5 Steps to Tackle Your High Levels of Debt

High Levels of Debt

You can do a number of things to eliminate debt entirely, or at least pay off most of it. Being in debt can be stressful for anyone, regardless of your circumstances or the amount you might owe to another party.

Here are 5 steps you should take, which will help cut down your debt levels.

Step 1: Estimate Your Financial Obligations

As a first step, you need to know how much you owe and to whom. It’s a salient idea to organize your figures on an excel sheet or use an online debt calculator to keep a tab of kind of debt (loans, credit card), interest rates (in order of lowest to highest), and the total amount due to various parties.

You will never hit your target to mitigate debt if you don’t know how much it really is. Be upfront about it and create a systematic debt reduction plan that will actually work.

You should also prepare a list of your monthly income and expenditure while you are computing your total debt. Expense items would typically be listed on your credit cards and you can take account of the cash expenditures from your bank statements.

This will provide you with a fair picture of the total debt and how much you might be able to spare every month to pay off the most expensive debt components first.

Step 2: Halt any Further Debt Creation

You need to stop creating more debt if you plan to reduce it. You will never be able to get out of the vicious debt trap if you continue using borrowed money to finance your lifestyle. Remember, you are not the state of California or Congress.

For instance, you can curb the habit of charging some credit cards to pay off the debt amount on others.

Get into the habit of utilizing cash as your primary mode of payment. This will at least start reducing your credit card interest costs, and even deter you from making impulsive purchases. It is far easier to spend money by paying with plastic on things you do not need.

Postpone any non-essential purchases, and start focusing exclusively on resolving your current debt situation.

Step 3: Have a Prudent Debt Elimination Strategy in Place

Your goal should be to double down on your credit card payments because credit cards usually have the highest interest charges which is no fun to pay even during a solid economy with lower taxes. Unless you create a solid debt management strategy and execute it with a firm resolve, it will be difficult to come out of the debt cycle.

Snowball Debt Reduction Approach

This strategy involves paying off your smallest debts first. The advantage is that when you start small, it will give you the confidence that you can come out of your situation one small step at a time. The emotional advantage will be immense when you see your smaller loans are getting eliminated one by one.

Once you begin small, you will continue to gather momentum to take more tangible debt reduction steps. One small step will eventually ‘snowball’ into a huge dedicated endeavor on your part to eliminating your bigger debts.

Avalanche Debt Reduction Approach

The avalanche debt management strategy involves paying off the costliest debt first. Remember that your goal here is to focus on the highest interest rate, and not the total debt amount or the total interest cost.

While you can keep paying minimums on other debts, you can start working on eliminating those debts first which are crushing you with a very high interest burden.

Stay committed to the debt reduction strategy you choose, and slowly you will start emerging out of your difficult debt situation.

Step 4: Set Aside an Emergency Fund

While it may appear counter-intuitive to set aside an emergency fund when you are working to eliminate debts, this is a vital step that will help you prevent additional debt. Life offers no guarantees to support you in your difficult financial situation.

An unforeseen health trouble, car breakdown, or a leaky roof needs to be taken care of, and if you have an emergency fund, you will not be forced to pile on more debt. Keep a goal of building a fund of about $1,000 for these types of emergencies.

Step 5: Consolidate Multiple Debts into a Single Loan

A well-structured debt consolidation plan can help you combine multiple consumer debts into a single loan. This will usually result in a lower overall interest rate on the entire amount, and you will need to make just one payment every month.

It will simplify your finances, and give you clear goals about debt elimination. You will have to discuss with your credit union, bank, or another lender to see if they are willing to cooperate with you on this proposal of debt consolidation.

Is an AARP Membership Worth It?

So you just turned 50, and all of a sudden you start seeing online ads for AARP, seeing the magazines everywhere you go, and getting the pamphlets in the mail. I know, you’re just trying to come to terms with the fact that you are now 50 years old, all you need is another reminder that your mid life crisis is sure to start any minute now. Well I’m here to tell you it’s time to embrace your new age with a new attitude. You now get to take advantage of senior citizen discounts all over town, so why not also take a peek at those AARP benefits? Is it worth it? I’ll lay everything out for you now.

