Debt management plans – can someone please explain?

Apr 232008

I’ve been hearing a lot of about debt management plans lately and how they are touted as a cure for the ills of people in debt. Taken at face value the debt management services on offer sound great – take all your loans, credit cards, overdrafts and store cards and turn them into one easy to afford single monthly payment. Wow this sounds great – that is until you dig a little deeper.

How it works

You as a potential customer contact a debt management company. The debt management company will ask you for information in relation to your debt, your monthly income and your day to day expenses. The debt management company will devise a plan for you based on your monthly income and on the amount of unsecured debt that you have. Please note that the debt management company can only devise a debt management plan for you in relation to your unsecured debt, this includes credit cards, overdrafts, store cards and personal loans. Mortgages and car loans will not be covered by the debt management plan.

Straightaway this is what I would regard as a negative since you will still have the monthly car loan and mortgage payments on top of the debt management plan payment.

Ok so the debt management company has the necessary information about your debts and your income. The debt management company calculates and agrees a realistic monthly payment that you can make to pay off your debts while at the same time allowing you enough money to pay for your day to day expenses.

Once you have agreed the monthly amount the debt management company will approach your creditors looking for more favourable terms for you. They may in some cases be able to negotiate a lower interest rate and/or reduced monthly payment amounts.

When the debt management plans starts the debt management company takes the monthly payment that you give them and distributes it to your creditors as agreed with them under the new repayment terms.

That’s it in a nutshell.

What’s in it for the debt management company?

Funny you should ask that. Why a nice juicy fee of course. Depending on the organization the fee will vary from being a one off admin fee to a recurring percentage based fee.

What’s in it for the creditors?

For the creditors it is a case of something is better than nothing. If you default on all your debts then the creditor will eventually have to write off your debts as a bad debt and they will not get any more money out of you. If the creditor agrees to your debt management plan they know that you will be in a better position to repay your debts and the creditor will get some if not all their money back.

Advantages and disadvantages of a debt management plan

Advantages:

1. Only one monthly payment.

2. The debt management company may be able to negotiate lower interest payments and lower monthly repayments for you.

3. You no longer have to communicate with your creditors as your debt management company deals with them on your behalf.

4. You can avoid getting a loan to consolidate your debts as a debt management plan does not involve consolidating your debts.

Disadvantages:

1. Creditors may not necessarily agree to participate in your debt management plan.

2. Your credit history may be affected. It’s not so much the debt management plan that will affect your credit history rather it’s the fact that you were unable to keep the original payment schedule as agreed in the original contract.

3. If you have less than $10,000 in unsecured debt you may not qualify.

4. It will take longer for you to repay debts as the debt management company will most likely try to negotiate lower monthly repayment amounts.

It is up to you to decide if the advantages outweigh the disadvantages. It will depend entirely on your personal situation.

Do it yourself debt management program

The one point I will make is that if you are thinking about using the services of a debt management company why not try to create your own debt management plan first? There is nothing from stopping you dealing directly with your creditors and trying to renegotiate your debts with them yourself. Use the information on this website and on the internet to empower you to take control of your debt.

One of the fundamental problems with the services offered by a debt management company is that they do not offer services that cover secured debt. This means that you will have to deal with your car loan and mortgage yourself anyway so why not simply apply what you learn to all your debts? In the long run it will serve you better to create your own debt management plan and deal with your creditors yourself. You will gain incredibly useful skills and knowledge that will serve you a lifetime. Not only that but it is you who is in full control of the situation. You will be empowered.

However if the thought of creating and running your own debt management plan intimidates you and you are more interested in using the services of a debt management company then please do your research carefully. Do not sign up to any debt management service until you have read the following information about debt management services from the government contained in this link. Debt Management Plans

In debt? Your banks don’t care about you

Apr 212008

The banks are hurting. The recent meltdown in the subprime has hit their bottom line hard. Do I have much sympathy for them? No, not really but I am concerned about their financial health. Why you may ask? Do I own stocks in the big banks? No. The real reason that I am concerned about the banks is because of you.

