How to save that extra cash

Saving an extra $100 per month will give your budget additional flexibility. There is a lot you can do with $100, such as paying down high interest debt, saving for future expenses, or even a luxurious vacation.

Cut the luxury

Small luxuries are the first place to look for cuts. Look into your wallet at the beginning of the week and at the end of the week, chances are that the small bills go quickly and you never have anything to show for it. The $4 cup of coffee in the morning, a $.75 candy bar at lunch and a gumball at the store might seem like a small amount at first, but this adds up to $150 per month.

Insurance premiums are out of this world

Insurance premiums are another place to save some additional cash without risking financial safety. Raising the deductible on your home or car insurance will drop your premiums by 25% or more. Increasing your deductible from $500 to $1000 will free up a significant portion of your budget while only adding additional liabilities if an emergency occurs. Why pay an extra $600 a year for just $500 more in protection on your car? Call your insurance broker and lower your deductible immediately.

Invest in cost saving devices

Invest in your future. Changing out light bulbs or your shower faucet head can bring instant savings in electric and water bills. New light bulb technology drops electricity use by 75% while still delivering the same amount of light. Low flow showerheads limit water usage but can still deliver the pressure that you enjoy from your traditional shower head.

Saving the small change

Start collecting spare change. The small amounts of money is quickly lost or spent on things we do not really need. The “gotcha” stores with the $1 items might sound cheap at first, but when you realize you have no need for them, they are no longer doing you any service. Start saving the small change and it will quickly add up.

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Some simple steps to crawl out of debt

If you're like the average American (only with much better hair), you carry about eight credit and charge cards in your wallet, owe more than $7,500, and are paying around 14 percent in interest on those balances. If you paid off your credit card balance in full last month, take a bow -- you're part of the 40-percent minority who did so.

If you're struggling with debt, clearly you're not alone. Being debt-free takes resolve and a little know-how. We'll help you get on the right track, starting with these eight steps.

Step 1: Separate "Bad Debt" and "Okay Debt"
Unless your last name is Hilton, some debt is inescapable. How can you tell the difference? "Okay debt" has an interest rate well under 10 percent -- preferably with some tax advantages to boot. In the best case scenario, the thing you bought with borrowed funds will appreciate in value. (Think mortgage and even that student loan.) "Bad debt" is everything else -- especially credit card debt.

Step 2: Don't Pay by Their Rules
You're smarter than they are -- and by "they" we mean the suits on the receiving end of your hard-earned paycheck. You know that the "minimum amount due" is cleverly calculated to keep you beholden to The Man for your entire adult life. A $4,500 balance on a card with an 11-percent APR will take 44 years to pay off, even if you don' t put another dime on the card. Oh, and the interest you'll pay on that loan? A cool $17 grand. That's why you're going to pay by your rules. Keep reading.

Step 3: Get Intimate with Your Visa
Gather your bills and clear a space at the kitchen table to line them up. Find the minimum monthly payment for each account, add them all up, and behold your overall monthly minimum. But you, you go-getter, have a plan. Rank your cards from the lowest to the highest interest rate. Identify the one major credit card with the lowest annual interest rate and room for a balance transfer. Your other cards are now dead to you -- take them out of commission. Cut them up if you have to or throw them behind a major appliance. Promise that you'll use the one card left intact for emergencies only.

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Step 4: Play the Heavy with Your Existing Lenders
Grab a bill from any account charging you more than 14-percent interest. Dial the toll-free number and ask to have your rate lowered to 11 percent. Tell them that you'd really like to stay with them out of customer loyalty (embellish according to your acting skills -- fake a French accent if you must), but that you've received offers for much-lower-rate cards. Expect to be made very uncomfortable, but stand firm. Remember that, to them, you're both a customer and a profit center. Your lender would rather keep you as a customer than shell out (anywhere from $50 to $200) to find your replacement. And you also stand to save a bundle. Studies show (yes, actual studies exist on this technique) that more than half of the customers who tried to negotiate lower interest rates with credit card companies had some success.

Step 5: Shop Around for a Better Deal
If you or your honey have got a decent credit report card, you may qualify for "teaser rates" -- low, short-term interest rates -- from your credit card's competition. Move as much of your higher interest debt onto those cards as possible, and then put the card under lock and key. If it's going to take you a while to pay off your balances, it's worth it to find the lowest rate you can get for the longest period of time. But do this as few times as possible: The less you have to apply for new credit, open the new account, transfer a balance, and close the old account, the more simple your finances (and your credit record) will be.

