Trapped in debt? Here are 7 steps to free yourself

MANILA - Do you feel like you're drowning in debt? If you are, and you think there is no way to escape the debt trap, don't despair. With good planning, discipline, and a measure of sacrifice, you can retire your debt and be free from its burden.

Before you address your problem, try to look back and see how it started. You may be among thousands of Filipinos who are saddled with debt accumulated slowly over the years. This may be the result of living beyond one’s income, lack of planning, or sudden emergencies that force one to borrow, among many other factors.

For many, debt can creep up unknowingly. A personal loan here, a mortgage there, plus months of just paying the minimum amount due on your credit card, could add up until you one day find it beyond your control.

Whatever the cause, what’s important is that you take immediate action before debt paralyzes you financially and even legally. Your action will have to be on two levels – behavioral and financial – so that you can effectively cut down your debt.

 Here are seven steps to help you surmount your mounting debt:

1. Take a hard look at your finances.



This step is necessary since retiring debt calls for a sound plan that you can implement. Try to determine what you are paying for and how much. Just knowing how much you owe can surprise you. By doing this, you will also be able to determine which debt you have to prioritize, e.g. those that cost the most to maintain. You would like to retire the debt that charges you 20 percent a month ahead of the debt that charges you 12 percent a year. Understanding your finances will also allow you to come up with a workable solution.

2. Restructure the most expensive loans.

Today is a great time to restructure loans, given the low-interest rate environment. Are you paying credit card debt? Possibly with more than one credit card company? You will never get out of debt if you do not manage this. Talk to your credit card providers about restructuring the loan. You may also get a personal loan at a lower interest rate to help bring down your interest costs. Study all options available to you, while taking note of penalties and transaction fees.


3. Slash, not just cut, your monthly expenses.

Look at your lifestyle to find out where you can scale back. If you spend so much on entertainment, then cut this drastically. No more expensive night outs or fancy dinners for the time-being, unless you can find more affordable alternatives. Forget expensive vacations. Turn off the aircon and use an electric fan instead. Skip the expensive hair treatments. The cutbacks you can make will all count.

4. Sell assets. Raise cash to retire your loan by selling off assets, big and small.

Do you really need two cars? Do you need to stay in that very expensive house or would a smaller unit in a less luxurious part of town suit your purposes? Those diamond rings sitting in the closet may be your ticket to debt freedom. Even those expensive bags you picked up in your shopping sprees could fetch a fortune in the second-hand market. Selling off assets could help you bring down debt levels drastically.

5. Find additional income sources.
Find other cash sources so that you can put this toward retiring your debt. Are there additional projects you can take on or other jobs you can hold? Try tutoring children in your spare time, or baking cookies on weekends. Your creativity is your limit. This new income source will give you the elbow room to wiggle out of debt.

6. Live below, not just within, your means.

Sometimes you have to change your lifestyle drastically. You may need to dress simpler, consume less, and live a less luxurious life. You may look into selling your car and going back to taking public transportation to work, if your car loan is the cause of your debt burden. If living independently is causing you to bleed financially, think about moving back to your parents. Perhaps the kids could go to a less pricey school. The situation varies per individual, so take what is most appropriate for you.

7. Pay off as much as you can.

Try to retire as much debt as you can, to keep interest costs low and to hasten the debt retiring process. Pay more than the minimum amount due on your card. The longer you are in this situation, the more stressful it can get for you. Bite the bullet now and embrace the inconveniences and hardships it brings, knowing that this is necessary on your way to getting out of debt.

In all these, do not forget to stay focused. Don’t lose sight of your goal, which is to free yourself from debt that can affect you for life if you do not act on it now. By staying focused, you will be less tempted to spend on unnecessary items or to slack off in your debt retirement efforts.

Have a spreadsheet to help you monitor how close you are to your targets. Stay positive and remind yourself that freedom from debt will soon be at hand.

source: www.abs-cbnnews.com

Debt Repayment 101: How to Create a Repayment Plan

Are you in debt and unsure how to start getting out? Or are you in debt, and unsure of if you want to find a way out? If so, that’s okay—tackling debt can be a little scary, but it’s in your best interests to start working your way out of financial trouble like this.

Don’t you want to reclaim your paycheck, and not have to send a portion of it off to a creditor? You should enjoy the money that you earn! If you’re tired of living paycheck to paycheck and having maxed out lines of credit, you can (and should) take action.

Read on to find out how you can get started making good financial decisions, and how to start making a debt repayment plan.

Making the Decision to Get Out of Debt

Deciding that you’ve had enough of debt can be empowering and overwhelming all at once. On one hand, you can’t wait to kick your debt to the curb. On the other, you’re worried about how to get there and the sacrifices it might require.

