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Your Debt Limit
"Stand up to your obstacles and do something about them. You will find that they haven’t half the strength you think they have."
- Norman Vincent Peale
As I sit down to write this on Monday morning, we’ve all been greeted by the blaring headlines that the US Treasury has reached its legally-allowable debt limit.
But what’s a paltry $14.3 trillion among friends? Well, if investors stop purchasing our nation’s debt on the markets, we could really see some fallout. "Fortunately", the Treasury department employs a bunch of smart accountants who have figured out a way to move money around, and extend the "real" deadline into August.
How’s your debt situation? I’m here to help. And though I don’t work at the Treasury Department (thankfully), I’m pretty decent at (legal) accounting "tricks". That said, there are some basic first steps at which I’d encourage all of my clients and friends to take a good hard look, BEFORE we sit down to discuss other strategies.
So, here are my "Debt First Steps". Let me know what you think — and remember that we are truly here for you! After all, it can be a lonely task to manage your family’s finances … which is why we make it a point to keep in such close touch with you — and to help you know that you don’t have to walk out your financial life without help.
John Neal’s
"Real World" Personal Strategy
Neal’s Debt First Steps
Whether you’re dealing with a couple thousand dollars or a couple HUNDRED thousand dollars of debt, there are some important steps to take before you consult with further professional help. Taking these steps will not only help you handle things financially … but I’ve found that taking positive action — ANY positive action — can make an enormous difference to your state-of-mind.
Which, as you may know, is one of the greatest casualties that people experience in the midst of debt loads.
So, here are the things we advise our clients and friends to do first … I’m focusing on credit card debt here, as it’s the most common form, but the same principles apply with other creditors.
1. If you ever hope to pay off your credit card debt, pay more than the minimum payment each month.
If you only pay the minimum payment each month, your bill could continue to INCREASE, even if you completely stop using your card. This is called "negative amortization"–where you think you are paying on your debt but the additional fees and finance charges are more than the minimum payment. The bottom line is: Pay more than your minimum or you will eventually be in debt over your head.
2. Implement a regular *system* for credit card debt reduction.
With online banking and automatic payment options, there are GREAT tools for ensuring you don’t mess up because of administrative chaos. If you feel you can’t manage all your bills by pen and paper, there are several good software programs available for keeping track of your financial records.
3. You can negotiate with your credit card company.
No, you do not need to be an attorney or other professional to negotiate with your credit card company (you will need patience and persistency though). The rising amount of consumer debt in this country has made creditors realize that they need to be more understanding of their customers — if they hope to get any money back. If you file bankruptcy they are only going to get pennies on the dollar, so they are willing to make deals.
4. Write letters to each of your creditors acknowledging your debt and the situation, and tell each one when you can begin repayment.
Open communication always helps. Usually credit card companies get ignored and end up sending delinquent files to a collections agency. So they’ll actually appreciate your openness in contacting them and may be more understanding of your situation. Proactively dealing with your debt problem rather than hiding will not only help your financial problem but make you feel better about yourself.
5. Keep track of what you are able to pay each creditor every month.
If you are not able to pay the full amount of your credit each month, you still should still pay something to stay on top of it. You should work off a written budget so you know exactly where you stand. Some experts suggest that you divide your monthly debt budget by the percentage each bill makes of the total and pay that amount.
Here’s an example: If you owe a total of $1,000, and one credit card is $800 and the other is $200, and you only have $100 available to pay for that month… You should pay $80 on the $800 balance, and $20 on the $200 balance. This way you are reducing each debt by the same percentage.
6. Don’t fall prey to intimidation tactics
No matter how forthcoming and honest you are, some creditors have been taught to be mean and downright nasty. Hang in there and don’t let this tactic intimidate you.
We’re a phone call away: (414) 325-2040
To You and Your Family’s Peace of Mind!
