is going so, gather up the info.

2. Gather up the last twelve months of income/deposits. Net take home pay, rental income, investments, etc.

3. Get yourself a small notepad that you can fit into your purse or put in your back pocket. Starting at the beginning of the month, every time you spend money, write the date, item and amount down in the notebook. When you buy gas or go to the grocery store, get a cup of coffee, go to the movies or dinner, write down the date and amount spent. At the end of the month when you sit down to put your budget together, you have an overall snap shot of where some of your non-fixed expenses are. This is where you can usually identify extra income you could be using to get out of debt or invest in something other than a latte.

4. Get yourself a legal size note pad. Now, you could go out and get a budgeting program like QuickBooks but, it will only work if you use it. Let’s just start with the basics and then you can move on from there.

The first sheet of paper will be labeled at the top: Current Income

If you are married and both you and your spouse work, create two columns on the paper. One is for you and one for your husband/wife.

On the first line, you are going to list your average monthly salary. If you get paid every two weeks, take your take home pay (after taxes) and multiply by 26. Take that total and divide the number by 12. This will give you your monthly take home pay (average).

For example: If you take home $1,500 every two weeks - $1,500 x 26 = $39,000 $39,000 / 12 = $3,250 is your monthly take home pay.

If you get paid weekly, take that number and multiply by 52 then divide by 12.

$750 x 52 = $39,000 $39,000 / 12 = $3,250.

Below the average monthly salary, you are going to list any of the following with the appropriate amount of money received. If you get any kind of interest or dividends payments periodically (quarterly) add up the grand yearly total and divide by 12, this will give you that monthly average.

Income from real property
Interest and dividends
Alimony, maintenance or support payments that you receive
Social security or other government assistance
Pension or retirement income
Any other monthly/yearly income that you get not listed above……
Now, tally all the columns up and that will give you your current income situation.

5. On the separate piece of paper we are going to get into the heavy lifting. Label this one at the top, Current Expenditures – this is where you are going to list all of your monthly obligations (both fixed debt and non-fixed debt).

make a list of the following and fill in the blanks.

Rent or home mortgage payments (include lot rented for mobile home)

Real estate taxes (if not included in your regular mortgage payments)

Property Insurance (if not included in your regular mortgage payments)

Utilities: electricity, heating fuel, water and sewer, telephone, gas, cable, DSL service

Home maintenance – figure out what you spend a year and divide by twelve. (fix a leak, paint, general overall house maintenance.)

Food (you can get that from your small notebook)

Clothing (every year when the kids go back to school and they get new close, etc.; figure out the monthly average)

Laundry and dry cleaning

Medical and Dental expenses: prescriptions, co-pays, etc.

Transportation (not including car payments): oil changes, regular vehicle maintenance, registration fees, etc.

Recreation, clubs and entertainment, newspapers, magazines, etc.

Charitable contributions

Insurance (not deducted from wages or included in home mortgage payments) – if insurance is paid quarterly, etc. total the yearly amount and divide by 12.

Homeowners/renters
Life
Health
Auto
Other

Monthly Debt Installment payments:

Auto
Minimum monthly payments on all credit cards debts
Furniture, etc.

Alimony, maintenance or support you pay to others

Payments for support of dependents not living at home

Add all those columns up and you will have an average monthly expense page. Hopefully, when you take your monthly income and subtract your monthly expenses, you will have what we call a budget surplus. This money should be put toward getting out of debt, setting up an emergency cash reserve, invest, etc. If you don’t have a surplus, then you really need to think about getting some type of professional help to manage your debt or to get some type of debt solutions help you eliminate your debt.

Now that you have a clear picture of what is coming in and what is going out, you can map out a plan for the future. You can figure out what areas you can cut back on (cook at home more often) or ways to save in certain areas (using coupons when grocery shopping). Shop around for a better phone plan or DSL package, check with other insurance carries for a better rate. Contact your credit card companies and see if they will give you a reduced interest rate to stay competitive (believe it or not this sometimes works).

To learn more about your options and managing you debt, log onto www.debtreliefoptions.com.

Jon Noble
Staff writer
Debt Relief Options
asktheexperts@debtreliefoptions.com

Let’s say that your net monthly income (that’s after taxes) is $2500. Your monthly debt payments are $600. Divide $600 by $2500, and you’ve done it.

600 ÷ 2500 = .24 (24%)

So, what’s your debt to income ratio?

• Look at last month’s bills. Add up all the fixed monthly expenses (rent, mortgage, car payments, insurance, gas/electric, etc.)
• Check your credit card bills and add up the minimum payments required on each.
• Figure out your monthly take-home pay (net salary).
• Divide the monthly fixed expenses by monthly income.