How Much Does it Cost? 

An AARP membership costs $16 a year. But the more years you pay for in advance, the cheaper it is. See below for the discounted breakdown.

$63 for 5 years — $12.60 per year, with a 21 percent discount
$43 for 3 years — $14.34 per year, with a 10 percent discount
$12 for the first year if you choose to auto-renew — 25 percent discount

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What Discounts are Included?

Members get a variety of discounts at the following popular stores and restaurants.

Retail: Tanger Outlets, 1-800-Flowers.com, Harry & David
Restaurants: McCormick & Schmick’s, Saltgrass, Outback, Bubba Gump Shrimp Co., Denny’s and Rainforest Cafe
Entertainment: Ticketmaster, Regal Cinemas, Cirque du Soleil
Home & Technology: AT&T, UPS Store, Consumer Cellular

What are the Travel Deals? 

Rental cars: Members get a discount with several popular rental car companies, as well as a 30 percent discount on Zipcar memberships.
Hotels: Members get up to 20 percent off at several hotel chains, such as Days Inn and Wyndham Hotels and Resorts, as well as up to 35 percent off from Endless Vacation Rentals.
Flights: You’ll get access to the AARP Travel Center Powered by Expedia, which has members-only flight deals, plus you’re entitled to a discount at Park Ride Fly USA for off-airport parking.
Cruises: Members can get discounts on select cruises by Norwegian Cruise Line, Windstar and Grand European Travel.

What are the Health & Wellness Deals? 

Exams: Members get a free hearing test once a year, as well as special rates on eye exams and eyeglasses at participating eye doctors.
Insurance: Members get access to exclusive insurance plans through the AARP® Auto & Home Insurance Program from The Hartford.
Medication: Members have access to the AARP® Prescription Discounts provided by OptumRx program and save an average of 61 percent on all FDA-approved medications
Family: Add a spouse or partner to your plan for free so you can both enjoy the benefits
Dating: Members can sign up for the AARP dating site and meet other 50+ singles who are ready to mingle.

This is only a small portion of the discounts and benefits you can get from an AARP membership. You can read the full list of discounts by checking out the AARP Member Benefits Guide.

As you’re nearing retirement, I understand you want to be intentional with how you spend your money. I’ll let you do the math, but if dine out frequently, travel, and want access to health and financial resources to assist in your retirement transition, it might be worth trying AARP for one year to see if you like it. That $16 you spent on the membership will be saved in no time. 

15 Questions to Ask When Shopping for Health, Homeowners and Auto Insurance

There’s nothing more difficult and confusing than choosing the right insurance, whether it’s health, homeowners, or auto. There’s so much information that it’s sometimes hard to digest, so we’ve sifted through it and are here to help you make well-educated decisions about your future. In this article, we outline 15 questions that you should ask your agent when shopping for health, homeowners, and auto insurance.

Health Insurance

1. Is my current provider available in the plan?

If you have a current doctor that you are loyal to, it’s worth asking your health insurance agent if he or she is covered under the plan you’re considering. We all know the struggle of finding a doctor that we are comfortable with, on top of one that knows our health history. It’s worth noting, if you are considering a PPO, keeping your same doctor may cost you a bit more out-of-pocket, but could be worth the extra expense. Weigh and calculate your options.

2. What’s my deductible?

In other words – how much will you have to pay out-of-pocket on treatments and procedures before insurance kicks in and starts to cover costs? The cheaper your monthly premium, the higher the deductible. Do the math. If you see a doctor regularly, consider opting for a more expensive monthly premium but a lower deductible. And keep in mind – most preventative services are covered without use of the deductible – think shots, screening test, vaccines, etc.

