A sad truth is that credit, budgeting and money in general is considered a topic better left discussed in private among family, or is never discussed at all. For some reason it seems like a dirty subject. Many, many people are woefully unprepared to use credit when it is presented to them, and lots of people get into trouble because of it. Personal bankruptcy rates in the United States are high.
Formal credit counselling is a structured process. A general definition of it is that credit counselling is used to help individual debtors with debt settlement through education, budgeting and the use of a variety of tools with the goal to reduce and ultimately eliminate debt.
Credit counselling is most often done by credit counseling agencies, either for-profit or non-profit entities that are contracted to act on behalf of the debtor to negotiate with their creditors to resolve most debt that is beyond a debtor’s ability to pay. Depending on the structure of the agency, fees for services range from none to very expensive. Different states have various regulations governing credit counselling and debt restructuring enterprises. It is the law in the United States that individuals filing for Chapter 13 bankruptcy are required to receive credit counselling.
Credit counselling became mainstream with the establishment of the National Foundation for Credit Counseling in 1951. Banks and credit card companies realized that there was a need for consumer education about best practices for using credit when it became readily available to the general public and resulted in the growth of personal bankruptcy.
A Credit Counselor looks at a person’s total financial situation, and helps them to create a plan to pay off debt. Some of the tools used can include a money management plan, a debt pay down plan, as well as providing free resources and workshops related to money management.
In order for credit counselling to be successful, the debtor must be committed to the process and honest with their disclosures, and the chosen counselor must be reputable, knowledgeable and trustworthy. It must be emphasized that being forthcoming about all debt, expenses and income is the only way to ensure a good outcome.
It should be noted that any actions taken as a result of credit counselling can negatively affect a person’s credit score, at least for the immediate future. The credit counselor will explain how and why this happens.
Owing money and being in debt is an intensely stressful situation. Most people in debt never imagined it would happen to them. Many people are just a few paychecks away from debt. Hospitalization, repairs and sudden unemployment can happen to anyone, and devastate savings. Others may just have poor money management skills that need addressing.
Seeking help to address your debt issues is the first step. At Credi-serve, our aim is not just to help you to pay off your debt in full, but also to untangle the problems that led you towards debt in the first place. We offer three core areas of aid to our clients:
Giving expert advice on managing your money, tailored to your unique financial circumstances
Finding real solutions that work to eliminate your current financial problems as painlessly as possible
Developing a personalized financial plan around your needs and lifestyle to mitigate financial difficulties in the future.
Despite what the media would have you believe, the majority of Americans are facing a losing battle against steadily increasing prices. Not only are their wages stagnant—and essentially falling due to inflation—their 401(k)s are shrinking and an economy in the doldrums has all but made economic opportunity a seeming fantasy.
Unsurprisingly, many American consumers have turned to credit cards, personal credit lines, hospital financing and other loans to decrease the fiscal pressure bearing down on them.
This credit is debt—but responsibly managed, it is an efficient way to cope with the financial realities of today’s economic world. Unfortunately, with so many priorities fighting for headspace, it can be tough to ensure that you are on top of your obligations. Simply put, if your expenses are more than your income, it is only a matter of time before the house of cards comes crashing down.
If you are suffering from debt, it is vital to recognize that you need to take action in order to become solvent again. There is no shame in debt: a sudden illness or job loss can cause real credit issues where the fault does not lie with you. What you need to know is that you do have options.
Perhaps you’ve looked at your Minimum Payment Plan (MPP) and crossed your fingers. It’s the easiest way, right? Not quite.
By United States law, all credit card issuers must offer a MPP, calculated on the total balance and interest rate of your account, along with some other elements—and the results can be surprisingly low.
For example, if you have a balance of $7,000 on one card, your MPP could be as low as $125 a month. For many, that is a manageable payment—but there is a catch.
