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Mary Hunt's Debt-Proof Living Help! I've Fallen and Can't Get Out of Debt!
by: Maria T. Russell WritrsBlok@aol.com


How many times do we find ourselves buried in the middle of our bills wondering if we will ever see over the mounds of indebtedness? Probably every month. And still we are no better off than the month before and even the month before that. Is there a solution short of doing the 1929 jump out of your apartment window? And what about filing for bankruptcy?

The answers are yes and no; there is a solution, so shut the window. And no, you really donít want to file for bankruptcy. That only will add to your problem down the road. So what do you do other than pray for a miracle? You resolve that this is the year that you will get your house in order and STICK TO IT. Donít let this be like one of your New Yearís resolution to lose fifty pounds. But just like your resolution, you need to plan out your strategy. It just doesnít poof away; it takes work, patience, and time. If you are willing to invest those three into your problem, I guarantee it will be resolved.

There are three things you need to do in order to make this plan work:
(1) Tear up your credit cards
(2) Set up a budget
(3) Learn to save

Youíre cringing at the thought of the first idea, wondering how to do the second, and laughing at the third thinking I have absolutely lost it.

First, take all those credit cards out of your wallet. And yes, include those you hardly ever use. Letís remove ALL temptation. Now in a ceremonial atmosphere take the scissors and slice down the middle and then horizontally making it look like petrified confetti. Now congratulate yourself. Even though youíre scared to death, please know you will survive those charge withdrawals that are slowly coming over you right now. Remember in time you will be glad you went through this bit of pain now in order to obtain financial independence for the future.

But now that you have cut up the cards, you cannot spend what you donít have, right? Letís take this one step further. The check book. No, you donít have to cut it up (you still have bills to pay). But donít carry it with you. Leave it at home. You want to remove any temptation to steal from Peter in order to indulge Paul a little pleasure. From now on itís strictly cash. What a thought! Do you remember those green pieces of paper? They changed the look of a twenty. Did you know that? I figured Iíd educate you in that since the only thing you could relate to was the card with the brown stripe on the back. Forgive the humor. Iím not heartless. Iíve been exactly where you are right now.....and yes, I survived.

Second thing you need to do is sit down and set up a budget. This could be as simple as grabbing one of those ledger sheets you find at the stationary supply store to (if you have a computer and you know how to set up a spreadsheet) creating a file to work in.

First thing, determine what your net income for each week is. If you get paid bi-weekly then list it accordingly. If you get alimony, child support, donít forget to include that. This is going to be your workable capital. Next grab ALL your monthly bills: rent/mortgage, utilities, charges, food, insurance, gas, car repairs, and anything else you need to pay like property taxes, and place them on the table. Set up on that ledger (spreadsheet) a column with all those bills listed. Next to each one write down what you pay monthly on those notes. Now total those columns. Your ledger sheet should look something like this right now.


Net Income $3000.00
Bills Amounts
Rent $900.00
Food $400.00
Car payment $300.00
Electric $100.00
Gas Heat $200.00
Car $80.00
Insurance $100.00
Charges $500.00
-------------- --------------
Total $2580.00



Regarding those charges, make sure you pay at least the minimum plus the monthly interest. If you pay just the minimum, itís like swimming up a river. You donít get anywhere. If you can pay a little more, that would be great, in fact fantastic. But for right now, letís deal with minimum plus interest. So using the hypothetical example above you should have a balance of $420 left for the month. Of course you are saying you wouldnít be in this mess if you had that much. Iíll go over that "what if I donít have anything left over" thought in a moment. But going along with the premise that you just might have something left over, albeit very little, you will be handling that as a cushion.

Using that "extra" money, you are going to set up another debt called "savings" and add it to your list. Put at least three-fourths of that money in the "savings" bill. So in essence you are paying another bill, but a bill that is a plus to you. So now your ledger should look like this:


Net Income $3000.00
Bills Amounts
Rent $900.00
Food $400.00
Car payment $300.00
Electric $100.00
Gas Heat $200.00
Car $80.00
Insurance $100.00
Charges $500.00
Savings $300.00
-------------- --------------
Total $2880.00



The money left over will give you some room to play or maybe a chance to go out to eat some time. So letís say $2880 is the total of your bills for each month; now divide that by 4, the number of weeks in a month. That comes to $720 per week that needs to be set aside in your account, $75 of that should automatically be placed into savings. Pay that "savings" bill without fail each week. Let that be the first bill you pay. Then those months when there are five pay weeks in a month, you pay just the basic (food, car, etc) and the rest you put into savings.

Now letís work with those charges. Letís say that $500 you pay each month (which includes minimum plus interest, if not more) is spread out among 4 credit cards. List them according to balances like this:


Visa $2000.00
MC $1000.00
Sears $750.00
Penney $500.00



What you need to do it work on a pyramid payment plan where you start seeing results right away. How you accomplish that is by paying off the smallest amount first, then the next, then the next after that. But during this time you are paying the minimum payment on the rest. This might sound contradictory considering I mentioned paying more than minimum but this is where the "Peter Principle" of mine works well. In this situation you will be stealing from Peter to pay Paul but eventually you will be paid back by Paul. Let me show you.


