ConquerYourDebt.com

Judging from the ways people are finding their way to this site from the search engines, it seems that there are quite a few people who are in the same boat I was and looking for help in paying off their credit cards.

While the plan we used to pay off our debt is not rocket science, it did take a monumental change in our approach to money to even begin to think about our end goal.

The plan we used was based upon the book The Total Money Makeover: A Proven Plan for Financial Fitness.

In a nutshell, the plan is broken down into a series of baby steps.
1. While making minimum payments, put together an emergency fund of $1000 (essentially to break the cycle of using credit cards for emergencies).
2. List your debts from smallest to largest, pay the miniums on the larger debts and throw every dollar you can scrape together at the smallest. As you pay one off, move to the next debt in the list. (a series of small wins will give you a sense of accomplishment and keep you motivated).
3. When all of your debt except your house is gone, fully fund your emergency fund with 3-6 months worth of expenses.

The book then covers remaining steps for investing for the retirement, saving for college, paying off the house, etc.

On a side note, he also has a popular radio show. You can listen online, or download the previous two weeks of shows, or download a 1-hour commercial free podcast from the previous day’s show at: DaveRamsey.com.

There is also a support site for his book: MyTotalMoneyMakeover.com.

Bookmark:
del.icio.us Digg Furl Reddit

By this time next year, your minimum monthly payment for your credit card(s) will double. The federal government is requiring all banks to raise the minimum monthly credit card payment from 2% to 4%.

Consider a family with three credit cards all with interest rates of 16 percent, which is a standard rate.

Card #1 has a $2,500 balance. At two percent, the minimum monthly payment on is about $50 dollars–$33 goes toward interest; $17 to principle. At four percent, the minimum monthly payment doubles to $100, $33 still goes to interest; but $67 goes toward principle.

Card #2 has a $6,000 balance. At two percent, the minimum payment is $120 with $40 going to principle and $80 to interest; at four percent it’s $240 with $160 going to principle and the remainder to interest.

Card #3 has a $10,000 balance. At the new 4 percent minimum, the $400 payment would cover $267 in principle and $133 in interest.

While the family would be paying off their balances much faster, their monthly payments would double from $370 a month to $740, something that many would probably find difficult to afford.

Then consider that most families have 5 to 8 credit cards.

Read the full story.

While this might just be the kick in the pants some people need to pay off their credit cards balances faster, it could be a scary proposition to those who only make their minimum payments. Escpecially when you consider only one in six families pays more than the minimum due every month.

Bookmark:
del.icio.us Digg Furl Reddit

It’s no joke. American consumers seem to be turning the corner on credit card debt and wisening up to the dangers of what has become “normal.”

But all is not tulips and nectar over at MBNA, the largest independent issuer of credit cards. Yesterday it reported a poor quarter and ratcheted down earnings expectations for the year. Its stock sank to a two-year low. Credit card giant Capital One Financial had a better quarter, but its stock has been slumping lately, too. Bad news for the credit card companies may be better news for us. There are signs at both companies that consumers may be responding to higher rates by doing something almost completely unexpected and practically un-American: paying down credit card debt.

If you are still in the dark as to what the credit card companies expect from their customers, the following should give you ample insight:

The credit card industry presumes, based on happy experience, that Americans will borrow more money each quarter to support their spending habits, regardless of the direction of interest rates, and that enough consumers will be happy simply to pay off just enough debt to allow them to borrow more.

Read the full story at Slate.

Bookmark:
del.icio.us Digg Furl Reddit

A 302-126 vote by the House sent the legislation to President Bush, who is eager to sign it, the biggest rewrite of the bankruptcy code in a quarter-century. It marks the second major change in law to benefit business since Republicans increased their House and Senate majorities in last fall’s elections.

Debate in the House was acrimonious as Democratic opponents warned that the measure would hurt the economically vulnerable.

After eight years of strenuous efforts by congressional backers, banks and credit card companies, the legislation was catapulted toward enactment starting earlier this year. The legislation, which garnered some Democratic votes, cleared the Senate last month on a 74-25 vote.

The measure would require people with incomes above a certain level to pay credit-card charges, medical bills and other obligations under a court-ordered bankruptcy plan.

Opponents say the change would fall especially hard on low-income working people, single mothers, minorities and the elderly and would remove a safety net for those who have lost their jobs or face crushing medical bills.

While I don’t believe bankruptcy is needed in the vast majority of filings by individuals, I have issues with any bill that seeks to give protection to the credit card industry. The overly-aggresive marketing tactics of the credit card companies go too far with encouraging the practice of indebtedness.

Bookmark:
del.icio.us Digg Furl Reddit

If you do not recognize information on your credit report, or believe an item may be inaccurate, you may request credit reporting agencies to investigate the data and correct any discrepancies. Only inaccurate information may be removed from your credit report; negative information that is accurate will stay on your credit report as long as governing laws allow.