You see when the banks feel pain they try to pass the pain on to us. Now some may argue that it was us who got the banks into trouble in the first place by being late with our mortgage payments. My response to that comes in the form of a stack of bank letters that contain offers of loans, credit cards and mortgages dating back a couple of years. These were allsorts of sweetheart deals just to get me to sign up for one of their financial products. If we were the cause of the problem then I would say that it takes two to tango Mister Bankman. You were my best friend two years ago.

Passing on the pain

So interest rates have been cut but the banks don’t seem too eager to pass on the full cuts? Why is that? Well the simple answer is that banks have become so distrustful of each other that they are reluctant to lend to each other let alone lend to me or you. As a result of this credit crunch when the banks do lend to each other they lend at higher rates of interest because they are now a lot more worried about the risk of default. The credit crunch is hitting the bottom line hard. Banks and financial institutions have become more focused on controlling the quality of the customers that they try to sell their products to.

What this means for you

The financial pain being felt by the banks has wide implications for you. Even if you have an impeccable credit history with very little or no debt and a good income the banks will still be reluctant to lend to you. This means that if you want to get a mortgage you will have to jump through a lot of financial hoops to get it.

It’s nothing personal – it never is with the banks. You are simply just another number to them. They have their computer models that determine whether or not you are creditworthy. If the computer says you are creditworthy then great, if the computer says you are uncreditworthy then you get cut. It’s as simple as that. However in recent years the models that the banks have used seem to have been thrown out the window. People who clearly had very little means to repay their mortgages were give large sums of money to buy houses with. When these people eventually stopped paying the banks woke up and started to re-evaluate the way they lent money. A little too late I might add.

Since the bank looks at you not as a person of ability but instead as a set of numbers it is time for you to start thinking in a similar way. If you want to be financially successful and rid yourself of the burden of debt then you need to start looking at your financial life as a set of numbers. The key numbers in your financial life will be

1. Your credit score

2. Your income

3. Your total credit card debt

4. The number of years until you plan to retire

5. Your overdraft

6. The amount and number of outstanding loans

7. Your mortgage and how many years are left on it

By reducing your financial life to a set of numbers you begin to speak the same language as the bank. No matter how emotional your appeals to the bank are in relation to your debt situation they will fall on deaf ears. The reason why they will fall on deaf ears is because you are not speaking the same language as the bank. As soon as you start speaking the same language as the bank things will start to open up for you.

You need to see things from the banks perspective. They have automated all their lending decisions based on your credit score which in turn is based on your credit history. To get ahead and get on with the bank you need to keep on top of all the key financial numbers in your life.

Dealing with banks and financial institutions – one of life’s great mysteries

Apr 212008

Countless times I’ve hung up in frustration when I’ve called my bank. The automated voice on the end of the phone simply doesn’t seem to understand the urgency. ‘Your call is important to us’ – Yeah well obviously not that important because otherwise you would have answered the phone!!! Argh! Why do I waste my time? At one stage my attitude was let them call me when there was a problem. The thing is if your bank is calling you, you know you have a big problem.

If you do insist on calling the bank once the call gets answered you invariably get talking to someone who doesn’t like their job and has very little interest in your situation. Now some may find this a bit harsh but this has been my general experience. If you are already stressed about your financial situation the last thing you want is someone dealing with you in a cold and detached manner? Unfortunately that is almost exactly what you always get.

If you have a financial problem you want suggestions and solutions to it. You don’t want to talk to some one who sounds like a robot reading from a rehearsed script.