Let’s get this out of the way: there’s no wrong or right way to get out of debt. Everyone should go their own pace and choose a method that works for them. Some people are okay with giving up many possessions and “wants” while living meagerly. Others still want room to enjoy life.

Before you start on a plan to pay off your debt, you should outline what you want your journey to look like. It’s okay if it changes, but it helps to have a list to go off of when things get rough.

Make a list of your values, your goals, and your wants. Ask yourself what you’re willing to go without—and what you’re not willing to sacrifice to achieve debt freedom. Be honest with yourself about what’s truly worth it. Once you determine the parameters, you won’t have to question your priorities (or be upset if others do).

It’s also important to understand what you’ll be able to do once you’re debts are repaid. You can devote more money to your other financial goals. You can accelerate your progress to your retirement goals, for example, or save up for a big purchase. Maybe you want to take a round-the-world trip, or you’re ready to start paying down your mortgage.

Use these other financial goals as your motivation to repay consumer debts from credit cards and student loans as soon as possible. When you’re free of these burdens, you’ll be able to reach other money goals even faster!

What Are Your Numbers?

It’s difficult to face the reality of your debt situation. But in order to move forward with a plan, you need to know exactly where the numbers stand.

The easiest way to do this is to list out all the debts you have, like so:

Type	Lender	APR	Balance	Min. Payment	Due Date
Credit Card	Chase	11%	$3,020.17	$75.00	4th
Credit Card	Discover	8%	$7,385.28	$130.00	8th
Student Loan	Nelnet	8.5%	$11,274.32	$220.00	11th
Car Loan	Dealership	3%	$21,295.23	$250.00	20th

You don’t have to follow a spreadsheet layout. This is just an example to help you get started. Some people like putting their numbers on a whiteboard, while others people have found creative ways to measure their success with paying off debt. Pick a method that will keep you motivated.


Creating a Repayment Plan

Now comes the fun part: strategizing! Again, there’s no wrong way to repay debt. All that matters is that you’re erasing the red on your balance sheets. There are a number of options you can choose from: pick the one that makes the most sense for your situation.


    The snowball method requires paying off the loan with the smallest balance. (In the example above, it’s the Chase card). This gives you a quick win and added motivation to keep going. Once Chase is paid off, you snowball the amount you were paying to Chase into the balance with the Discover card. If you paid the minimum amount, you’d be able to put $205 toward Discover from paying off Chase.

    The avalanche method requires paying off the loan with the highest interest rate first (in this case, Chase again). The reason for doing this is that the loan with the highest interest rate is going to cost you more down the road. Interest is ugly; the quicker you can get to paying off the principal balance, the better.

    You can also try a combination of both the snowball and the avalanche methods. Maybe you want to tackle the loan with the highest interest rate to get that out of the way, but then you want to target the loan with the lowest balance to get a quick win after all your hard work.

    The emotional method isn’t an official strategy, but it’s still an option worth covering. For some people, there is a certain debt that they absolutely despise. They would do anything to get it out of their lives. If you have one like that, feel free to attack it with a vengeance and let numbers go out the window. Then get down to strategy with the rest of what you owe.


At the end of the day, what matters is that you make progress and do what is best for you. Don’t be afraid to tweak things if one method isn’t working for you. Financial plans are rarely ever set in stone because life gets in the way.


The trick is to not give up and adapt to changes, no matter how hard it may seem at first. Share your plans with supportive friends and family members – this isn’t a journey you have to take alone.

source: totalmortgage.com

8 Easy Steps We Used to Pay Down $60,000 in Debt - Fast

There are plenty of ways to wind up with debt. You can acquire it as the price of a good education. You can pile it on when bad stuff happens to your house. Or you can simply spend too much money at the mall. With almost $60,000 in consumer debt, I was guilty of all of these -- and more.

Worse than just having debt, I was in debt denial. I happily made my credit card and auto loan payments every month without thinking twice about them. In my mind, I was doing the right thing. I had no idea what kind of impact my debt was having over my financial life.

Then, in the fall of 2011 my wife and I found out that we were expecting, and realized immediately that our spending habits needed to change. We didn't want our children to be burdened by our financial mistakes. Together, we made a plan we hoped would eliminate our debt before the birth of our new baby.

We didn't quite make that deadline, but 12 months later, we were completely debt free. Here's the basis behind our strategy:

Step 1: List All Your Debts, Their Balances and Interest Rates

Go to the website of every financial institution to which you owe money. Copy down all the balances and their respective interest rates, exactly as they appear. It's also important to know what your minimum payments are for every account.

Step 2: Set Periodic Goals
Short-term goals allow us to break really hard things into manageable chunks that we can feel good about after we complete them.

When you set a goal to pay off your all debt, you first need to assess how much money you can contribute to debt repayment every month. Divide your total debt by your planned monthly repayment amount. This will give you roughly the number of months it will take to become debt free. This isn't accounting for interest, of course, so understand it'll likely take you longer than that to repay your debt, but it's a fair gauge of how much longer you have to bear this burden.

