One of my Debt Free Divas community members just sent this question in about her finances - hope you find it helpful!

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

Initially, it was Frank McNamara of New York’s Hamilton Credit Corporation that come up with the idea of giving affluent businessmen a convenient way to charge some of their business related expenses.

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 …continue reading the article titled Credit Cards, debt of a Nation

It’s that time of year again; soon you will have many sources popping up suggesting ways to spend your upcoming tax refund. Let’s put this in perspective.

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 …continue reading the article titled Tax refunds a good way to get out of debt

I want to share with you another question from one of my readers - the same concerns are shared by many people and this is one of the most commonly asked questions:

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.

…continue reading the article titled Knowledge is Power…Know your options for getting out of DEBT

For too long, DEBT SETTLEMENT as a form of debt relief has been misunderstood and not utilized bythe many people who could benefit. As of Oct. 17, 2005, the changes in the bankruptcy laws now make it more difficult for people to file for Chapter 7 bankruptcy which would absolve them of all their debts. Now, consumers filing for bankruptcy are subject to a means test to determine if they’re eligible to file for Chapter 7 or if they’ll need to go the Chapter 13 route.

…continue reading the article titled Debt Settlement Viable Option in Light of Changes in Bankruptcy Laws

A debt elimination plan starts with an understanding of where your money is going. If you are ever going to become debt free or get ahead financially, you have to start with setting up a budget. I’m not talking about keeping a running tab in your head or doing your best “guesstimate”, we’ve all done that. I’m talking about taking the time to actually calculate every penny that is coming in and going out. It isn’t easy but once it is set up and you get into the routine, it’s easy to maintain and will give you a better perspective about your overall financial situation and allow you to gauge and plan towards the future.

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: …continue reading the article titled Get Debt under control by setting up a budget first

You should start off by looking at your debt to income ratio. Here is a simple formula to help you calculate yours: …continue reading the article titled Do you need debt help

When dealing with debt, stay calm and try to focus on the positives. If you are digging yourself into a hole, month after month, the simple solution is to stop digging. The real estate market in most places throughout the Country has created equity in peoples’ homes. Looser lending practices has also made it easier to borrow as much as 10% more that what your home is worth. But is consolidating all of your debt into one monthly payment the answer? Here are some things to look at when considering a debt consolidation loan:
…continue reading the article titled Debt consolidation loans - Good or bad for you?

If you force yourself to stick to a plan - whether it’s losing weight or getting out of debt, it’s not going to work if you force yourself to do it. It’ll only work if you’re ready, willing and see the benefits!

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.
…continue reading the article titled You’ve got to be ready to create your Debt Free plan!