3. What’s my co-payment?

This is a big one, as this is the amount you’ll be paying out of pocket every time you see a doctor. Should you expect a small flat fee around $10, or will it vary by provider and be upwards of $100? Generally speaking, your co-payments don’t count towards your deductible. So this is something you’ll want to factor into your budget as you’ll still need to meet your deductible on any treatments or procedures that you receive. 

4. Is there a pre-existing condition exclusion period?

It’s not uncommon for health insurance companies to place limits or exclude benefits for a period of time for a medical condition that you had prior to selecting and enrolling in the health plan. Make sure to ask your agent if they have an exclusion period, what they define as a pre-existing condition, and how long their exclusion period lasts. There’s nothing worse than getting caught in the middle of an expensive procedure with no help on payment.

5.What will my monthly premiums be?

Monthly health insurance premiums vary drastically from person to person depending on their monthly budget, desired deductible, any dependents you have, and if your place of work is covering a portion of it. We recommend checking out AffinityCoverage to get the best health insurance quotes in your area, for up to 30% off.

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Homeowners Insurance

1.What does my homeowners insurance plan cover?

You’re correct to assume that homeowners insurance doesn’t cover every disaster. It will cover the most common situations: fire, windstorm, hail, lightning, smoke, explosion, theft, vandalism, riot and vehicle collision. It likely will not cover earthquakes, flood, power failure, war, nuclear explosion, or neglect. Make sure you ask your agent and fully understand what it covers before signing on any dotted line.

2. Do you have any discounts available?

The safer your home is, the more discounts and special rates the home owners insurance company can offer you since there’s less of a chance for a catastrophic event. Some common discounts: bundling/multi-policy, having a monitored burglar and fire alarm system, having an impact resistant roof, installing new wiring, plumbing and A/C, living in a gated community, new home discounts, having an HOA, paying in full, and even being a first time customer and/or homeowner. Don’t skip this step. 

3. How much homeowners insurance do I need?

This will differ for everyone. You should base your estimate off how much it would cost to rebuild your home. If you live in an older home, have additional structures on your property such as a shed or garage, or if construction costs run high in your area, consider insuring over market price so you are fully covered. 

4. Are my personal belongings covered?

Most homeowners insurance policies offer a built-in personal coverage of 50% of the dwelling limit. For example, if you choose a $200,000 policy on your home, it’s standard to receive $100,000 in personal property coverage. If you have expensive furnishings and personal belongings, ask if that percentage can be increased. You’ll likely pay a bit more out of pocket, but the added coverage may be worth it.

5. So how much is this going to cost me?

Again, this is going to be different for everyone depending on how much coverage you need and the city/state that you live in. According to the Insurance Information Institute, a standard policy costs homeowners about $1,100 a year. We recommend checking out MyQualityCoverage to find and compare the best homeowners insurance companies before making a decision.

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Auto Insurance 

1. Will my policy cover other drivers of my vehicle?

What happens if a family member or friend borrows your vehicle and is involved in an accident? What about if you are driving someone else’s vehicle and are involved in the accident? How these situations are handled will all depend on your insurance company, if the person driving has insurance, and the laws in your state, so it can get a bit confusing. Generally, if a friend who has their own car insurance is borrowing your car and is at fault in a collision, chances are, they’re covered. But, which company will actually handle the claim and send payment for damages can vary based on the accident, damages, who is officially at fault, etc. Ask your agent how the plan you are considering handles these situations.

2. What type of parts will be used to repair my car after an accident?

Many auto Insurance companies are going to take the cheapest route in repairing your vehicle after an accident. On some discount plans, insurance companies will request the use of second-hand parts instead of brand new parts to complete the repair. You may pay less with the used parts, but is a slightly lower monthly premium worth having 10 year old parts on your 1 year old car? Make sure you fully understand what you’re getting yourself into here.