That catch is that the interest rates that will bleed you dry. That $7,000 balance may come with a 19% interest rate, totaling an incredible [$10,326.14] in payments for the interest alone. If you think that’s bad enough, how about interest rates of 21% and more?
An MPP looks good on paper, but the reality is very different.
LET US HELP YOU ESCAPE THE DEBT TRAP—CONTACT US TODAY
In fact, that is only a part of the story, as these rates are only for people who cease using their credit cards. If you continue to use them, that financial hole keeps digging itself.
There is one silver lining here: recent changes to consumer protection laws now mean that credit card issuers are compelled to tell you exactly how long your MPP term will be.
You can see for yourself when your next bill lands at your doorstep—look for a boxed area which will have a phrase such as “a minimum payment on this balance means that it will take X years and Y dollars to pay off your balance”. For many, this is a real eye-opener.
It is 2017 already and well underway. At this time of the year, it is wise to make new plans, set new goals and most importantly, make new budgets. This is the best time to take a look at your financial matters and set priorities. Financial matters should be the top of your list for a New Year’s resolution. You should have a budget plan at the beginning which you can follow for the rest of the year.
According to financial experts, “to continue enjoying our lives to the fullest, it is necessary to plan for our financial futures”. To help you set your financial priorities right, following are some points which can make you financially stable this year and help you change your lifestyle.
Many of us could not achieve our dreams and change our lifestyles because we lack the habit of saving. In 2017, it should be your top priority to start saving money. It doesn’t matter how much you save. You are not forming an annuity fund for yourself (although you should, if possible) but you have to save regularly. This will make you financially stable after the end of the year.
Spend Within Your Means
You should know and realize how much your income is. You should not let your expenses exceed your income and by income, we mean real income. Spending less than your income is the best way to meet your financial goals.
Buy an Insurance Policy
Insurance policies may seem like an unnecessary expense but it can provide safeguard against many accidental expenses. You should consider buying fire and health insurance policy. These two are the best insurance policies with little premium and more benefit.
Plan Your Retirement
Since another year has passed and the rest of the years will pass also. You are aging with each passing day and you should know the sensitivity of this matter and start planning about your retirement. This will enable you to have a significant amount of money at your retirement that will make your life extremely easy at the later stages.
Grow Your Business
If you are a businessman, you should look for ways to grow your business. Best thing you can do is devise a strategic plan for your business and analyze your financial position to see how you can implement that strategy. If you are an employee, you should consider starting your own business to enjoy the life of being a rich person.
Set Backup for Emergencies
There can be some instances that can disturb your savings and budget both. You should have a backup to tackle those incidents to some extent. Best way is to have an emergency reserve, separate from your savings. This can provide you with credit at the time of need without your savings being disturbed.
These are some ways that can help streamline your finances and make your life totally different at the end of this year. With these tips, you can be financially independent and enjoy your life more without sacrificing the small wishes.
A proper plan and deciding upon the budget is necessary before the holiday period starts. The expenses that incur during a holiday may leave a hole in your pocket, if they aren’t planned properly. The ideal way is to make a budget and stick to it, as planning and executing your holiday can be an expensive affair. Making the right budgets during the planning phase is of the utmost important for every individual. As per a survey, more than 60% people make budgets for their holidays. However, not all of them are able to stick to it and exceed the estimated budget.
There are numerous expenses that you need to take care of, irrespective of the fact whether you are moving out to spend your holidays or staying in town. Now a question arises; should you use cash or credit cards during holidays? Let’s try and find out the answer to this question.
The Risk of Credit Debt
As per a recent survey, people who use cash for their spending during the holiday tend to spend lesser as compared to the ones who use credit cards. The main reason behind this behavior is that when an individual runs out of cash or have a lower amount of cash in their wallets, they simply can’t buy anything you want as the purchasing power is backed up with the availability of cash. However, the excessive use of credit cards can land you in unwanted debts in the later stages. It is always a better move to let go a tempting offer now to avoid getting into troubles later.