Jan Feb Mar Apr May Jun Jul
Visa $2000.00 100 100 100 100 100 250 500
MC $1000.00 50 50 50 200 400 250 0
Sears $750.00 50 150 350 200 0 0 0
Penney $500.00 300 200 0 0 0 0 0
--------------- --------------- ------- ------- ------- ------- ------- ------- -------
Total Paid 500 500 500 500 500 500 500


The glory of this method is seeing your bills disappear. If you notice, when a bill is paid off, that amount is added onto the next until everything if finally paid on the larger indebtedness. Then itís downhill from there on out. It really feels good watching those bills disappear.

BUT, if you found that when you added up the bills and compared it to your net income and came up short, then you need to deal with trying to bring down some of the costs of the flexible bills, namely insurance, utilities, food, and the like.

Insurance

Learn to shop around. Insurance prices are not the same everywhere you look, especially if you are a good driver or at least have had no claims for at least three years. Also, if you raise your deductible, your premium changes, sometimes drastically. If your car is paid off, remove collision coverage Ėespecially if your car already looks like itís been through WW II. Some companies will lower rates if you also have homeownerís insurance and cover your automobile with them. Also, check the amount of liability. Some states require only a minimum amount of liability and not $250,000 or so you might have on your policy. Check to see what your state allows and carry just the minimum. If you have glass coverage, you might want that excluded from your policy as well as the rate charged to pay for a loaner in case of accident. You pay for these ďluxuriesĒ. Itís up to you if you want to continue paying them. You just might save a few dollars each month by checking exactly what you are paying into your policy.
Suze Orman's Financial Guidebook
Utilities

Some electric companies have a budget program when it comes to paying your utility bill. They take the previous year and divide it by twelve months, averaging it. By doing that ,you can pay one flat rate each month instead of worrying about that February heating bill being way beyond what you expected. Then at the end of the cycle you make up any difference. So instead of paying $60 during the summer and over $200 during the harsh winter months, you could see a bill each month for $100, which is more palatable.

Food

There are many avenues in which you can save money at the grocery store, one being using coupons. Do I recommend you using coupons? Only if you use those products. But I find many people go and buy some multi-colored cereal they never have used before just to get the free milk the coupon offers. So what did they get? A breakfast with no more value than eating candy and didnít even save a dime in the process. I am an advocate of using store brand labels. Most of the time, the product is the same as the well known brand or at least comparable. But there are times when double coupons is the better deal. You have to watch for sales, use coupons and decide which will offer you more of a savings.

Regarding meatsó it really depends how much you are willing to cut your food bill. If you are bent on having prime rib or delmonico every night, then you wonít save. If you can wait till thereís a sale to buy those "luxury" cuts, that would be better. Use your Sunday circular and decide your menu from there. And donít be afraid of going to more than one store when you shop. Donít be so tied to that one grocery store that you wouldnít even "think" of going to a competitorís.

Also, if you have a store in your area that sells by bulk, you could save a little more, especially if you split the bulk with some neighbors or friends. Do you always save in those stores? No, again, shop around and find out where the bargains are.

Also, learn to economize when you cook. You donít have to have a huge meal every night. Soup and sandwich is good. Even a stew can last a few meals. But make sure the stew meat was on sale first. I also have noticed you can find marked down meats on the shelves on Monday, the expiration date being the same day you are there. Thereís nothing wrong with the meat. Use it that night or freeze it and you save a dollar or two in the process.

Automobile

This is where Iím going to tell you to spend money instead of cutting back. If you donít pay in the beginning, you surely will pay more later. Pay for that oil change every 3000 miles. Get a tune up, make sure thereís enough tread on those tires. If not, the bill will be heftier later. This is where you donít cut corners. Yes, find a good tire sale, find oil changes on special, but donít ever neglect the care of your car.

No-Brainers on Personal Finance Now that Iíve shown you how to budget your money and lower your expenses, now itís time to learn how to save. Saving is the hardest thing anyone can do. It seems like thereís always someone or some emergency that eats away at a savings account. But it is possible to do, even if you only end up putting $10 a week away. Believe me, in time you will see the result of your hard work. Once youíve put yourself through the hard rigors of sacrificing all those elegant lunches to munching on a burger, you will see a decent size bank account. So what do you do with it?

Thereís three things you can do with it. One, set a portion aside for emergency, set another part for "special" things, and finally the other for the future, your retirement. Once youíve gotten your bills down to zero (and that may take a few years) then you will want to start planning what you want to do with all that money you have in savings. The first to consider is your retirement. Check with a professional regarding your long term savings but donít neglect putting a portion of it into something totally safe, unless the government folds, CDís. Sometimes they donít pay much more than a savings account, but you also know you canít lose the principle like you could if you invested in mutual funds. Iím not saying donít invest in mutuals, just donít invest more than you would be willing to lose. Consider a Certificate of Deposit as one of the vehicles you use for long term savings and even IRAís.

Right now you should be sitting there feeling like the little engine that could, saying to yourself, "I think I can, I think I can, I think I can." My friend, the future isnít as gloomy as you think it is. There is hope if you have the discipline. Iíve shown you the tools for that discipline; controlling your credit, creating a budget, and finally learning how to save. Now itís up to you if should choose to take up those tools and hammer away at your debt. The choice is up to you.


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