The reality of working in a call center for a bank

Many moons ago as a student I spent sometime working as a credit card salesperson for a large financial institution. The pay was poor and the conditions cramped and the work was awful. My job was to ring people and ask them if they wanted to buy additional insurance as part of their credit card package. It was cold calling at its worst and a very tough job at that. To be honest I didn’t last long. I could handle the rejection but I simply couldn’t handle the repetitiveness of reading from the same script over and over again. I almost always invariable ended up going off script and talking about things like football. As a result I would get reprimanded for not making enough calls per hour and not sticking to the script.

I did find it a very useful experience though. I gained a valuable insight into the workings of a financial institution’s call center and the things that customers who call looking for help can do to improve their chances of a successful call.

Okay so here are my top ten pieces of advice when it comes to dealing with financial institutions over the phone.

1. Mentally prepare yourself. What this means is have a clear idea in your mind of what to expect from the call and exactly what you want from the call. Don’t expect the person on the end of the phone to be your friend. Don’t expect a miracle solution to your problems. Do have a clear idea of what you deem to be a successful outcome to the call.

2. Have your paperwork, facts and figures prepared and to hand when you make the call. There is nothing more frustrating to someone working in a call center than someone who does not know their account details or who has to fumble about for the details of the payment they are querying.

3. If your call is answered by a person whose first language is not English then please be patient. More and more large banks and financial institutions are outsourcing their call centres to places like India and Poland to take advantage of the lower wage cost. The thing is these people are usually highly educated and often people are too quick to label them as stupid simply because English isn’t their first language. The best strategy is to be patient, speak slowly and clearly and treat them with respect. Remember an angry person in anyone’s language is still an angry person.

4. Take the full name of the person you’re dealing with. If you’re happy with them and have further queries you will want to call them back. This might seem obvious but how often have you rang the bank back only to forget the name of person or worse still you remember their first name as ‘Jane’ and then you are told that there is 8 women called ‘Jane’ working in the place. You have to realise that these call centers are huge with hundreds of employees working side by side. The staff turnover is usually quite high so the chances of you finding Jane again are slim if you do not know her second name. So the key is to get the full name of the person you are dealing with.

5. Related to number 4. If you are unhappy with the person you are dealing with simply call the bank again at a different time and explain your situation to someone different. Repeat this process until you are happy with the customer service rep that you are dealing with. Try to vary the times that you call. So if you called at 10am in the morning call back later in the evening. Hopefully this way the shift will have changed in the call center and you will have avoided the chance of getting the same person on the phone. If you do happen to get the same person on the phone simply hang up.

6. Keep calm. Dealing with financial problems can be emotionally draining. For a lot of people dealing with the bank can be an intimidating experience. It is easy to get frustrated and upset when you are kept on hold for 20 minutes only to be told that you are in the wrong. Keep calm. It will only make your interaction with the bank more awkward if you get the reputation for being a difficult customer.

7. Be persistent – resolve yourself to the fact that when dealing with your bank you are most likely in for the long haul. If you are having financial problems and need the co operation of your bank to help you solve those problems then your are going to have to be persistent. The pace of progression will be slow and you will meet with a lot of frustration but the key thing for you to be is persistent. You have to remember that you are dealing with a faceless monolith of an organisation that cares very little for you or your problems regardless of what they might say. The only solution to their inertia is the overwhelming persistence that you will bring to bear on them.

8. Anything that is agreed between you and the customer service rep. during the call have agreed in writing if possible. Ideally it would be great if you could get an email confirmation of everything that you agreed with the customer service rep. This will help avoid any confusion as to what needs to be done and who needs to do it. At the end of every call simply call back the facts to the customer service rep. Say something like this “okay, I just want to confirm what we just discussed. I need to do XY and Z and you are going to do AB and C…is that correct?” This will help clarify the situation.

9. Complete the tasks that you agreed to do with the Customer Service Rep. This shows that you mean business and that you are determined to solve the problem. If possible mark any documents that you send to the bank for the attention of the customer service rep. This should help speed up the process.

