Hitting the Financial Bottom: 3 Options for You to Consider to Prevent Debt from Ruining Your Life

If you are unable to pay your debts, it’s always advisable to seek professional assistance as soon as possible. Taking prompt actions against such cases helps remedy your financial situation. Unfortunately, finding solutions to one’s debts is not as easy as it sounds. If you find yourself hitting the financial bottom as a result of your debts, here are a few strategies to consider.

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Debt Management Plans

These kinds of plans make it possible for you to settle your unsecured debts in full, but often with fees waived or with reduced rates of interest. A debt management plan allows you to make a single payment to the credit counseling agency every month. The payment made is then distributed among your creditors. With this approach, however, you will have to live without your credit cards because they will be closed until the plan is completed. Although the debt management plans cannot affect your credit scores, closing the accounts will most definitely do. Therefore, make sure you apply for credit cards again once you have completed the plan.

Bankruptcy

There is little or no point of entering a debt management plan if you cannot pay as agreed. You can always talk to a bankruptcy attorney before you can decide to pursue any relief plan. Most attorneys will not charge for the initial consultation, so do not fear approaching one.

The most common type of bankruptcy is Chapter 7 liquidation and this can be used to erase the unsecured personal loans, credit card debts, or even medical debts. If you qualify for this process, debt relief can be done in a period of 3 to 4 months.

You should note that not every individual with an overwhelming amount of debt qualifies for debt relief through bankruptcy. For your family size and state, if your income surpasses the median, you may be required to file Chapter 13.

There are numerous law firms that can offer the professional help you need. Make sure you search around to ensure you are working with the best bankruptcy attorney in your area. You may also consider visiting www.steinbergerlaw.com/ to learn more about Chapter 7 bankruptcy.

Debt Settlement

This approach should always be the last resort when it comes to seeking debt relief. Debt settlement organizations often ask debtors to stop paying their debt and place their money in their controlled accounts instead. As the money accumulates, the company approaches every creditor, and you as the debtor continue to fall further behind payments. This approach may work since the fear of not getting anything may prompt the creditors to accept any form of settle even when it means getting a smaller lump-sum, as long as they agree not to pursue the debt any longer.

However, with this approach, you subject yourself to collection calls, potential legal action, or even penalty fees. Debt settlement cannot stop any of these from happening while the negotiations are still ongoing.

Last Words

When you are about to hit the financial bottom, make sure you consider the three options above. Best of all, make some time to talk to a bankruptcy attorney to get all the help you need when seeking debt relief.

 

Credit Card Debt – Are You Paying Thousands in Extra Interest?

Millions of people around the world use credit cards and despite our best intentions of clearing the balance very month, most of us will carry a balance. In fact the average outstanding credit card balance is $5700 in the USA (source ValuePenguin) and is over £2500 in the UK.

Chances are when you take out a new credit card you will be offered the opportunity to pay via direct debit either the full balance or the minimum amount every month. Since most people use credit cards as flexible spending for emergencies or contingencies it can be difficult to commit to paying off the full amount. This is especially true when transferring a balance from another card.

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Statistics show that over 65% over credit card holders carry a balance from month to month

Did you know that if you opt to pay the minimum balance you could take over 20 years to pay off the card? It is far better to agree a fixed monetary amount each month than the percentage which is often suggested by the credit card company.

The video below explains in more detail and you can prove it for yourself by using a credit card calculator

For more financial education tips and videos visit The Personal Finance Academy

Skip The Rut & Avoid Debt

When it comes to money, people often find themselves stuck in a financial rut because of bad management. The best way that anyone can avoid getting themselves into a mess is to be proactive about how money is managed and spent. The trouble is, money is such a tempting thing and getting into debt is far easier than it should be. Many people fall into the trap of short-term satisfaction with credit cards and loans and then have to suffer the long-term difficulties of making repayments.

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It can be very easy to run up a mountain of debt through credit cards as they are so very easily available. Trying to avoid being in a rut means a lot of self-control and willpower, and only paying for things as you can afford them. The trap happens where you need to borrow and repay money on time to build an efficient credit rating, and that can spiral out of control. There are companies that are out there like creditrepair.co that can assist with fixing your credit rating as you need it, but it sometimes can be better to avoid the bad credit in the first place. There are some ways you can manage your money and not get stuck in a rut of debt, and we’ve got some of those below for you:

Keep Employed. Okay, so it’s not always possible, but maintaining a secure level of employment is a great way to minimise debt. Secure income means not having to turn to other means to get things paid, as you have a regular amount coming in each month. By ensuring you don’t lose your job, you can keep things smooth and ticking over correctly. Losing a job can happen randomly and sometimes this can be without fault, and you want to avoid this happening as much as possible. Maintain a network with your colleagues and clients so that if recession hits and you are made redundant, you have contacts in your field to fall back on.