Transunion:
Credit Report Dispute Process

Experian:
Disputes

Equifax:
How to Dispute

A note on Credit Repair Services:
If you are tempted to contact a credit repair company for help, use considerable caution. The FTC and a number of state attorneys general have sued credit repair companies for falsely promising to remove bad information from credit reports. Only inaccurate information may be removed from your credit report; negative information that is accurate (such as a bankruptcy filing or a defaulted loan) will stay on your credit report as long as governing laws allow.

Bookmark:
del.icio.us Digg Furl Reddit

Soon you’ll be able to get your credit report for free. A recent amendment to the federal Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies to provide you with a free copy of your credit report, at your request, once every 12 months, from www.annualcreditreport.com. The Federal Trade Commission (FTC), the nation’s consumer protection agency, has prepared a brochure, Your Access to Free Credit Reports, explaining your rights and how to order a free annual credit report.

A credit report contains information on where you live, how you pay your bills, and whether you’ve been sued, arrested, or filed for bankruptcy. Nationwide consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.

Consumers in Western states will first be able to order their credit reports under the federal law beginning December 1, 2004.

Free reports will be phased in during a nine-month period, rolling from the West Coast to the East beginning December 1, 2004. Beginning September 1, 2005, free reports will be accessible to all Americans, regardless of where they live.

Consumers in the Western states – Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming – can order their free reports beginning December 1, 2004.

Consumers in the Midwestern states – Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin – can order their free reports beginning March 1, 2005.

Consumers in the Southern states – Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, and Texas – can order their free reports beginning June 1, 2005.

Consumers in the Eastern states – Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, Virginia, and West Virginia – the District of Columbia, Puerto Rico, and all U.S. territories can order their free reports beginning September 1, 2005.

How do I order my free report?

You can order your free annual credit report online at www.annualcreditreport.com, by calling 877-322-8228, or by completing the Annual Credit Report Request Form and mailing it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

When you order, you need to provide your name, address, Social Security number, and date of birth. To verify your identity, you may need to provide some information that only you would know, like the amount of your monthly mortgage payment.

Bookmark:
del.icio.us Digg Furl Reddit

Fair Debt Collection

If you use credit cards, owe money on a personal loan, or are paying on a home mortgage, you are a “debtor.” If you fall behind in repaying your creditors, or an error is made on your accounts, you may be contacted by a “debt collector.”

You should know that in either situation, the Fair Debt Collection Practices Act requires that debt collectors treat you fairly and prohibits certain methods of debt collection. Of course, the law does not erase any legitimate debt you owe.

What debts are covered?
Personal, family, and household debts are covered under the Act. This includes money owed for the purchase of an automobile, for medical care, or for charge accounts.

Who is a debt collector?
A debt collector is any person who regularly collects debts owed to others. This includes attorneys who collect debts on a regular basis.

How may a debt collector contact you?
A collector may contact you in person, by mail, telephone, telegram, or fax. However, a debt collector may not contact you at inconvenient times or places, such as before 8 a.m. or after 9 p.m., unless you agree. A debt collector also may not contact you at work if the collector knows that your employer disapproves of such contacts.

Can you stop a debt collector from contacting you?
You can stop a debt collector from contacting you by writing a letter to the collector telling them to stop. Once the collector receives your letter, they may not contact you again except to say there will be no further contact or to notify you that the debt collector or the creditor intends to take some specific action. Please note, however, that sending such a letter to a collector does not make the debt go away if you actually owe it. You could still be sued by the debt collector or your original creditor.

May a debt collector contact anyone else about your debt?
If you have an attorney, the debt collector must contact the attorney, rather than you. If you do not have an attorney, a collector may contact other people, but only to find out where you live, what your phone number is, and where you work. Collectors usually are prohibited from contacting such third parties more than once. In most cases, the collector may not tell anyone other than you and your attorney that you owe money.

What must the debt collector tell you about the debt?
Within five days after you are first contacted, the collector must send you a written notice telling you the amount of money you owe; the name of the creditor to whom you owe the money; and what action to take if you believe you do not owe the money.

May a debt collector continue to contact you if you believe you do not owe money?
A collector may not contact you if, within 30 days after you receive the written notice, you send the collection agency a letter stating you do not owe money. However, a collector can renew collection activities if you are sent proof of the debt, such as a copy of a bill for the amount owed.

What types of debt collection practices are prohibited?
Harassment. Debt collectors may not harass, oppress, or abuse you or any third parties they contact.

For example, debt collectors may not:

• use threats of violence or harm
• publish a list of consumers who refuse to pay their debts (except to a credit bureau);
• use obscene or profane language; or
• repeatedly use the telephone to annoy someone.

False statements. Debt collectors may not use any false or misleading statements when collecting a debt. For example, debt collectors may not:

• falsely imply that they are attorneys or government representatives;
• falsely imply that you have committed a crime;
• falsely represent that they operate or work for a credit bureau;
• misrepresent the amount of your debt;
• indicate that papers being sent to you are legal forms when they are not; or
• indicate that papers being sent to you are not legal forms when they are.