10. Patience my friend is a virtue or so the slogan of the banks and financial institutions that I’ve had to deal with should read. To understand why the process of dealing with the banks takes so long you have to try to imagine the size of the bank. Generally there are thousands of people working for the bank. There are hundreds of departments. With in these departments there are dozens of teams. Each team deals with something slightly different than the others. As a result when you have a query with the bank it has to be filtered through multiple layers of the organisation to find an answer then the answer has to be filtered back through the same layers to you. Generally the banks are well set up to cope with these queries but as you can imagine the sheer size and scale of the organisation can result in delays in getting a response to you.

Some banks and financial institutions are better than others when it comes to dealing with customer queries. What we as customers need to realise is that we have to prepare for our interactions with the banks. The more prepared we can be in terms of documents, facts and figures and more importantly attitude the more easy it will be for us to get what we want from them.

Up to your eyeballs in debt – so what?

Apr 172008

So you’re up to your eyeballs in debt and you’re beginning to get stressed about it? Don’t bother. More and more being in debt is seen as a lifestyle choice rather than an affliction of the cash poor. How many of your friends have debt? Quite a few I’d say and I bet a lot of them have well paying jobs? Yet they seem to progress through life just fine. Why not you? Where is it written that you have to get stressed over your debt?

You can sit there confused as to what your next step should be or you can simply acknowledge that you are in a whole load of debt, accept this fact and get on with your life. The choice is yours. Sure if you want to have the joy of the knowledge that you will be debt free some day then great – go ahead and read some of the articles on this website and they will help you on your way. For the vast majority of people becoming debt free is simply a pipe dream. I’m not being mean spirited. I believe people can change but if we are realistic and look at our debt situation in its entirety – short of winning a nice lump of cash a lot of us may never be debt free. Unless people change the spending habits of a lifetime (which is a very hard thing to do) then they are likely to go on spending and spending. So why even bother trying to change?

Now if the thought of being in debt for life depresses you then don’t let it. The vast majority of the people you know are probably in the exact same position. You can either fight against this and get stressed and worried or you can go with the flow and do the best you can to make the most of your current situation with a view to managing your debt or at least getting it down to a more manageable amount.

Accept that you will be in debt for the rest of your life and make peace with that fact. Like going to a job or taxes accept debt as a simple fact of your life.

How a stress free debt laden lifestyle would work

In order for this to work you are going to need a regular sustainable flow of income. This income can come from anywhere – rent out a room, benefit payments, salary. The key thing is that it is regular and that it is sustainable.

The main idea behind living a stress free debt laden lifestyle is that you learn how to better manage the flow of cash in and out of your bank account. In some cases you will need to be creative and may even need to rob Peter to pay Paul.

To manage your cash flow better you need an income and expense management system. This sounds very grand but this is simply a method of keeping track of your income and expenses each month. This system will help you identify who you can pay now and who you can hold off on paying while also allowing you enough cash to have a life.

To build this system all you need is a sheet of paper, a pen, a calculator, a calendar and details of when your loans, utility and mortgage/rent payments fall due each month. You also need to know the date when your salary/income is received.

Take the sheet of paper and list all your recurring monthly expenses. Beside each amount put the date when it falls due. At the top of the page put the amount of the salary and the date you will receive it.

Now here is the tricky part. You need to look at each expense and assigning an importance level to each. For example your mortgage would be considered highly important. The way to assign the importance to the expense is to think about it this way – what is the worst that can happen to me if I do not pay this bill this month. If your electricity is about to be cut off then it would be regarded as highly important.

Once you have assigned an importance level to each item you then need to allocate the available resources (your monthly income) to the most important expenses. At least this way you are managing to keep on top of the most pressing expenses.

