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03-11-2008, 06:49 AM
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#1
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Step #28: Get a Handle on Your Debt
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Ms. Mommysavers
Last Online: Yesterday 05:20 PM
Join Date: Jul 2006
Location: Southern MN
Real Name: Kim
Posts: 15,899
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Get a Handle on Your Debt
Don’t Take on New Debt
It may sound cliché, but you can’t get out of a hole if you continue to dig. Stop all unnecessary spending and retire your credit cards until you can pay them off. Don’t take on any new loans, either (if your car breaks down, repair it). From now until your credit cards are paid in full, you should only be using cash for what you need.
Cut up all your credit cards except for one to keep for emergencies, and leave it out of your wallet to avoid temptations. Don’t close the accounts entirely – that could impact your credit score negatively. Avoid putting it on ice as well, which could damage the magnetic strip.
If you’re intent on paying off your debt rapidly, go back and review the Spending Freeze phase. The more you’re able to cut out of your budget now, the quicker you’ll be back on your feet financially.
Lower Your Rates
As we discussed in step #27, if you have a good FICO score (720 or higher) you may be able to qualify for lower credit card rates. Make sure you call all your lenders to request one. Sometimes it’s as simple as making a phone call. Because of so much competition in the credit card industry, your company will want to retain you as a customer.
Here’s a sample script:
“Hello, this is (Your Name). I’ve been a good customer of yours for years and have been getting offers in the mail from other credit card companies with lower APRs. I would like a lower rate, otherwise I will cancel my account with you and get another card. Is there anything you can do to help me out?”
More than half the time, customers who call end up with lower rates. If you don’t get the answer you want the first time you call, try another day. If that still doesn’t work, you may be tempted to shop around for a new card. This should only be done with extreme care and with full knowledge of possible pitfalls such as: - Balance transfer fees
- Short introductory period low APRs
- Transferring too often can lower your credit score
- Low credit limits can lower your credit score
- Be wary of the Universal Default clause which states that if you are late in paying any bill, your APR on an unrelated card could rise
As always, read the fine print. In the end, the hassle, fees, and uncertainly of transferring balances often isn’t worth it.
Create a Debt Spreadsheet
Collect all your current credit card statements and other bills in which you carry a balance. Create a spreadsheet (Excel works well) so that you can track your progress as you pay down your debt. Here is a sample of how to set up your spreadsheet:
Column A: Name of the Creditor/Account
Column B: Interest Rate
Column C: Balance Remaining
Column D: Minimum Monthly Payment
Column E: Budgeted Monthly Payment
Add the totals in columns C, D. You’ll then have a clear picture of your total amount of debt and the minimum amount required to stay current with your payments. In the next step, we’ll look at how much to allocate to each bill (column E) to come up with your debt repayment plan. However, it will be your goal to put as much extra money as possible towards your monthly debt payments.
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i did this last week as well lol! i re do my debt spreadsheet about every 3 months. 
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