Step 6: Lather, Rinse, Repeat
Repetition is the key to success. Pay the minimum amount due (on time, every time!) on all accounts except the one with the highest rate. Send every extra dollar, every quarter you find on the street, every dime you earn over time, and that $20 your mother-in-law gave you for cab fare last month to the high-interest rate winner -- well beyond the minimum your lender hopes you'll pay from now until eternity. Lather, rinse, and repeat until you've washed each debt right out of your hair.

Step 7: Be Prudent
Be aggressive in paying down your debts, but don't get so ambitious that you risk missing minimum payments on your mortgage, automobile, or any other secured credit account. (Secured means that if you miss enough payments, the bank can show up and take your stuff.) A small emergency stash of cash will help cover those budget busters. Sticking to this plan requires willpower over a long period of time. Anticipate strong shopping cravings that will arise during your debt triage and give yourself props for each day you keep your cards in your wallet. Mark some reward days on your calendar to celebrate (inexpensively) your newfound savings mantra.

Step 8: Resolve to Spend Less Than You Make
If you can't pay for it today, then you can't afford it. In a household built for two, that goes doubly. Sound harsh? At least the math's easy. Getting and staying out of debt boils down to this simple formula: Outflow is less than inflow. In other words, spend less money than you make on a consistent, long-term basis. By making just a few small sacrifices -- and paying a little more attention to the bigger money items -- you can amass a nice chunk of change in just a few months. Look at you! Not only are you out of debt, you're saving for the future!


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Stop harrassing phone calls

Scenario: You’re at home with your family, about to sit down to dinner. The phone rings, and you already know who it is on the other end. You don’t want to answer it, and the caller ID confirms your suspicions. It’s a 1-800 pay-me-now #, and you know it’s a collection agency again. How annoying.

It can be so embarrassing and nerve wracking to have creditors harassing you. They call you all the time, even at work. Don’t you’ve some rights? Isn’t there something, anything you can do?

In fact there are several ways to make creditors stop harassing you by phone. When you get a harassing phone call, you should sit down right away and write the company to whom you owe the debt in question what’s called a “Do Not Call” letter. This letter will instruct the creditor to stop harassing you with phone calls, and give them a superior way to contact you.

The ideal way to make creditors stop harassing you is to prevent the situation from coming to that in the first place. As soon as you know you will be unable to pay a bill on time, call the company to whom you owe the debt and try to work out a payment plan. This shows good faith on your part and makes it less likely that they will harass you.

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Keep a notebook next to your phone and log every time a creditor calls. Mark the date and time of the call, the debt in question, the callers name and the creditor they represent. If it is legal in your state, record your conversations with the creditor. If you don’t record the call, tell them you’re. This may “scare” them into changing their personality and might stop future calls.

Federal statutes are in place to protect people in your situation too. Creditors are not permitted to call you before 8 in the morning or after 9 in the evening, and might call you only one time after sending them as “Do Not Call” letter - and this is a call to tell you they will stop calling. Creditors may not under any circumstances call you at work, ever. If this ever happens, tell them so.They cannot threaten you with action they can’t carry out nor can they threaten your kids. They can’t use offensive language. Creditors can’t speak to an uninvolved celebration about your debt such as your neighbor, employer or relative. They can, however, talk to your spouse, attorney or a co-signer. Creditors cannot seize or garnish your wages without a court order. They cannot send you to jail nor threaten to do so.

What creditors CAN do are these three things: They can refuse your business in the future, they can sue you for what you owe (though this is unlikely as will almost certainly cost more than you owe to sue you) or they can report your non-payment to a credit reporting agency

Another thing they cannot do is bully and harass you. You are a citizen and you’ve legal rights and protections. If you’re being harassed by a creditor, you can stop them. You don’t have to be treated badly on account of debt which you fully intend to repay.
Here is a link that you may find helpful.

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Negotiate with your creditors

If you are in danger of credit problems because you have more debts than you can handle, there are things you can do at least keep your creditors reasonably happy.

