Thanks for visiting!  Here are this week’s debt-reduction related posts:

• Steadfast Finances runs through several thought-provoking quotes on debt and paying interest.
• Debt Eagle show how to do debt settlement yourself.
• Silicon Valley Blogger warns about refund anticipation loans.
• The Smarter Wallet discusses the Dave Ramsey cash-only diet.
• Do You Dave Ramsey? does the emergency fund baby step.
• Ask Mr. Credit Card shows how to use credit cards for a debt repayment plan.

Thanks!  If you have debt-reduction related questions (or any other money questions, for that matter!) ask them over at Cash Commons.

Have a great week!

Got money questions? Ask them at Cash Commons

If you have several debts that need paying off, there are a number of basic strategies to accomplishing this.  Each one has its own pros and cons.  I’ll talk about three that have made the rounds, and introduce a fourth that is a bit different.

• Make extra payments on the debt with the lowest balance first. This is the method advocated by Dave Ramsey and his followers.  The main advantage of this method is a psychological one: it eliminates one of those bills the fastest, and provides positive dragon-slaying feedback the most quickly.  The main disadvantage is that it does not take the interest rate of the debt into consideration, and hence the amount of money needed to pay off all of the debt is higher, and it takes longer to do so.
• Make extra payments on the debt with the highest interest rate first. This is a straight number-crunching, cost-minimizing approach.  The advantage of this method is that the least amount of interest is paid.  The main disadvantage is that the first “dragon slaying” is farther off, and motivation to continue has to come within.
• Pay only the minimum amounts on the debts and stash as much cash as you can. This method isn’t really a debt reduction strategy but more a protective mechanism, and was recently endorsed by Suze Orman.  The key idea is that times are especially uncertain these days, and having a bolstered emergency fund is more valuable than paying off debt aggressively, because a bolstered emergency fund buys you time.  While this is being done, of course, the debts remain, and the interest expense is the costliest.
• Accelerate payments on the debt that has the shortest fuse. This is a bit different strategy, but it may have some merit.  Liz Pulliam Weston’s article on how to not pay your bills discusses ways to minimize the damage of having too much month relative to your paycheck.  She lists the debts that have the shortest fuses — the time period of delinquency after which bad things happen like repossession, credit score hits, and foreclosure.  Of the debts she lists, car loans have the shortest fuse. Lenders can repossess the car the next day in some cases.  Mortgages and home equity lines of credit are next, then unsecured debt, and finally student loans.

So, might it make sense, given the choice, to try to eliminate those short-fuse debts first?  It could even be argued that things would really fall apart quickly without a vehicle.  Job loss could be imminent if you couldn’t show up for work, no?

In any case, doing something proactive is better than doing nothing beyond the minimum, in any case.  Hunker down!

Thanks to Gather Little By Little for including this post in the Carnival of Personal Finance.

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(This is a guest post from Kris Bickell. For more tips on getting out of debt and turning around your financial situation, visit www.debt-tips.com. You’ll learn the actual debt elimination tips he used to get completely out of debt.)

If only money grew on trees … life would certainly be easier! But of course, it doesn’t. So when money is tight, what can you do to relieve some of the stress?

Well, some people start buying more lottery tickets. But the odds of winning are so small that you might as well throw your money out the window. Others start using credit cards. But someday you’ll need to pay those credit card bills, so making them even bigger will only make things worse.

There are some real ways to make your life easier without doing anything drastic or illegal. So here are five hidden ways to find extra money – even when money is tight:

1. Sell stuff. As they say, one person’s junk is another person’s treasure. So look in your basement, your attic, your bedroom drawers. And sell anything you don’t use. You can go to your local consignment store to sell clothing and household items, or a pawn shop to sell other valuables. Or use Craigslist.org to sell your stuff online (it’s easy and it’s free!)
2. Write down a list of all your expenses and cross off all the “extras.” Then take the list and stop buying all of those extras, things like coffee, lunch (bring your own), snacks, magazines, newspapers – be creative and you can probably save yourself between $50-$100 a month. Maybe more!
3. Start a business or get a part-time job. Even if you don’t want to work long hours at a second job, you can find something “light” to give you a little extra spending money. Like working on a Saturday at a local store you like to visit. Or finding one lawn to mow or house to clean in your neighborhood. Or start a tutoring business. Or even start an online business you can do in your spare time.
4. Shop around for all monthly bills, insurance, etc. You might be pleasantly surprised at how much money you can save by shopping around. And not just when you need a new coat or pair of shoes. You can shop around for cell phone service, car and home insurance (if you’ve been with the same company for more than a few years you might save a few hundred dollars), electric service, credit card interest rates and annual fees, heating oil delivery. Or you can switch to cheaper plans for cell phone and cable TV, and raise your insurance deductibles.
5. If you got a tax refund, have your employer take out less. It definitely feels a lot better to get a tax refund than to owe Uncle Sam money. But if you get a big refund year after year, something’s wrong. Do you realize you’re letting the IRS hold your money throughout the year? You might be losing out on a nice treat come refund time, but it’s usually better to get your money sooner rather than later.