Timing will play a big factor in this lifestyle. If you time your expenses correctly you can free up some cash. Here is an example of what I mean. Let’s say I’m ambitious and I want to pay off my entire credit card bill as it falls due. I know that if I purchase anything with my credit card after the 10th of the month I will only have to pay the credit card bill 56 days later. This gives me two months to raise the funds to pay it. With this knowledge I know that I will only have to take half the amount out of this month’s salary and the other half out of next month’s salary. Once I have allotted this amount and mentally prepared myself for the bill I don’t feel as much pain as I would if I had to take it all out of one month’s salary.

This is a simple example and you might say why bother paying off your credit card at all. Again this is a choice that you will have to make.

The things you need to do to maintain this lifestyle

Pay off more than the minimum amount each month on your credit card. This will help absorb any interest amounts that are applied to the balance and eventually it will help you pay down the entire amount – I did say eventually.

Pay the bills that absolutely must be paid – your mortgage, utility bills, phone, electricity etc.

Put limits on the amount of new debt that you are prepared to take on. To stop this ship from sinking you have got to stop taking on water, well at least until you have repaid some of your existing debt. So resolve that while your goal may not be to become debt free you need to be careful about taking on additional debt. This method looks to maintaining the status quo while letting you reduce some of the emotional pressure you may be feeling.

Remember the goal of these changes is not to make you debt free. The goal is to allow you to maintain your current lifestyle with only a few minor changes. You need to adopt a positive attitude towards you debt. Strange isn’t it? But it makes sense if you think about it. The less you resist your debt and fight with it the less of a problem it will be once you know your limits.

A word of warning

The one major drawback of this approach is that you are like a rat on treadmill. You can’t afford not to work or risk your income. It requires a lot of energy and focus on what you can afford to pay this month versus what you must pay this month.You are at the mercy of your boss and the economy.

For those of you that not happy with being in debt there is a way to become debt free. It’s not easy and it will take a lot of hard work but it is possible. Check out the articles in the archive section for more details.

Debt and relationships – this ship is sinking

Apr 162008

Which of the following two scenarios seem more realistic to you?

Guy meets Girl. Guy likes Girl and buys her presents. Girl really likes presents and falls in love with Guy. Guy asks Girl to marry him. Girl says YES. They both live happily ever after. The end.

Or

Guy meets Girl. Guy is already in debt from four years at college. Girl is in debt too from four years of shopping. Guy tries to impress Girl by bringing her for nice dinners on his nearly maxed out credit card. Girl is suitably impressed. Guy can only keep this up for so long before his bank manager starts joining them on dinner dates. Guy gets a couple more credit cards and the relationship continues. Girl happy with all the nice new shiny stuff that Guy has bought her. Guy really likes girl and asks Girl to marry him. Girl says yes once she sees the nice ring. Girl plans a nice wedding, ‘That’s another $20,000 thanks honey’. Ok so far so good. Guy gets a promotion – more spending follows, the house, the SUV, the golf clubs, the joint gym membership, the dinners out, the nice holidays.

Things are good…for a while. Then Guy gets worried. His loan application is rejected. He takes stock of his debt and realises that he owes far more money than he thought. Guy tries to talk to Girl. Girl is not listening as she has become accustomed to the nice shiny things. Guy is determined to stop spending and control his finances. Girl not happy, thinks that Guy no longer loves her. Guy thinks girl is being selfish. Interest rates rise on the mortgage. Guy and Girl in even more financial difficulty. Not a nice situation. Guy and Girl fighting a lot now. Guy can’t take it and leaves. They both do not live happily ever after. The end

Before I have the women’s lib organisation firing like a million emails at me let me explain that the examples above are tongue in cheek. They serve a purpose of outlining the fact that relationships are expensive and can ultimately lead to a lot of debt. The roles could have been reversed Girl meets Guy or even Guy meets Guy. The point is not so much of the make up of the relationship but the fact that money is often a factor in a relationship that is not considered important until it is too late.

So what is it about money that makes it such a dirty word when it comes to relationships? The lack of communication and understanding around money in relationships can be the Achilles heel that causes a lot of relationships to end. Money in itself is nothing but pieces of paper and numbers on a screen but it’s the meaning that people assign to money that causes the real problems.