First, prioritize your debts or rank them in terms of the ones that can give you the most trouble the quickest. If you are three months behind on your utility bill and the company is threatening to cut off your power, you should deal with this debt first.

Second, be sure to keep an accurate log of all phone conversations with creditors and copies of all correspondence.

This way, you will have a good record of what's going on, to whom you spoke last, the date of that conversation and its result. It's not uncommon for large corporations to have different people or even different departments contacting you about late or missed payments. If you keep accurate records, you will always be able to defend yourself against the claim that you have been unresponsive or uncooperative.

It's kind of human nature to want to run away and hide from creditors. But its better to be aggressive. If you know you are not going to be able to meet a mortgage or credit card payment, call the company before the payment is due. Tell the company's representative why you are having money troubles. Be sure to give a real reason for your problems such as a divorce or loss of a job, and not just some feeble excuse.

If you can give your creditors a real reason for being in financial trouble, you may find that they are sympathetic and willing to work with you.

Your next step is to arrange a payment plan. When you contact your creditors representatives, explain that you know you are behind in your payments but that you want t make a payment arrangement. Let them know what you can afford to pay this month and the next. Make certain they know you intend to make full payment eventually.

You might also see if one or more of your creditors would be willing to let you skip a month's payment. Be sure to get all payment plans in writing. If the company's representative does not volunteer to mail you the plan in writing, send a letter requesting that he or she do so. Calculate just how much you can afford to pay a creditor before contacting the company. Then, do not agree to pay any more than this, no matter what the company demands. It may take a number of phone calls before the company agrees to a reduced payment. If the company keeps saying no to your offer, keep calling until you get a different answer. Or ask to speak to the representative's supervisor as he or she may have more authority to work out a plan with you.

Finally, always try to negotiate. Your landlord may be willing to let you miss a payment now if you make it up at the end of the lease.

If you have a mortgage, ask your lender if they would take a 60 percent payment now with the promise to make this up over the next few months. If you will be paying late, explain the circumstances and ask that at least they waive the late fees.

If you are having trouble paying for your utilities, see if you can switch to a budget plan or set up a partial payment plan. Most utilities will not cut off your service so long as you are making some kind of payment.

You could sell your car and purchase a cheaper one if a car payment is a problem. If you're going to make a late payment, be sure to let the lender know in advance. Otherwise, you might find your car has been repossessed. You might ask for an extension of the loan. For example, if you have 36 months left to pay, you might ask to extend this to 42 months in return for lower monthly payments. And if you are leasing a car, see if you can terminate the lease early. All the leasing company can say is no.

Being in serious debt is never any fun. But if you tell your creditors what you will do and then do what you say, things will get better. Never be afraid to negotiate with your creditors. Negotiation is a proven method but will only work if you are willing to make that first step.

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Myths about debt consolidation

By watching television just a few times a week, you’ll notice a number of commercials pushing debt consolidation loans. You can save on interest and get a smaller monthly payment. That sounds great! The truth is that most of the time debt consolidation doesn’t work. If you aren’t convinced by the fact that they are being marketed so heavily by these loan and mortgage companies, let’s go over why they don’t work and why they are a bad way to get out of debt.

Smaller interest rate.
Debt consolidation typically saves little or no interest because you throw your low interest loans into the deal.

Smaller monthly payments.
This is an obvious one–smaller payments equal more time in debt.

Truth be said, you cannot borrow your way out of debt. By borrowing money to pay off debt, you are simple moving your debts, no paying them off.

Why does debt consolidation not work even if the math works?
Because there was no change in behavior. “Debt is not the problem, it’s the symptom.1” Having no emergency fund, buying things we can’t afford and being out of control. If those things aren’t addressed, you can’t borrow your way out of debt. It won’t work.

Debt consolidation is America’s attempt at microwaving their debt problem. Most of the time, you pay off your credit cards with a home equity loan, don’t change your habits, and the credit card debt grows back. Now you have credit card debt along with the loan you took out to fix the problem.

Debt snowball

The quickest and best way we’ve found to eliminate debt is to use debt snowball method. How does the debt snowball work? It’s easy. Simply list your debts in descending order with the smallest payoff or balance first. (Some people prefer to list them by interest rate, but if you’re looking at building momentum, list by balance.) Paying the little debts off first will show you quick feedback and you will be more likely to stick to the plan.

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