Pay Taxes. Taxes are one of those bills that you must pay no matter what happens. Owing money is hard enough but owing the IRS is a whole other ball game. Make your tax payments a priority as early as possible in the year, and be vigilant about keeping money aside each month to pay for your taxes. Contacting the IRS and enquiring about extensions or making part payments is going to help if you feel like you can’t manage your usual tax bill, but if you don’t call them that’s where the issues begin. Avoid that debt by being organised.

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Ultimately, you have to be savvy. When it comes to buying the things that you want, only get the things you can afford. If you can’t afford what you want, then it’s time to save up and wait. Don’t just move onto the credit cards or tap into your savings as you will likely need your savings! Be financially smart and you can reap the reward as you go!

Teaching Kids The Money Game

Most adults will agree that teaching kids about money is more important than ever. Those of us who didn’t get much financial education before we joined the working world often wish we could go back and do it all over again. But we also remember that financial education was not the most thrilling aspect of our childhood. Even though our parents explained the concept of saving money in order to afford the things we wanted, our eyes glazed over whenever complicated abbreviations and percentages were mentioned, then we just got confused about what it all meant. Financial education is an essential part of adulthood, but it’s not the most engaging topic for some young adults, let alone small children.

There are many tools at hand to help parents teach their children about financial responsibility, especially debt and lending since the next generation is just as likely as the Millennial generation to enter the working world with a huge amount of debt from student loans. Being open about your own finances to set an example, helping them build a budget from their savings, and explaining the difference between good and bad debts are just some of the ways you can teach children about money. However, to make it a little more engaging for young children, you can use games to make finances fun, yet still teach them practical lessons that will serve them well when they reach adulthood. Here are just a few board games that were created specifically to teach children financial responsibility.

Monopoly

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Most parents – and people with siblings – will recognise Monopoly as the game that started off amicably, but would soon descend into chaos and cause family feuds over Christmas or Thanksgiving. The earliest known version of Monopoly, known as The Landlord’s Game, was designed by an American, Elizabeth Magie, and first patented in 1904 but existed as early as 1902. Magie, originally intended The Landlord’s Game to illustrate the economic consequences rent, and the concepts of economic privilege and land value taxation.

When it first appeared in the 1930s, it had been significantly simplified and Monopoly was simply intended to teach children about paying rent, buying property, and how unexpected circumstances could suddenly lead to financial trouble. It even teaches children about some of the real-life options available to them to get out of debt, such as borrowing money from the banker, or mortgaging one of their properties until they next pass Go and collect $200. Monopoly teaches players money management and the impact of financial and investment choices and situations. Most importantly, it teaches children that life is unpredictable and not always fair, but you still have to pay the banker.

The Game Of Life

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For parents looking for a game that can give an accurate representation of life and the effects your decisions have on finances, The Game Of Life is as close as anyone can get. This game teaches children the effect of education and career choices on income, the impact of taxes, the importance of early investing, and even the cost of compound interest and loan payments. It does everything except teach kids about debt consolidation, but more complex explanations can be found at DebtConsolidationUSA.com, or any other financial websites. What sets The Game Of Life apart from Monopoly, is that it stimulates a person’s travels through his or her life, from college to retirement, with jobs, marriage, and possible children along the way.

Unlike Monopoly, which starts everyone off on an even footing, The Game Of Life can show children that even the choices they’ve made in their early years can have long-reaching consequences into adulthood. Therefore, it subtly explains why they’re receiving a financial education even though they won’t have to worry about bills and credit for several more years. As a result, they might be more willing to pay attention the next time you sit down with them to discuss the family budget.

Payday

It’s never too early to teach kids about the excitement and anticipation of payday; even most adults celebrate this day with the enthusiasm of a public holiday. As a board game, Payday is not too different from Monopoly and The Game Of Life. The player with the most money wins, kids learn about paying bills and dealing with unexpected expenses, and surviving the game until you get more money. The difference is that the board is set up like a 31 day calendar, and the players move through the month dealing with the new situations that each day brings. It does capture the sensation of feeling financially secure one week, then having to tighten your belt overnight because of an unexpected bill.

The month is full of financial bonuses, such as winning the lottery, and financial pitfalls, such as extra bills or bad investments. While in Game Of Life the players can almost pinpoint the decisions that led to their financial situation, Payday emphasises the random side of financial responsibility – even when you do everything right, sometimes things happen that can either boost your savings or drain them altogether.