Debt collectors also may not state that:

• you will be arrested if you do not pay your debt;
• they will seize, garnish, attach, or sell your property or wages, unless the collection agency or creditor intends to do so, and it is legal to do so; or
• actions, such as a lawsuit, will be taken against you, when such action legally may not be taken, or when they do not intend to take such action.

Debt collectors may not:

• give false credit information about you to anyone, including a credit bureau;
• send you anything that looks like an official document from a court or government agency when it is not; or
• use a false name.

Unfair practices. Debt collectors may not engage in unfair practices when they try to collect a debt. For example, collectors may not:

• collect any amount greater than your debt, unless your state law permits such a charge;
• deposit a post-dated check prematurely;
• use deception to make you accept collect calls or pay for telegrams;
• take or threaten to take your property unless this can be done legally; or
• contact you by postcard.

What control do you have over payment of debts?
If you owe more than one debt, any payment you make must be applied to the debt you indicate. A debt collector may not apply a payment to any debt you believe you do not owe.

What can you do if you believe a debt collector violated the law?
You have the right to sue a collector in a state or federal court within one year from the date the law was violated. If you win, you may recover money for the damages you suffered plus an additional amount up to $1,000. Court costs and attorney’s fees also can be recovered. A group of people also may sue a debt collector and recover money for damages up to $500,000, or one percent of the collector’s net worth, whichever is less.

Where can you report a debt collector for an alleged violation?
Report any problems you have with a debt collector to your state Attorney General’s office and the Federal Trade Commission. Many states have their own debt collection laws, and your Attorney General’s office can help you determine your rights.

Bookmark:
del.icio.us Digg Furl Reddit

With a two-month old now inhabiting our house I decided to start looking at ways to save for college.

Educational Savings Account (ESA)
The ESA is also known as the Cloverdell Education Savings Account and the Education IRA. If your household income is under $200,000 year, you are able to invest up to $2000 per year per child in an ESA. The investment grows tax-free when used for higher education. Typically an ESA can be invested in any standard investment vehicle including mutual funds. Funding an ESA from birth until the child turns 18 with $2000/year and investing in a mutual funds averaging a 12% annual return will see that $38,000 invested resulting in $126,000.

529 College Savings Plan
The 529 plans are similar to the ESA with the investment growing tax free when used for higher education, however they offer more aggresive savings limits. There are also many state variations of the 529 Plan - usually this isn’t an issue but you should check your state rules and regulations to be sure. The downfall to the 529 is that you are locked into the investments of the plan administrator, which limits the amount of control you have over the investment of the money.

All things considered, I would recommend an ESA if you are starting the investment early in a child’s life. If your child is older and you need to agressively fund the account with more than the $2000/year then perhaps the 529 might be a better option.

Also note that if you are funding an ESA and want to invest more than $2000/year, there is nothing prohibiting you from opening both types of accounts. Fund the ESA first, then any extra can go into the 529.

Bookmark:
del.icio.us Digg Furl Reddit

I put a feeler out to friends and family to keep an eye out for advice from their banks, credit cards, financial planners, etc. This tip was brought to you by Providian Financial.

Monthly Credit Tip
High levels of debt have you singing the blues? Work to reduce your balances by creating a budget and starting with the highest or most expensive debts. Lowering your debts can save you in interest and could also help improve your credit score.

While on the surface this appears to be good advice, for the average person this simply won’t work. Human beings require feedback and accomplishments to keep themselves energized and focused on a goal. A better way to do this would be to create the budget and list out debts from lowest to highest. Then start knocking them out in that order. Each time you knock out a smaller debt, you’ve taken a big step towards your goal and you then roll what you were paying on the smallest debt into the payments to the next debt on your list; working you way through until they are gone. This is also commonly known as working the debt snowball.

I realize that there it is a valid point that you will be continuing to accumulate more interest on the bigger debts, but for the average joe, working and working on a large debts without ’seeing’ some immediate results might be enough to push them back into old habits. Additionally, if the goal is to become totally debt free, the amount of interest on the large balances will be negligible when you consider that the average household has the means to become totally debt free within 12-24 months (with exception of home mortgage).

Bookmark:
del.icio.us Digg Furl Reddit

Welcome to ConquerYourDebt.com.

My name is Shawn and I started this site to help other who are in the situation I used to be in. About 16 months ago, my wife and I were going over our finances and realized that we had way too much money going out the door, primarily to credit card payments. Our total debt load, mainly through credit cards and student loans, was close to 1/2 of our yearly household income.

We were sick and tired of living paycheck to paycheck and looking for a way out without the mess of bankruptcy. We realized that finding the solution was going to involve more than just paying it off - it was going to take a change to how we approached our finances in general.

Here we are 16 months later, and we are within 60 days of becoming totally debt free!

Through this site, we hope to help others with their finances; becoming debt free, saving for retirement, saving for kids’ college fund, and putting your money to work for you instead of against you.

Bookmark:
del.icio.us Digg Furl Reddit