With the use of credit cards, resisting a particular offer becomes a tad bit more difficult. High credit card balance can lead to more purchases that can result in higher debts. The use of cash is definitely a better option in such a scenario.
Resisting the Temptations
A clever trick employed by credit card companies in association with different brands to lure in customers is by tempting them with discounts they can avail with the use of credit cards. Getting to see a huge discount on your favorite brand can be difficult to resist and you may end up making purchases you did not intend to.
The 20% or 30% discount on different products if you purchase them through your credit card may sound an attracting offer. However, you may often end up paying more than the actual price because the interest rate will accumulate up if you wouldn’t be making payments to your within a month.
It is a commonly observed trend that people tend to buy a holiday gift for themselves even if they don’t have a budget for it. Surely, pampering oneself with gifts from their hard earned money is necessary, but doing so with the risk of disturbing your budget is definitely not a wise move. As per a study, 17% people are found the guilty of getting themselves a holiday gift despite having a tight budget.
Credit Cards – Are they of any use?
With all the discussions above, you must be questioning the usability of credit cards. They can come in really handy if you are in a position to clear off the balances in the near future. Otherwise, it is going to be a tricky situation in which you are going to land yourself in. Furthermore, you can enjoy certain extra features that you may not get with cash purchases such as extended warranties, the return of damaged goods etc.
In the end, it’s all about having the adequate balance in your credit card account to avoid landing yourself in unfavorable circumstances.
Using Technology for Savings
The world has advanced and almost all of manual work has been taken over by artificial intelligence. Gone are the days when you would need a paper and pencil to draft your holiday budgets. You can have dedicated apps for this purpose.
Various apps especially created for the budgeting purpose are available on IOS’s AppStore and Android’s PlayStore for you to download. These apps allow you to make budgets and stick to them in the most effective manner. All the important holiday essentials such as traveling expense and gifts etc. can be tracked with these apps. Furthermore, there are electronic calendars, which can remind you of any pending and due payments that you need to make so that you can stay on track and interest rate remains on the lower side.
Going the Traditional Way – Allocating the Resources
The best way for enhanced savings and keeping the budget on track for families planning the holidays is to allocate the resources to every individual. Make sure they stick to the resources allocated to them. This will result in little to no chance of overspending and landing into debts.
If you are planning to buy gifts for your loved ones in the holiday period, the thing you need to do for remaining in your budget bracket is to allocate a portion of the budget for each of them. Make a priority list and spend accordingly. This is only possible if you are cash instead of credit cards during your holidays as the behavior pattern that has been observed with the users of credit cards is that they tend to overspend thinking they will somehow manage to clear off the debts in later times. However, they may not be able to do it and land them in some not so favorable conditions.
Getting gifts for your loved ones on holidays and special occasions definitely add value to your relations but doing so by disturbing your budget is not considered to be a wise move. Of course, the sentiments matters but not more than you missing out on a credit card payment.
The gist of this story is that the use of cash has an upper hand as compared to the use of credit cards during holidays. The use of cash saves you from overspending and lets you enjoy the holiday period without drilling a hole in your wallet.
Whether it’s because you had an unexpected medical expense, an expensive emergency home or car repair, or the result of poor money management, there are many reasons that you may find yourself over your head and in debt.
The key to being on a firm financial foundation is to first fix the immediate problem by eliminating what you owe and then addressing and fixing the issues that put you in debt in the first place.
When counselling and financial education alone are not enough to help, a useful tool in determining the best options to meet your credit and debt needs is a Debt Management Plan, also known as a DMP. A DMP is a debt relief option where a counseling agency works with your creditors to come up with a suitable monthly payment plan as well as a new budget for your particular situation. A DMP alone is not credit counseling, and DMPs are not for everyone.