The good thing about these tips is that they can help you later even when money is not tight. Just like credit card debt that seems to sink you deeper and deeper into a hole over time, these strategies will help your savings account grow bigger and bigger!

So don’t get discouraged – get to work and before long you’ll be in much better shape financially!

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Howdy!  Here are the on-topic submissions for this week’s carnival:

• Bargaineering hosts a guest post on how to sue debt collectors.
• The Smarter Wallet shares some first-hand experience with debt collection practices.
• The Digerati Life runs through options for debt consolidation loans for people with good credit.
• Studenomics asks if student loan consolidation is right for you.
• Ask Mr. Credit Card has a radio interview with Lending Club, with an emphasis on debt consolidation.
• Budgets Are Sexy wouldn’t mind moving back in with the ‘rents to pay down debt.

Thanks!

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Welcome to this week’s Carnival of Debt Reduction! I’m very pleased that more of the submissions are on-topic. This is a very good thing, and I know it will benefit everyone concerned, from readers to submitters to hosts, to have a more on-target carnival each week.

Here are this week’s debt reduction posts, with the personal debt reduction stories up top:

• The Good Life on a Budget has paid off a car loan eight months early! Congrats!
• Man vs. Debt has a post from a reader on how they paid off their $15,000 debt by selling their stuff on eBay.
• Digerati Life has a post from a guest contributor that reduced debt with a loan modification.
• Reduce Debt Faster outlines three good ways to lower your credit card payments.  (Hint:  It never hurts to ask!)
• PT Money has an interesting question from a reader with a bit of debt problem that isn’t really her own overspending.
• Damon Day shares a sad story of a woman hit with a debt settlement nightmare.
• Christian Personal Finance gives four ways on how to pay off your mortgage early.
• Bargaineering has a post from Kyle from Suburban Dollar on telling the difference between first- and third-party debt collectors.
• Cash Money Life suggests this question as a wake-up call:  “Do you know how much interest you are paying each month?”
• Clear Choice Credit Cards posts a debt elimination guide.
• Your Money Relationship stirs up the good debt vs. bad debt question, with an anecdote on student loan debt.
• Eliminate the Muda has an interesting take on debt consolidation.

Again, thanks everyone for the on-topic posts.

One last thing:  If you’ve got debt questions, head over to Cash Commons and ask them!  They can even be as specific as this one.

Have a great week!

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Happy Columbus Day, everyone!  Here are the articles for this week’s Carnival of Debt Reduction.  At the top are the posts by people who discuss areas of their personal debt reduction, which is what the carnival is all about:

• Modern Tightwad is deprioritizing her debt payoff in pursuit of some other goals.

And other posts closely tied to debt reduction:

• Free Money Finance lists a couple of suggestions for deciding when to pay off your mortgage.
• Bargaineering shares a guest post on debt validation, which is a lender’s response to a debt collection dispute letter.
• Man vs. Debt has taken the plunge and told credit card companies exactly what they can do with their rewards.
• The Digerati Life discusses the pros and cons of debt settlement companies.
• Financial Methods asks a simple question: What would you give up to get out of debt?

Thanks for checking out the articles this week.  Also, if you have a debt reduction question, you can ask it over at Cash Commons!

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Hi everyone, and welcome to this week’s Carnival of Debt Reduction. There were more good articles submitted this week than are shown below, but only a small number of them dealt directly with (a) personal debt reduction stories or (b) how to reduce consumer debt:

• No Credit Needed dispenses with a lengthy introduction and jumps right in with a six-step process for eliminating credit card debt.
• Free Money Finance recounts a story of how one couple paid off their mortgage.
• Financial Methods confesses that there’s no such thing as the debt fairy.
• Clear Choice Credit Cards runs through seven tips for reducing credit card debt.

I’ll include some of the other articles in a roundup later this week, but if your post wasn’t included, please revisit the submission rules and rest assured that it’s absolutely nothing personal.

Have a great week!

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Five Cent Nickel published a post that discussed what things to consider when you have both debt to pay and money in the bank.  The main problem is that the difference in what the bank pays in interest is far below what one would pay on a typical credit card balance.  Holding on to a large bank account while slowing paying down a credit card balance means that there are a lot of interest expenses being paid to the credit card company.

Nickel’s advice isn’t one-size-fits-all, which is good:

… sit down and carefully consider how much money you really need to have sitting in the bank. $1000? Six months of expenses? Twelve months of expenses? The “right” answer will vary. But if you’ve got more than that amount stashed away, use the excess to attack your debt.