3. Does the policy include 24/7 towing and roadside assistance?

Some auto insurance companies offer 24/7 towing and roadside assistance built into their plans as a perk. You never know when you’ll get a flat tire, lock your keys in your car, or need to have your battery jumped. Having this extra layer of protection puts your mind and wallet at ease. 

4. Do you offer any discounts?

Auto insurance companies have the ability to offer discounts on your premium in certain situations. The most  common is if you pay on an annual or bi-annual basis instead of quarterly or monthly. Some other common discounts that they can offer are: accident-free, safe driver, parking in a garage at home and work, new car, anti-theft, anti-lock brakes, low usage and mileage, and military and senior citizen discounts. Asking this question is the easiest way to shave money off your premium. 

5. How much does Auto Insurance cost?

This rate is going to vary drastically depending on the type of coverage you select (full or liability), your city/state, the type and cost of your car, and any past violations. For example, a driver who has an older vehicle in Little Rock, Arkansas, selects liability only, with no past violations will likely pay $30/month. Another driver who has a brand new Tesla in San Francisco, California with two past violations may pay upwards $200/month. To find the best rates in your area for the coverage you are looking for, check out Get-Auto-Quote. 

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Legitimate Ways to Save Money if You’re Living Payslip to Payslip

According to a recent study, about 25 percent of British adults have no savings. No matter what your reason is, have hope that there are ways to get out of debt and give yourself access to extra cash. Every cent earned is one less cent worth of debt, and even the smallest measures can make a big difference if you live payslip to payslip.

Here are some examples of things people across the UK are doing to get more cash in their hands without ever leaving their flat.   

Step #1 – Switch banks to take advantage of significant bonuses.

Many banks try to attract new customers by offering switching bonuses for opening new accounts. They tend to even double those offers if you have your payslip direct deposited. With that bonus, consider opening a savings account that earns interest. An initial £150 deposit can double over time if you simply leave it alone.

Step #2 – Search the web using InboxPounds.

Next time you need to search for something online, skip Google and instead use InboxPounds. It’s powered by Yahoo, and you can earn up to £0.70 per day doing something you would normally do anyway. That’s £21 in one month, so it adds up quickly. All you have to do is use their search engine. Plus, you get a £1 bonus simply for trying InboxPounds.

Step #3 – High credit card balances? Shop around for lower interest rates.

If you’re only paying the minimum balance when your credit card payment is due, it can take quite a long time to get out of debt. Interest continues to build on the balance, making it difficult to put a dent in high balances. Try shopping around for a card with a lower interest rate, and transfer your balance to that card. Some cards even offer promotional rates where you pay no interest for a specific period. So if you have £10,000 in credit card debt and are paying a 16% annual percentage rate, you could save $133 per month during the promotional period.

Step #4 – Play games on InboxPounds.

Besides paying you to use them as a search engine, they also pay you to play games. If you pay for online games anyway, do it through  InboxPounds to get as much as a £15 credit. Examples include Gala Bingo, Ladbrokes games, Betfair Sports and LottoGo.  

Step #5 – Charged a late fee? Ask for a one-time courtesy refund.

Nobody is perfect, and late fees can easily happen. However, you may be surprised at how simple it is to get a fee reversed if you simply ask. Realize that your credit card company will probably only do this once or twice a year, so don’t assume you’ll get your fee reversed every time. Also, If you’re habitually late only because you forgot to pay, consider setting automatic payments so you it doesn’t happen again.

Step #6 – Take surveys on InboxPounds.

Get something for nothing by taking a survey on  InboxPounds and simply sharing your opinion. It’s a simple three-step process:

  1. Select a survey from the list of available surveys to complete.
  2. Qualify for the survey by answering the screening questions honestly.
  3. Complete the survey, and earn cash.

Be sure to check back regularly to see if there are more surveys available.

None of these tips require too much work, so it certainly doesn’t hurt to see if you can make a few quid or even a couple hundred. Remember that when it comes to money, every little bit counts. A few extra pounds in your hand can help you stop living payslip to payslip and erase unnecessary financial stress in your life.