Different backgrounds

If the relationship is made up of two people from different socio-economic backgrounds then straightaway there will be a conflict in attitudes towards money. Someone from a middle class background will have a different attitude from someone from a working class background. It is this difference in attitude that can cause problems in the future. I’m not saying that these relationships can’t work what I am saying is that this difference in attitudes towards money in all relationships needs to be understood and appreciated so that it can be removed as a road block to a happy long term relationship.

Different financial educations

This is related to different backgrounds but does not necessarily always apply to people from different socio-economic backgrounds. Financial education can vary between people from the same socio-economic background. The level of financial education largely depends on their parents attitudes towards money. Some people (not many!) have an aversion to debt while others have no problem embracing debt. This in turn can lead to conflict.

Debt in relationships

Debt in a relationship is a strange thing. When a couple first get together they each bring their own financial baggage with them. The financial baggage usually comprises of debts and an attitude towards money. Now when people first meet they are unlikely to begin discussing how much in debt they are in. On the contrary people usually try to project how successful they are and that they are in some way financially secure. It is not until later in the relationship does it come out that Guy has $50,000 in student debt and has creditors chasing him.

If the dominant attitude in a relationship towards debt is relaxed then it is likely that this spells trouble down the line. So what if we live pay check to pay check? Relationships can be tough enough without having the unrelenting pressure of having to go to a job you hate to pay off debt you got into as a result of a relationship that you are beginning to dislike …and the spiral continues.

Social pressures to conform

Once in a relationship the tendency is to socialise with other couples. Your single friends don’t want to be reminded that they not in a relationship or simply don’t want to see you two cooing like babies! Get a room!!! Anyway the point is when you socialise with other couples a certain type of weird competition forms – which couple is the best? I’ve witnessed this first hand and it’s bizarre!

Picture the scene. Guy and Girl are out for dinner with two friends Paul and Cindy. The conversation turns to travel and holidays and it suddenly becomes a case of one-upmanship between the couples. As a result Guy and Girl come away from the dinner feeling deflated. They silent vow that the next dinner date with that couple they will outshine them whatever way they can.

Now I know to the casual observer the above scenario seems unrealistic but I’ve witnessed events like this happen first hand. I’m sure if you think about it you too have probably witnessed similar events. Adults acting like kids in the playground. Oh I’ve got the latest BMW which is way better than the latest Mercedes or whatever.

This social pressure can cause some couples to take leave of their senses and start accumulating ridiculous amounts of debt. For what? To look good? Well in truth a lot of the time these couples end up looking stupid as their cars are repossessed and they struggle with their mortgage payments.

Don’t get me wrong. I do have sympathy with the couples who find themselves in such situations. As with any situation where there is a lot of debt involved there is always a positive way out.

How to get that positive outcome and make the relationship last

Assuming that the underlying problems in a relationship are caused by debt then there are a few simple but highly effective steps that can be taken to rectify things.

1. First off there needs to be acknowledgement that it is the financial strains that are causing the problems not something else.

2. Get a complete picture of all the outstanding debts – every last one. This will allow you to know exactly what you are facing. Don’t hide bills away. This exercise needs to be carried out with 100% honesty.

3. Look at all the options available. This will involve researching every possible option open to you from debt consolidation to remortgaging to bankruptcy. No option should be off limits.

4. Reduce the number of options to the ones that you have agreement on – both parties need to be happy and prepared to go along with it.

5. Decide on the best option and make a join commitment that whatever it takes that you will see this out until the debt situation is more manageable.

6. Set a timeframe – there is not point in saying “someday” make it “TODAY”.

7. Take action. Assign tasks and follow through on them. There is no point in just paying lip service to the need to change. You need to actually go out and do something or not do something like not going out for an expensive meal.

