You are reading Week 24 of 52 Weeks to Eliminate Debt & Curb Spending. Please read the overview here to learn more about the series & get your FREE financial planner. If you just joined us, please start with week 1.

If you are currently facing large quantities of credit card debt, there may be a point when you want to make a settlement with your creditor. This week we are covering the basics of credit card settlement facts. This will help you to understand what a settlement is, and how it will affect you and your credit score in the long run.

In case you don’t already know, a credit card settlement is when you are able to pay a large percentage of the credit debt to clear your account and have the remaining balance forgiven by the creditor. If you have gotten behind on a debt and have received a letter from the collections department, it is very likely you have been offered a chance to make a settlement. You can also approach a creditor and ask for a settlement as well.

Settlements require 70% or more of debt be paid off. While on a rare occasion you can see a lower percentage accepted, typically the amount a creditor will require before they settle is 70% or more of the original debt owed. Usually they are figuring in you paying off the principal and they will be forgiving the interest and fees. This is not always the case, but should be understood so when you are negotiating you can understand why different creditors offer different things.

You have to pay taxes on the difference in original debt and amount paid. The amount that is forgiven by the creditor can be considered income by the IRS. Since it was not paid, but was forgiven, it is almost like it is considered a gift to you. You may have to account for this money on your income taxes and pay taxes on it.

Settlements do ding your credit report. While a settlement is better than having a civil judgment and garnishment places on your account, they will still be rated lower on your credit report. It will look good to potential creditors that you have paid off the debt, but the settlement will also ding you because it shows you did not fulfill your original obligation.

Settlements result in account closure. If you had hopes of getting that account back open to use later, a settlement will end that option for you. Account settlements almost always result in the account being closed completely.

When you are looking at the big picture of credit card debt and these credit card settlement facts, you will want to acknowledge that there are some times when it can be a great option for you. It can also be a bad option for some people. As with any major decision regarding your debt, make sure to crunch the numbers and look at all options before making a final decision.

Week 24 Challenge:

Read more about Credit Card Settlement facts before making any decisions and talk to a professional.

Disclosure: I am not a financial adviser nor do I have formal financial training. All articles are for informational purposes only and should not be interpreted as financial advice or consultation. Please consult your account and/or financial adviser before making changes to your finances. All situations are different, so please consult a professional to determine your individual needs.

You are reading Week 23 of 52 Weeks to Eliminate Debt & Curb Spending. Please read the overview here to learn more about the series & get your FREE financial planner. If you just joined us, please start with week 1.

We will continue throughout this series to focus on the multitude of ways you can create funds in your budget to pay off debt. Here are 7 of the most common ways to save money on groceries & household expenses. Each of these methods is just one more step toward getting out of debt and finding financial security.

7 Ways To Save Money On Groceries & Household Expenses:

1. Use coupons and savings apps. Right away you have free and easy savings on food, household and health supplies just by using coupons. There are tons of options for savings that can easily cut your grocery bill by 50% or more. Savings apps are also great options if you aren’t into clipping the coupons. There are many stores with rewards cards or savings apps that you can scan at check out or upload receipts to and get cash back on your purchases.

2. Make your own household cleaners. Homemade laundry detergent, fabric softener, hand sanitizer, all purpose cleaners, natural bleach solution and more are easy to make for often times half the cost. This also results in a safer and more green home.  I have a post on how to make your own frugal green cleaners from your kitchen – no extra supplies needed.

3. Drop cable or satellite. We will mention this a lot throughout the year, but we often spend money unnecessarily on entertainment each month. Cable and satellite can be upwards of $100 per month. Instead invest in the $99 per year for Amazon Prime that offers free movie and television show streaming along with tons of free books, music and shipping.

Alternately, you can pay low monthly fees to places like Netflix and HuluPlus for streaming services.  We have a Roku for streaming movies on our TV, but I’ve heard the Fire TV Stick is a good option.

4. Go to prepaid cellular phone service. You can easily find prepaid cell plans that are a fraction of the cost of your current contract plan. Crunch the numbers and make a choice to go with prepaid in the future.

My sister-in-law recently switched to this option.  She’s saving a ton of money, has a phone and texting abilities while on the go, and uses her iPad for messaging while connected to WiFi at home.

5. Menu plan or use freezer meals. Last minute drive thru purchases or wasted food in your refrigerator are some of the biggest frivolous expenses in your grocery budget. Create functional menu plans and utilize them or freezer meals to guarantee meal time is smooth and you aren’t wasting food that is being thrown in the garbage.

6. Carpool when available. Gas prices yo-yo up and down all the time. Carpooling with your spouse, neighbors or friends to and from work can split expenses easily. It can also come in handy for taking kids to school, school events, practices and other after school needs.

If there is no carpool in your area, simply work hard to make sure your time out and about is used wisely. Plan your trips for errands well so you aren’t back tracking or making multiple trips when unnecessary.  Read these 6 tips for saving money on gas now.