Charge Large

Games like Monopoly, Payday, and The Game Of Life are all useful tools for teaching kids about money, but their major flaw is that they were introduced back in the 20th century, when finances were a little different for new graduates. Charge Large was designed in 2007 by two young entrepreneurs, and it was released by Hasbro in 2009, making it the most recent financial-themed board game for children. This is one of the few games out there that specifically teaches children about credit cards and the importance of building good credit. The players start out by receiving a gold credit card and must strive to upgrade to  the elusive black credit card. However, the winner must also have no debt and $2,500 in cash, which challenges players to manage credit responsibly while they navigate the board and build wealth.

Not all credit is bad; children will soon learn that they need good credit to qualify for a mortgage, to pay for a car, or just to get a good rate on a loan if they need funds to further their career. But they will also learn that bad credit can leave them in difficult positions. By playing Charge Large, children can learn that responsible credit use builds your credit rating, giving access to higher credit limits, but that racking up credit debt without saving and investing can create a financial disaster. It’s more engaging than looking up a Bankrate.com article about building good credit. The sooner they accept that a credit card is an essential tool for building credit, and to use it wisely, the better their chances for starting their adult lives with a good credit history. There is a great article at Creditcards.com which explores how children can benefit from being taught about money from an early age.

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The Allowance Game

No matter how mature your children are, not all of them are old enough to be thinking about credit cards and decision-making. Their only appeal for playing Monopoly or The Game Of Life is to crush all their opponents and win the most money – they’re probably the cause of most of the feuds. To get them to really think about money as a tangible thing, instead of just a toy in a game, start them off with The Allowance Game. This is a perfect game for younger children, or those with short attention spans. The goal is smaller – only $20 – but it does get kids thinking about the value of $1. It also teaches them about budgeting, and that, although money can buy a lot of things, money eventually runs out. Most importantly, it will make them think about where they want to spend their money; is it better to spend it all in one place, or to save as much as possible?

On a more practical note, The Allowance Game teaches your children the benefits of completing their chores, and the penalties that come with forgetting to complete their assignments. As the kids play, they earn money when they land on spaces that say “mow the lawn” or “walk the dog.” It then teaches responsibility with scenarios such as “I forgot to do my homework,” which causes the player to lose a turn. It even touches slightly on unexpected bills, because they see just how quickly their hard-earned money can go when they’re forced  to spend some of it buying a gift or paying for an overdue library book. Instead of letting them play at being grown-ups, The Allowance Game teaches younger children about money in an environment that relates to them, making the lessons feel more relevant.

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Teaching kids how to handle money doesn’t have to be boring and full of complicated figures. These games are just a few examples of the wide range of educational tools out there that parents can use to simulate real life financial situations. While some games, like Puerto Rico, might feel more like a historical simulation where your children can pretend to be colonists, it still teaches them the basic concepts of setting up a business. Kids learn while they have fun, and money is definitely something they need to learn.

Getting Over Credit, Debt, And Other Horror Stories

When people think of credit and debt, their minds immediately go to the worse case scenarios of them. We’ve all heard ghost stories of how bad credit can drag you down and limit your options and how debt can become a spiral that can truly be very hard to climb out of. But the problem is that a lot of people focus on the negative consequences of these stories that they fail to consider just how helpful credit and debt can be. Here, we’re going to challenge the phobia and help you use credit and debt better.

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The sooner you come face-to-face with it, the better

There’s a significant portion of adults who have never once checked their credit report. Some of these people might not know to, others have chosen not to because they’re staying well away from credit as much as possible. However, even if your record is immaculate, your report might not be. You might have to repair your credit score by no fault of your own but because there are erroneous accounts on them. For instance, you might be getting bad reports based on accounts that are mistakenly tied to your name but aren’t yours. Or you might be up-to-date with all your payments but your creditors made a mistake in reporting that you missed a payment.

It’s the next step in a better financial life

When used responsibly, credit and debt are the steps you take to make some of the biggest financial decisions in your life. When you get a car, when you buy a house, when you start a business, the chances are you take out a loan for them. With better credit, which is built by taking debts responsibly, you have the chance to get the best discount auto loans and the best mortgages. Having no history of credit isn’t going to help you get better deals. You have no history of being a responsible debtor, after all. Only by building a healthy credit history can you get the best deals.

Credit cards aren’t the devil

Those pieces of plastic might be considered the single most dangerous aspect of credit. Yes, people get themselves into credit card debt they can’t handle by using it to make lifestyle purchases they otherwise couldn’t. But that debt can be used positively to build up your credit so long as you have pre-planned a budget to always keep on top of it. Debt management turns debt from a danger into a simple part of life. You can get rewards cards that turn credit card use into extra purchasing power, whether it’s through air miles or through grocery vouchers.

Wise use of credit and responsibility for debts can be one of the most effective financial tools at your disposal. It can improve your purchasing power and it can help you make some of the biggest financial decisions in your life. In any account, it’s important to come face-to-face with it so you make sure that it’s not marred by errors that could come back to haunt you.