8. Keep track of your progress. Follow up on the debt daily, weekly and monthly. Whatever it takes.

9. Continue to support each other in the process. Stop playing the blame game as there is absolutely nothing and I mean nothing to be gained by fighting. The debt will still be there at the end of the fight and you will only feel worse as you have fought and yet the debt is still there. Use that energy to get yourself to take action.

10. Once you have reached your target agree a common debt strategy that you are both comfortable with long-term.

Now it’s obvious from the list above that it is aimed at people who have been in a long term relationship and share financial commitments. I mean if you just met someone you’re not going to be talking debt management in relationships from the word go. However, while this may be true it is always worthwhile laying down a few financial markers once the relationship starts to get anyway serious. This could be simply a case of letting the other person know what your attitude towards money is and finding out what there attitude is. In the long run this could save you a lot of time, energy and in particular money.

Debt help program – do it yourself and save money

Apr 152008

The essence of any debt help program is that it is realistic. The debt program needs to be tailored to the individual’s situation in order for it to be of any help. There are many template debt programs out there that will apply standard rules to any given situation. Cut back spending pay off credit card debt first etc. In my mind this is like trying to fit a square plug into a round hole. The standard debt programs have things in them that will not apply to everyone and there are things missing in them that some people may need. For example a retired person in debt is going to have different priorities than a twenty five year old in debt.

What’s the alternative to using the standard debt programs? The ideal situation is where a debt help program is tailored to the individual, their resources and to their needs. In most cases you are going to have to pay for someone to tailor a debt program to your specific needs. The only other alternative is if you create your own debt help program to your own specific needs.

But I don’t know anything about debt management.

Ok – but what you should be saying is ‘Where can I learn more about debt help programs?’

The point is that if you really want to tackle your debt problems then you need to take charge of where you get your information from and how you apply that information.

With standard debt help programs the individual is told exactly what to do. Now most people don’t like being told what to do – it reminds them too much of school. Telling people what to do does not solve the problem. In the short term there may be relief as the people begin to follow the program but long term the problems with debt tend to persist.

Give a man a fish or teach a man how to fish

The old saying of ‘Give a man a fish and you feed him for a day, teach a man how to fish and you feed him for a lifetime’ holds particularly true in relation to debt programs. The saying could be rewritten along the lines of ‘Give a person a debt relief program and you give them debt relief for a day, teach a person how to build a debt relief program and you give them debt relief for a lifetime’.

By simply trying to research and build your own debt program you will gain an insight into how money really works. You will discover ways of managing the money that you have and paying off your debt in a manner that is suited to your situation. You’ll gain valuable skills in how to create and manage budgets. You’ll learn how to be creative with the limited resources you have.

Debt help program that suits you

The reason why a self made debt help program has a much higher chance of success is because you have tailored it to your situation, your needs, your income, your expectations, and your self knowledge.

If you are honest with yourself and try to be as objective as possible with your situation it is possible that you can create a very effective program.

The problem with self made debt programs

Ok I’m not doubting that you are intelligent, not one bit. I know you can research the information on this website and on the internet and combine what you learn into an effective debt program. The problem is that it was you who got you into this debt situation in the first place. You are effectively going to be creating a debt program with a bias towards your existing debt behaviour. You are either going to be too hard on yourself trying to purge the guilt from past overspending or you are going to be too soft on yourself telling yourself that you’ll start this great new debt program next month.

If you can balance the urge to quickly get rid of debt against the urge to go easy on yourself then you have the foundation upon which you can build a good debt program. That foundation needs to be solid. There is no point building the debt program on a foundation of sand. If you are not prepared to go that extra mile and acknowledge the issues that you have with debt then you may as well pay some finance company to manage your debt for you.

In Summary

1. Self made debt programs can be more effective than standard template programs. This is because they are tailored to an individual’s needs.

2. By building the program yourself you gain useful skills that will last you a lifetime and help keep you debt free for life.