7. Change the temperature on the thermostat. One simple way to save money on your heating or cooling expenses is to set your thermostat differently. In the summer set it at 78 degrees and wear looser lighter clothing while utilizing small fans or ceiling fans instead. In the winter set it at 68-72 degrees and add layers of clothing, throws, blankets and alternate heat like wood burning stoves as needed.

These ways to save money on groceries and household expenses are simple things anyone on any budget can evaluate and change. It’s often the little things like this that add up quickly to create hundreds of dollars per year to pay toward your family getting out of debt.

Week 23 Challenge:

Pick one new way to lower your expenses.  Start using coupons, shopping sales or driving less.  Adding in just one of these new habits to your daily routine can increase your savings over time.

What are simple ways you can reduce your monthly expenses?  Share with us your ideas.

Disclosure: I am not a financial adviser nor do I have formal financial training. All articles are for informational purposes only and should not be interpreted as financial advice or consultation. Please consult your account and/or financial adviser before making changes to your finances. All situations are different, so please consult a professional to determine your individual needs.

You are reading Week 22 of 52 Weeks to Eliminate Debt & Curb Spending. Please read the overview here to learn more about the series & get your FREE financial planner. If you just joined us, please start with week 1.

So far this year we have covered budgeting, negotiating terms with your creditors, and even getting serious about your expenses. This week we are going to look at knowing when you should refinance. This is topic is usually looked at when you are working on your credit score, debt relief or simply trying to be more responsible with your money.

When interest rates have dropped significantly. Watch interest rates on housing mortgages. If you purchased at a higher rate than is currently available, you may wish to consider a refinance. Being able to get a significantly lower rate can offer you thousands of dollars in savings over the course of your mortgage repayment.  This can lower your monthly payments as well as the overall amount you have to repay.

When refinancing would give you funds to pay off debt at higher interest rates. While you may hate to extend your mortgage, there are often options to use your equity to actually finance for more than the original loan and give yourself funds to pay off debts that are carrying a higher interest rate.

When you are in debt and have decent credit, but feel yourself struggling to keep on top of everything, a refinance to get money that will pay off other debts can be a great choice. In the process, you must establish better financial practices and not recreate the debt you just paid off.

• Make sure it is fixed interest rate and has no balloon payment.
• Remember you can always pay more to your principle each month than what is owed.  Don’t go for a shorter term loan that will lock you in on paying a higher monthly or bimonthly payment.
• Make sure the loan repayment will be lower than your current mortgage and loan repayment.

When you are working to get rid of debt, you must look at all options available. Knowing when you should refinance could make or break your financial life. Finding extra funds that you can pay off debt and create lower monthly payments at better interest rates is one of the best and easiest ways to get rid of debt.

Week 22 Challenge:

Discuss ALL options with your lender and financial adviser before making a decision.  Consider the added expenses of refinancing and what those fees will do for your total mortgage amount and monthly payments.

We looked into refinancing our home a couple of years ago.  After weighing all the options including our homes current value and how long we planned to stay in the home, refinancing wasn’t a wise option for us.   Knowing when you should refinance is all about doing the research and crunching the numbers.

Disclosure: I am not a financial adviser nor do I have formal financial training. All articles are for informational purposes only and should not be interpreted as financial advice or consultation. Please consult your account and/or financial adviser before making changes to your finances. All situations are different, so please consult a professional to determine your individual needs.

You are reading Week 21 of 52 Weeks to Eliminate Debt & Curb Spending. Please read the overview here to learn more about the series & get your FREE financial planner. If you just joined us, please start with week 1.

This week as we look at your debt relief goals, we are going to stop and evaluate your success and make changes. This is necessary, so you don’t find yourself in a rut and begin getting discouraged. Periodically pulling out your budget and list of debts to make changes is what will keep you successful financially.

Have you been able to stick to your budget? Pull out your spreadsheets for the last few months and evaluate if you have managed to stick to your budget. This is also the time to adjust for things that may have fluctuated. Perhaps utilities were more than expected.  Add in the additional funds needed to your budget, then see what areas you can subtract that from. Ultimately you want to maintain the same amount of savings and debt repayment or more.

If you’re lowered utilities or expenses – that is awesome!  Add those savings to your debt repayment plan.

Are you still in default on accounts? If you are looking at your budget and finding that you are still in significant default on accounts, you may want to go back and reevaluate our posts about when bankruptcy is a good choice and how to avoid bankruptcy. Accounts that are in default for multiple months are much harder to get in check again.  I’m still not suggesting bankruptcy, I’m just suggesting you go back and read those articles again.  I would also suggest getting professional advice if you have yet to take that step.

Have you found increased income?  Have you asked for a raise, taken on a second job or downsized? If your budget is still not providing for debt repayment, it may be time to look at these options again. Continue working on increasing your income and lowering your expenses throughout your journey to getting rid of debt.

What areas need improvement? This is when you have to just get brutally honest with yourself. Look at your spending habits. Have they changed? Check the expenses in your budget and see which ones could be lowered even further. Can you menu plan or lower your grocery budget even more? Maybe it is finally time to step toward dropping your satellite, cable or entertainment budget? Check for areas that still need improvement.