Only certain kinds of debts can be included in a Debt Management Plan. Credit cards and other unsecured debts usually make up the bulk of personal debt, and they traditionally make up DMPs. Secured debts such as monies owed for taxes, mortgages, home equity loans, auto loans and student loans cannot be included. Unsecured debts such as medical or collection payments can usually be included in a DMP, as long as the collector has not gotten a court judgement for wage garnishment.
Please note that while on a Debt Management Plan all existing credit cards must be closed and no new credit can be obtained.
A Debt Management Plan works like this: you deposit money each month with the credit counseling organization. It then uses your deposits to pay your unsecured debts such as your credit card bills and medical bills, according to a payment schedule that the counselor develops with you and your creditors. In certain instances creditors may agree to lower your interest rates or waive certain fees.
A DMP is a voluntary agreement between three parties; the counselor, the client, and the creditor.
The New Year has rolled out, and you must be knee-deep in tackling numerous resolutions. Regardless of the specific theme of your resolution, there is no doubt that financial goals share a hefty chunk of the hypothetical Resolution Pie.
An insightful survey conducted by Experian and Edelman Intelligence discovered that tackling credit card debt – and managing to avoid it in the future – was a common theme that recipients listed as one of their top financial goals for 2017.
Why exactly does both paying off and avoiding future credit card debt seem to ring so truly amongst people? It seems to stand as an oddly-specific aim, particularly once coupled with other goals of increased savings and promises to carry forward with wiser financial decisions.
We have three main theories to answer this question.
Timing plays the ever-notorious role as the most significant factor. The survey happened to be conducted in October of 2016 – prime holiday crunch-time. The last quarter of the year is right about the time when people begin to experience amplified spending; credit cards swipe endlessly for long holiday shopping lists and steeply-priced gifts. Holiday debt is an entirely accurate term to sum up the debt most Americans experience immediately after December nears towards its close.
Desiring change is a common phenomenon to experience once we press the virtual reset button on the year. Twelve clean, uncluttered, and untouched months stretch before you, and you possess all the drive to work towards making smarter financial decisions.
The improving economy has ensured that even fresh college graduates are able to hold down some basic form of part-time employment. The country is stumbling out of a recession, and economic prospects seem significantly brighter. Individuals now understand how to earn via alternative sources, and how to monetize comfortably off the most basic skills.
Now that you may fully understand why your financial goals appear a certain way, it is now time to focus on how to effectively transform such goals into a reality.
Firstly, make it a point to go thoroughly through all your accounts, and jot down the balance and interest rate for each. This list will provide you with a fair understanding of where you currently stand in terms of debt repayment, and how much farther you have left to proceed. Continue paying the minimums on all of your accounts – except for a single one. Select one balance as your aim, and work towards erasing that debt. After you achieve your first goal, proceed to the second balance on your list.
Figure out which debts to prioritize. This organization will help you achieve a greater sense of control, and aid you in going about your goal-reaching process in a more efficient way.
You could choose to opt for the “snowball” method, whereby you begin with your smallest balance initially, and then slowly work your way upwards. Financial guru Dave Ramsay happens to be the mind behind this specific strategy, and argues that it assists those individuals prone to becoming quite easily demotivated when they do not observe immediate results.
For a more pragmatic approach, apply the “avalanche” method, whereby you begin with the heftiest debt to pay off, before moving downwards and eventually reach your lowest interest rate account.
Whichever strategy you opt to select – commit to it entirely. Budget your monthly expenses carefully, and trim any unnecessary spending. Perhaps invest your time in picking up freelance work as an additional source of income. As with any resolution or long-term goal, commitment and dedication is the fuel that will see you through the last leg of the race.
If you happen to feel unsatisfied with your progress, you may opt to look at various other alternatives, such as balance transfers, debt consolidation, or consulting with a credit counselor. There are numerous mobile applications that also serve to provide financial advice across a range of situations; hence they could also be worth looking into so that you are able to achieve your financial goals in the best ways possible!