3. Be careful to allow for your existing feelings on debt when building the debt program.

Credit debt solution

Apr 142008

As the housing market cools and the credit crunch bites a whole industry has grown up around Personal Finance but also debt and Bankruptcy. How often have you seen those ads on TV and the Internet offering to solve all of your life’s problems in one easy step…for a fee of course. A big one at that. So to solve your debt problem they are going to ask you for more money which in turn may have the effect of putting you further in debt – Nice.

Now I’m not saying that all these services are bad but the cynic in me just wonders have they your best interest at heart?

Queue the broken record: As I said before and I’ll continue to say it until I’m blue in the face – the ONLY person who can help you out of debt and bankruptcy is YOU! But what about my credit counsellor or my attorney? Well to be honest they can only do as much as you let them. Their effectiveness is directly impacted by how willing you are you go along with their suggestions…you can bring a horse to water but you can’t make them drink.

In reality for someone who is in debt or facing bankruptcy the emotional challenges (never mind the financial challenges) are huge. To tackle the financial issues in isolation of the emotional issues is recipe for disaster. The reason is because if the person tackles the debt and manages to pay off the debt without trying to understand why they go into debt in the first place then they’re doomed to repeat the behaviour.

No it’s not fair but that is simply the way it works. You can sit there and bemoan your situation or you can get angry and seek to change it in a positive way.

Change is possible

In order to restore your financial health you need to treat these two key elements.

Emotional financial health

Financial management habits

This may sound intimidating but if you can gear yourself up and are prepared even the smallest steps in the right direction then it will be as easy as painting by numbers because that is exactly what you will be doing and we all remember how much fun that was.

But please remember that it is up to you.

Over the coming weeks I have set myself the goal of posting on the key Debt management topics. My aim is to provide you with a comprehensive understanding of why you are where you are and how you can get to where you want to go in the shortest possible time. I’ll be placing a big emphasis on the emotions that debt and money cause and how you can spot the problems and solve them quickly. I’ll be looking for feedback, so please feel free to comment on the posts and let me know if they are useful.

Debt Free – Starting from where you are

Apr 072008

Do you really have a problem with Debt? The simplest rule of thumb to decide if you do is to take the stress test. The stress test is simply this – when the word ‘Debt’ is mentioned in general conversations do you feel your level of stress increasing? If yes then read on – if no then I suggest you find out why you are on this website but not yet stressed about your debts.

The real problem with Debt is that it’s not a sudden thing. It’s more a case of the frog being slowly boiled to debt in a pot of hot water than being dropped into a boiling pot of water and then jumping straight out. Mortgage aside – I’m sure that if some one said to you when you were fifteen – you are going to grow up into a responsible adult with a mountain of debt you would have said straightaway – no thanks!

Commitment

Ah the C word – yes it’s almost like a marriage. You are effectively married to your debt…until debt do us part. Well the sad fact is that the majority of relationship break ups are caused by financial problems. With Debt you can’t always up and leave the relationship. Yeah sure you could file for bankruptcy but then the shadow of your debt will still follow you around for years to come.

So you are effectively committed to your debts whether you like it or not. That’s the unfortunate reality of the situation. Your creditors have you. They own you.  It’s not nice to hear it being put like that but that is where you are starting from. You are effectively a slave to your debts and to your creditors. Each morning when you go to your ‘Wonderful’ job keep in mind that you are in fact going to work for creditors and they are laughing at you all the way to the bank.

Does this upset you? I sincerely hope it does. The reason why is not because I like making people feel bad but because you can harness the good from these negative emotions.

You have two choices – let the anger and frustration at your situation grow into despair and inaction or you can use your and anger and frustration as energy to push you to tackle your debts.

The cause and effect principle

If you do decide to tackle your debts the actions you take now will have a long term positive effect on your life. If you do nothing and let your debts continue to mount then you will pay the price in the long run.

Pay the price now in terms of discipline and action or pay the price later in terms of despair. Your call.

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