Financial Zip

When managing your debt it is important to first go through the process of discovering how much you and to who the next thing is put a debt reduction plan in place and here is how.

I find it funny that people who have more than $20, 000 in credit card debt refuse to use savings if they have any to pay it off. Some people have savings of $10,000 and are getting maybe 1% to 2% return for letting sit there when there credit cards have crushing rates of 20% or more. Why not just take that savings and pay down the debt. Once the debt is paid off then you can take the extra money you were using for credit card payments and put it towards your emergency fund or retirement savings.

If you don’t have any savings here are 5 sources you could use to help you in a crunch.

1. Life Insurance. If you have a cash value life insurance you can borrow against it if you have one.
2. If you have investments that are not retirement investments you have an option to sell them. Be sure to check the tax liability on them with a professional
3. Borrow against the equity in you home. This can be a form of consolidation. You can generally get a lower rate by doing it through a home equity line of credit. You do have to have good credit to do this.
4. Borrow against a retirement account. This is a last ditch option so be to sure to check with you employer and find out what repayment penalties exist. If the benefits out way the negatives then its always a good idea to pay off your debt.
5. Borrow from friends and family. This is absolutely the last option you would want to entertain. Approach it like a loan and define terms and conditions and payback schedules so that you have definite time and amount to repay.

Manage Your Credit Cards

Do: Tear up all your credit cards

Don’t: Use your credit cards for shopping at all.

Do: Have one credit card that you use in case of emergency. But, put it in a place that you can’t access easily. i.e a safe deposit box, or freeze it in a container of water in your freezer.

Do: Pay extra to your monthly credit card bill. It affectively reduces your interest rate they charge on the balance.




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