Are you debt free?

[kayleigh913]

Hi, I'm sorry to hear you are going through a rough time. I'm not sure how much advice I can offer since I've never really been in debt, but I can share with you how I save money. Take a look at your bills and what you can spend less on. Get rid of cable/internet if you can. Find a cheap cell phone/land line. See if you can reduce housing payments. Save on electricity by using energy efficient bulbs, etc. Don't go shopping/eating out until you can pay off whatever you need to. It's okay to splurge every now and then, though. I'm debt free and pretty much on top of my finances even though it is sometimes hard. What I have done that helps is try to keep a positive balance in my checking account as much as possible. I saved up about 8,000 before I lived completely on my own, it has helped to this day. Try your best to live within your means, as in try to match your salary with what you have to pay for. I may not make as much as a lot of other people by in comparison my bills are about the same to how much they have to pay. Try not to go for payday loans, that's just asking for a mess. Stop using credit cards if possible and work to pay off the balance. Get a second or third job if you need to, all these have helped me. Work out a payment plan with your creditors if possible, they'd rather get something than nothing. See if you can get your interest rate lower. Hope this helps good luck.

[ivyalmighty]

Hi Stephanie,

I'm not debt-free yet, but we are getting very close.

First, be prepared to spend a LOT of time on the phone and computer. More on that later.

Second, definitely go for that smaller house. Just in january, my family moved from our $1700/mo two-story home in a gated community with polished travertine floors, granite countertops in the whole house, travertine showers, closet systems in all bedrooms, stainless steel appliances... you get the idea... into a $1095/mo two-bedroom townhome with no master suite bathroom, in a much lower-income area. We were so spoiled! The impetus for moving was that my husband had a brain tumor and I couldn't work while he is in rehab, and we needed to move closer to the area where his doctors & therapy is. Luckily, he is in the military so at least his income is secured during this crazy time...

Now that we are here, I can't believe we never did this before. Before, on only his income, we had about $1700/mo of extra income after bills & food, so we immediately assumed that we could (and should) afford a rent payment of that amount. That is false false false. Paying that amount left zero dollars for OH CRAP! expenses, zero dollars for savings and zero dollars for paying off old debts. That meant that I had to work, which meant we had to get a second car (very costly!), and daycare, and extra gas... So I basically was working a $37K/yr job but only having $300/mo of that OH CRAP money after all the collateral expenses of having a job were taken out. We were falling for the American Dream Syndrome. We looked good on the outside but there was no financial cushion on the inside!

We've been in this townhouse for only two months and I have paid off over $1500 in old debts in just this time. The money we are saving just on gas (having shortened our commute to work, doctors, etc by 30 miles) and rent have made all this possible. This is the first aspect - cutting corners so you can find the money to pay the debts with.

The second aspect is paying them, and workign to have the debts removed from your credit report as soon as they are paid. This is where allllll that time on the phone and computer comes in. It is time consuming, really. I pulled both our credit reports and immediately disputed anything that was negative, but showed as 4 years or older AND paid. That's right, I said 4 years or older, NOT 7 years. See, if it had late payments or was paid after collections, but is NOW paid off and is a little bit old, there's really no point in having it on your credit report. The collectors know this and if you dispute it, there's not much reason for them to keep it on and they'll usually remove it. I've had four fall off in the past two weeks because of this. Next, I paid in full all smaller debts - anything under $150, I really didn't squabble over. As soon as I had a confirmation number and payment was completed, I disputed those transactions on my credit report as well. A simple "Please remove this from my credit report. It was paid on DATE, conf #XXX. Please delete." has worked wonders for me. So, instead of paying off debts and then letting them continue to affect you for years, just dispute them. There's really no reason for the creditor to keep reporting things like old cable bills, medical bills, etc, once you've paid them. Most of them don't feel like taking the time to keep a debt on your report once they've gotten their rightful money for it. Finally, I do try to make settlements for the larger amounts. I just want my money to go as far as possible, and as I understand, there isn't too much difference between how a "paid in full after collections" and a "settled for less than full balance" are rated on your credit report -- a few points, nothing more. Then, once those are also paid in full, dispute to have them deleted as well. Again, most are willing to delete because they've gotten their money.
And remember, you must delete/dispute each listing with each of the three credit companies. They do not communicate, so it's on you to do alllll the legwork to make sure all three credit reports reflect your newfound absence of debt.

Along with cutting out silly expenses like buying tons of CDs and movies (how often do you really listen/watch enough for it to earn its worth??), going out to eat so often (even when you're at work - pack a lunch, girl), and limiting grooming expenses (tanning bed, hair, nails really adds up) moving into a cheap place is a HUGE way to save. After all, it's only temporary. Would you rather live in a palace that you are afraid of losing every day, or live in a shack for two years if it means you'll have a fabulous interest rate on a fabulous home that you never have to think about losing in the long run?

LASTLY, when I had to stop working, I realized that I and most other americans don't understand "financial security." I thought financial security meant "we both work, we pay all our bills on time, and sometimes we can afford to do something nice like SeaWorld." But if either of us had lost our jobs, as happened when I quit to take care of him during his brain tumor issues, we were suddenly screwed. Base your entire life on ONE income. Never assume that both of you will be working at the same time. This way, if the second person works, ALL their income can go to old debts, savings and the OH CRAP! fund without affecting your true bottom line if one person is laid off or disabled.

-Ivy