Looking for tips for getting out of debt fast? Clarky Davis, The Debt Diva, and author of The Debt Diva's Financial Guide shares her knowledge and down-to-earth style by answering some of the key questions about getting out of debt.
How important is goal-setting in lowering debt?
Setting financial goals is like driving. You have to know your desired destination, or you'll just keep driving around in circles, seeing the same scenery without making any progress.
There are basically three different types of goals that you can set, depending on the time-frame of the goal that you plan to accomplish:
- Short-term goals: These are goals you plan to accomplish within one month to one year. Goals can include birthday gifts, holiday gifts, taking a family vacation, paying off a credit card or buying a new TV.
- Mid-term goals: These are goals you plan to accomplish within one to five years. Goals can include paying off all your credit cards, purchasing a new car, remodeling your kitchen or saving for orthodontic work.
- Long-term goals: These are goals that will take five years and longer to accomplish. Goals can include buying a new house, saving for a child's education or saving for retirement.
What are the most important things I should do to better manage my debt?
With the rising cost of many of life's basic necessities (groceries and gasoline), it's important for consumers to reexamine their budgets. Most likely, you have less disposable income this year as compared to last year -- even if your salary has stayed the same or increased! We must make sure that we are adjusting our spending habits to keep up with our financial commitments without incurring additional debt.To manage your debt most effectively, you must consider your entire consumer debt profile and make sure you are taking the appropriate steps to protect yourself:
- Limit the number of credit cards you have.
- Do not maintain credit cards with high interest rates, annual fees and early interest posting dates (when the purchases made are posted at the time of the transaction). This means a higher finance charge.
- Always pay more than the required minimum payment to keep your debt manageable.
- Limit the credit limit. For many people, a higher credit limit translates into higher monthly balances, which, in turn, means higher interest charges.
What are some tips on lowering expenses?
Two areas of your budget that are the easiest to reduce are food and entertainment.
- Saving on Food - One of the best ways to save money on food is to stop eating out and start cooking for yourself. Another great tactic is to purchase store brand or generic food items. Cut out pricey items that you don't need like expensive snack food, soft drinks and magazines. Make a shopping list and stick to it.
- Saving on Entertainment - Skip the same old routine of dining out with friends or watching a movie at the theater, and take advantage of the many free community activities, exhibits and performances available in your home town. Look for community festivals, gallery openings and special events at museums or concerts in the park. You can also look for opportunities to give back to your community by finding volunteer activities you and your friends can participate in together.
Should I save my credit cards for emergencies?
A credit card is an important financial tool if used correctly. To prevent excessive credit card debt, I suggest that a person have no more than one or two credit cards available for emergency situations. When considering which credit cards to maintain, choose cards with low interest rates, no annual fees, reasonable credit limits and clear billing policies. Keep in mind you want to make sure you pay off the balance as soon as possible.
What are the key tips for paying off credit card debt?
If you want to make meaningful progress in lowering your credit card debt consider these tips for getting out of debt fast:
- Always pay more than the required minimum payment. If you can possibly pay the total monthly the balance on your card, do so.
- Always make your credit card payments "on time, every time!" Those nasty late fees and missed payment charges will add to your outstanding balance and could define you as an "unreliable" borrower.
- Establish an emergency savings fund, even if it's just setting aside a few pennies per day. One of the biggest pitfalls for consumers is not having money set aside for unexpected expenses and life challenges. Something as simple as a car repair can be a huge financial hit to a family. Job loss, illness or even divorce can send others into a financial oblivion.
Any tips to pay off debt of other types?
Consumers across the country are struggling with medical debt. For those who are feeling overwhelmed with the pressure of mounting medical bills, here are a few things to keep in mind:
- Make sure the bill you receive is accurate! Medical bills often arrive in your mailbox weeks after your office/hospital visit or treatment. Review the bill one item at a time the day you receive it, and contact the billing department with any questions or concerns immediately. Resolve any billing disputes before putting the expense on a credit card or loan installment.
- Negotiate You may be able to get a portion of the bill reduced. A hospital bill typically includes itemized charges for every service provided -- ambulance transportation, anesthesiology, blood tests, medications and other expenses. Contact information for each should be included on the invoice. Contact the service providers to see if they will reduce or waive their fees in any way.
- Investigate payment plan options Most people are unable to pay the entire balance owed at one time. Medical providers are usually willing to arrange a payment plan with a patient. Many medical payment plans are more consumer friendly than credit card payment requirements. Some charge no interest; others do. Make sure the payment plan is realistic and based on your ability to pay. Honor your payment plan and make your payments each month, on time. If your financial circumstances change, contact the medical provider to inform them of this change in status and try to negotiate a different arrangement. Make sure you get all payment terms in writing by asking the medical provider to send you written confirmation.
When should I call a debt management company?
You should consider calling a debt management company for support if you are experiencing any of the following situations:
- You can no longer afford to pay the minimum payment on your credit card(s)
- You are consistently using your credit card to buy basic necessities such as gas or groceries
- You are consistently late with payments
- You use your credit card for cash advances
- You receive calls from a collections agency
- You have lost track of your total debt amount
- You constantly worry about money
- You are behind on your bills and have creditors contacting you about unpaid bills