Not a thing wrong with this advice.  Some specific questions I would ask as you “carefully consider how much money you really need to have sitting in the bank” are these:

• How safe is your job?
• Do you have an independent source of income, either in a second job or a side business?
• Are you in an industry that is slashing hours or slashing jobs?
• Are you important enough to the revenue stream of your company that your job is safe?
• If you were to lose your biggest paycheck tomorrow, how long would your emergency fund last based on your current expenses?

If you have cash, this is your ace in the hole for weathering a long recession. An excess of money in the bank buys you time to replace a lost income source.  The more cash you have, the more time you have before bad things like late payments, defaults, foreclosure, and bankruptcy happen.

Here’s a specific example.  Let’s say you have $10,000 in the bank, and $15,000 in credit card debt, at some interest rate.  Your minimum monthly payment on the debt is, say, 2% of the balance, or $300, but let’s say you’re whittling it down a little faster than that, say $500/month.  Your monthly expenses are $2,000 per month, and you’re just about breaking even right now:  outflows match inflows.

So, at the moment, you have enough to cover five months’ worth of expenses ($2,000 per month times 5 months = $10,000) should you lose your job today.  You can even squeeze another two weeks out if you cut your debt repayment back down to the minimum.

Now, say instead that you threw $5,000 at that debt.  Your minimum payment drops to 2% or $10,000, or $200, which is great.  But your bank account now stretches less than three months. You have only about half the time to replace that income should it go away.  Not a good position to be in.

Cash in the bank is recession insurance. It does carry a cost if you have debt to pay off: interest spread.  But once you make the decision to pay down your debt with your cash in the bank, it’s not available to you anymore. The credit card company won’t give it back to you, and if they loan it to you, it will be at very high interest rate.  You may as well start charging on your card again.

People questioned Suze Orman when she advised not paying down debt as quickly as she had advised before, but I don’t think it’s bad advice at all.  A bolstered emergency fund is an excellent idea in this economic climate.  I might go so far as to say that you can’t have enough emergency fund right now.

If you should lose your job, you’ll be glad that you have as much as you do.

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DINKs Finance jogged my memory of this U.S. National Debt Clock in a recent post, so I popped over to check it out.

Of course, it’s mostly really bad news:  $11.7 trillion on the national debt; another person gets unemployed every 20 seconds; the unfunded liabilities like Social Security, Medicare, and the prescription drug benefit, are pushing $59 trillion.

But there was one piece of good news – perhaps an indication of some responsible American behavior, or perhaps merely a micro-drop of Wite-Out® for the reams of red ink, perhaps just a statistical anomaly.  USDebtClock.org’s take is that credit card debt is decreasing.

This is known in the personal finance world as a Very Good Thing.  We’ll see how long it continues.

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(This post is a bit off-topic but I want to get the word out quickly on this.)

I’ll take time now to thank Debt Sucks for hosting this week’s Carnival of Debt Reduction and also for his next post on why he’s never, ever hosting a blog carnival again.

I’ve been watching as hosting carnivals has gotten to be more and more work for very little reward.  There were thirty submissions to Jake’s carnival this past week, and he included only four of them.  He deemed the rest to be spam, off-topic, or astray of the rules that I had set up.

And I applaud him for holding a high standard like that.  Carnivals have gotten out of hand with the volume of submissions, and if these things are to remain useful and viable, the rules have to change.

BlogCarnival.com has done a lot to make the blog carnival popular.  There’s a flip side to that popularity though:  blog carnivals are easy one-way links for the submitter.  Intentionally or otherwise, it’s become too easy for people to submit to carnivals there.  There is no limit to how many times a particular URL can be submitted at BlogCarnival.com.  What’s more, I know of services that will submit one link per week to between ten and fifteen carnivals through BlogCarnival.com, for only $25 per month!  This is possible because there is standalone software that automates the submission process.

So, starting as of about 25 minutes ago, I’ve deactivated the submission form over at BlogCarnival.  The only way to submit to the Carnival of Debt Reduction is now through this submission form on the carnival’s website.

I’ll also be encouraging hosts to be more selective about what posts they include.  Free Money Finance has a good thing going with the Best of Money Carnival.  It was a breeze to host that one.

What I’m hoping this will do is reduce the number of submissions from search-engine optimization companies on behalf of paying clients.  They’ll still be able to do it if they really want to, but now they can’t just click a button to submit a post to the Carnival of Debt Reduction.  They have to come over to the form on the website and do it all themselves.

I’m hoping that’s too much work for them.  I’m also hoping that it’s not too much work for people from whom I actually welcome submissions.

(If you already submitted your post for next week’s Carnival over at BlogCarnival.com, don’t worry, it got through.)

OK, back to regular content.

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