Now, how much debt is too much? The majority of debt settlement and credit counseling companies generally agree that debt expenses should be no more than 25% of your income. A ratio of 10% or less is ideal. Actually, no debt is the best but who are we kidding….

If you are carrying a debt load of more that 25% it’s time to take action. You may even want to get some type of debt help by looking into a debt settlement or credit counseling program. If you own real property, you may want to look into some type of debt consolidation loan.

To learn more about your options and managing you debt, log onto www.debtreliefoptions.com.

Jon Noble
Staff writer
Debt Relief Options
asktheexperts@debtreliefoptions.com

You could in theory, take a low interest rate credit card and roll over the other credit card balances with higher interest rates onto that card and consolidate that way. Most credit card companies offer 0% interest for the first 6 months, etc. Make sure you read and understand all the terms and conditions ahead of time. If you miss a payment your interest rate can go upwards of 20% interest, or after the 6 months has expired, an interest rate of 18% or more may apply.

Traditionally, debt consolidation loans are usually obtained by tapping into your homes equity to consolidate your bills. Here are the benefits:

* Most often, you will have a smaller monthly payment (the payments are usually spread over a period of 5 – 30 yrs. depending on the loan so, that is one reason why the payments are lower)

* Home interest rates are lower than traditional unsecured credit cards so, you get the benefit of that lower interest rate.

* You may get a tax benefit from the loan. You don’t get any tax benefit paying your unsecured credit card bills each month.

That all sounds pretty good. I get a tax break. My monthly payments and interest rates are lower. Why shouldn’t I do it?

Here is the downside:

* You have now exchanged unsecured debt for secured debt. Here is what I mean. When you obtain a consolidation loan, you are putting up your house as collateral. If you don’t make the scheduled payments (let’s say that you become ill or lose a job) you can potentially lose your house.

Your existing credit card debt is unsecured. If you default on the payments, your credit card company that you owe the debt to would have to sue you in order to try and recover any monies owed. If you default on your debt consolidation loan, the lender can start foreclosure proceedings and try to take your house and sell it at auction, to get the money they are owed.

* If the real estate market changes and property values decline, you may find yourself owing more than what your home is worth. This can effect your ability to sell your house or obtain a lower interest rate if you should decide to refinance the property again (let’s say that the loan is adjustable after 5 years, when that happens and your payments go up and you can’t afford to make those payments, what will you do?)

* Sadly, the average person that takes out a debt consolidation loan usually goes back and uses the same credit cards again and creates the cycle all over again, this time in deeper debt with fewer options. If you do consolidate, tear up your old credit cards. Keep 1 to 2 for emergencies, etc. but cut up the rest. I wouldn’t say to simply cancel all the others because old established credit can help your credit score/rating but don’t use them. If you are going to cancel any of the cards, cancel the youngest ones first and keep the older ones (provided you have had a good payment history and interest rates with them).

To learn more about your options and managing you debt, log onto www.debtreliefoptions.com.

Jon Noble
Staff writer
Debt Relief Options
asktheexperts@debtreliefoptions.com

Q: About 18 months ago I made a vow that I would pay off my $10,000 credit card balance, which was mainly incurred buying clothes and taking short weekend trips around the state — I don’t like to sit around my apartment on weekends. I have enough discretionary income to pay that balance off in less than a year, but got a jolt a week or so ago when I realized the balance was higher than it ever had been. Despite my best intentions I always seem to find something I need to charge. How can I make myself stick to a plan? I am single, over 40 years old and starting to get nervous about having so much debt.

A: When you use the phrase, “How do I make myself stick to a plan,” I know that this is where we need to start. It’s almost impossible to force something like this. It’s just too easy to stick with your old habits of spending and racking up debt. At this point, you need to be willing to change your habit. Once you’re willing to make a change, then we can move on from there. I’m also hearing some all-or-nothing thinking here. It sounds like you are either sitting around your apartment all weekend or you’re getting yourself into more and more debt – so there is definitely room for some middle ground. Make a list of some activities that you enjoy that get you out of your apartment, but that don’t require spending money on a weekend getaway. And for the next month, as you’re working to change your spending habits, forgo the use of your credit card. I suggest you give your credit cards to a trusted friend for a period of time so you can’t fulfil the urge to use it. Create a plan to make monthly payments to pay down your debt and keep your “frugal”activity list handy when you’re feeling the urge to spend. As you see your balance go down, you’ll get more and more excited that you’ve make a plan and are working to accomplish your goal.

To learn more about creating a debt free plan, log onto www.debtfreediva.com
Dee Dee Sung
Founder, Debt Free Divas
From Self Worth to Net Worth
coach@debtfreediva.com