At this point in your journey, it is time to truly evaluate your success and make changes. If getting rid of debt is your goal, it is time to get serious and make some big changes to see this happen. Work smarter and harder to see your financial goals met.

Give yourself a pat on the back!   If you’ve been following along with the series and have been working to make changes, no matter how big or small, stop and give yourself a pat on the back.

Congratulate yourself on sticking with your goal to eliminate debt.  You’ve earned it!

Week 21 Challenge:

Pull out your budget and adjust as needed for current debt, expenses and savings goals.  Make a note of how much debt you have reduced in just a few months.  Stop and acknowledge your accomplishments.  It’s not all about how much further you have to go.  It’s also important to celebrate how far you have come.

Disclosure: I am not a financial adviser nor do I have formal financial training. All articles are for informational purposes only and should not be interpreted as financial advice or consultation. Please consult your account and/or financial adviser before making changes to your finances. All situations are different, so please consult a professional to determine your individual needs.

You are reading Week 20 of 52 Weeks to Eliminate Debt & Curb Spending. Please read the overview here to learn more about the series & get your FREE financial planner. If you just joined us, please start with week 1.

If you have looked for any information in the past regarding getting out of debt,  Dave Ramsey is a familiar name.  One of the most popular methods he presents is using the envelope method to help stay on budget each month. This method is a great way to stop overspending. We are going to look at our version of the envelope method this week and hopefully inspire you to use it as well for future months budgeting. While the concept came from Mr. Ramsey,  you should adapt it to suit your needs.

Using The Envelope Method:

The envelope method is recommended because it offers you a chance to see money as it disappears to pay bills. Once the set amount of money has been spent, you have no more to spend. Simple as that.

The envelope system is a great visual and budgeting tool.

However, I am much more comfortable continuing to have my pay check direct deposited into my bank account, and scheduling bills to be paid directly from there. For things like your utilities, mortgage, insurance and vehicle payments continue to pay directly from your bank account. I recommend setting up bill pay with your bank so the check is sent directly from them.  There is no fee and you know it will arrive on time every time.  This step will help eliminate hidden fees as we discussed a couple of weeks ago.

Withdraw cash for groceries, gas and incidentals. At this point, stop by your bank and withdraw the monthly amount budgeted for groceries, gas and incidentals. These are some of the areas we tend to overspend quickly. This money should be there to cover everything from your grocery and household needs, to incidental splurges, lunches out, kids needs and gas.

Once the money has been spent, you have no more to spend until next month or the next payday. This gives you a visual and physical method of understanding how and when you are spending your money. You can put cash money into envelopes designated for each of these areas of purchase, or keep it together knowing it has to work for all of those.

Personally, I separate the amounts out into envelopes.   It’s easier for me to track my spending this way.  I have a separate envelope for each of my “extra” categories.  If you looked at my envelopes you would see groceries, eating out, entertainment, Dana allowance, Derrick allowance, kids needs, house, and gifts.

When money is gone create a spending freeze. This is where the real savings begins. When you set your budget and can’t stick to it, do you typically just pull more money out of the bank to pay for things? Or perhaps you have been using credit cards to make up the difference? When you use the envelope method, the idea is to stop spending when money is gone. On top of that, you hope at the end of the month you’ll have leftover money in your envelope to put back into savings.

When you are out of money – you have to stop spending. No more groceries. No more gas. No more special lunches out, etc.

Another approach is to “roll” the cash from one month the next.  This is helpful if you have a special event coming up.  Maybe you and your spouse want a special dinner out that will cost more than your typical months budget.  Save money prior to the event, so you can splurge debt free.

Every few months I would take out my leftover money and make a deposit into my savings account or into checking to pay off more deft.

If you find yourself going over the amount of cash you have each month.  It’s time to reevaluate your budget and spending habits.

What you need:

The frugal method is to use standard letter sized #10 envelopes.  You can simply write the category on your envelope or tape a spending record on each. I used this printable envelope label when I first started with the cash system.  Recording my expenses forced me to keep track of where my money was going and allowed me to make adjustments based on my spending habits.

You will also need something to keep your envelopes together. Your cash envelopes will become your new wallet so to speak.  I found this one as an example, but you can usually find them in the $1 Spot at Target.

If you prefer to get fancy, purchase Dave Ramsey’s Deluxe Executive Envelope System or a this pretty version of the envelope system.

Using the envelope method is a highly popular way to help you focus on where and how you are spending money. As a result, you often find yourself having a much easier time paying off debt. As you see your money physically leaving your possession you will be less likely to use it.  Trust me – it worked for us!

Week 20 Challenge:

Give the envelope system a try.  Create your envelopes and commit to only spending the amount of cash on hand.

Disclosure: I am not a financial adviser nor do I have formal financial training. All articles are for informational purposes only and should not be interpreted as financial advice or consultation. Please consult your account and/or financial adviser before making changes to your finances. All situations are different, so please consult a professional to determine your individual needs.