Step 3: Start Paying Off Your Balances from Highest APR to Lowest

Each month, make the minimum payment on every account, then dedicate all the rest of your debt repayment budget to the one that you're trying to eliminate first -- the one with the highest APR. Over time, this allows you to waste as little as possible on interest.

When you pay off one debt, that frees up money that you can now use to tackle the next debt down the list. This concept is known as " the snowball plan."

Step 4: Trade In Big Ticket Items

Do you still owe big money on your vehicle? You can significantly reduce your total debt by trading in your car for something cheaper. If you can get $18,000 for a trade-in, and find a $10,000 car on the lot, you just came into $8,000 to help you pay off debt.

You can apply the same idea to boats, yachts, jet-skis, snowmobiles, among other items. Now isn't the time to have pricey toys. You can have toys when you're debt-free.

Step 5: Sell Almost Everything

Now that all of your big ticket items have been either sold or traded in for less expensive versions, you can start becoming a professional Craigslister.

Carry around a notebook and write down every item that you use over the course of a given week. You'd be surprised with how little of your stuff you actually use. Why not try to turn some of your less-used items into cash?

Step 6: Work, Work, Work

This one is going to blow your mind: To pay off debt faster, you can work more. Overtime, second jobs, babysitting, etc. More money, more debt repayment.


Step 7: Reward Yourself for the Small Wins

Achieving a goal, no matter how small, should be celebrated. Naturally, this doesn't mean that you should go out and spend hundreds of a dollars at the mall for paying off $100 of your debt. Instead, splurge small -- perhaps on one of those fancy coffee drinks you've (wisely) been denying yourself.

Or, as a free alternative, you can guilt people into congratulating you by posting your achievements on Facebook.

Step 8: Use Windfall Money Wisely

My definition of windfall money is "any money that you receive that didn't directly come from your employment." Tax refunds, bonuses, inheritances, birthday money, wedding gifts, whatever. If you are in debt, windfall money isn't fair game for fun. You should apply it directly to your debt. You couldn't ask for a better gift than being closer to debt free, so don't blow it.

Congratulations, You're Debt Free

Now that you've made it, teach your friends and family how they can accomplish the same thing. You'll be living proof that it's actually possible.

source: dailyfinance.com

Greek economy pays high price for its high prices

ATHENS - Signs across Athens advertise property for rent or sale. One in three shops has closed. At those still open for business, turnover has slumped.

So it is one of the mysteries of Greece's economic depression that prices of some things - milk and the new iPhone, for example - are among the highest in Europe.

The riddle matters hugely. If costs and prices were lower, exporters would be more competitive and people's shrinking pay packets and pensions would stretch farther, cushioning a sharp drop in consumption.




Increases in value added tax and other indirect levies are part of the answer. Greece is also hostage to the cost of imported oil and food.

But another set of reasons goes to the heart of Greece's political and economic malaise: collusion among producers, the state's complicity in shielding protected professions and businesses, and a thorough lack of competition that allows a favoured few to extract economically unjustified profits from a long-suffering populace.

Much of the economy, in a word, is diseased. And until the disease is cured, sustainable growth cannot resume even if euro zone finance ministers finally agree - after two failed meetings in successive weeks - how to lighten Greece's unsustainable debt burden.

The good news is that Athens is implementing some deep-seated administrative reforms and its trade deficit is receding.

But the clock is ticking: the burden of austerity and reform has fallen disproportionately on the man in the street, and his patience is all but exhausted. Protests over inequality and austerity are proliferating, fomenting political radicalism.

"Greece is on the edge right now. That's why 2013 will be a crunch year for the economy and society," said Dimitris Asimakopoulos, who owns one of the oldest pastry shops in Athens.

Asimakopoulos, who also heads the GSEVEE small business confederation, said his turnover had fallen 35 percent since the crisis struck. Profits were one-fifth of what they were then.

"The economy here is not an advanced capitalist economy," he said. "But you can't change an economy by pressing a button. You need time, and right now we don't have time."

LOW WAGES, HIGH PRICES

One button that a country living beyond its means has to press is marked 'cost cutting'. Greece has done that. Wages are plunging at the behest of international creditors who are keeping the country alive on a drip-feed of aid.

By the end of this year, the entire surge in the average cost of labour per unit of output from 2001 to 2009 will have been unwound, according to a draft European Commission paper.

The drop in nominal unit labour costs this year alone is projected to be 8.7 percent - not surprising given that the unemployment rate is 25 percent.

But wages are only one input among many that determine prices. The most comprehensive gauge of a country's cost competitiveness is its real, or inflation-adjusted, effective exchange rate (REER) relative to its main trading partners.

And in 2011, Greece's REER was still 18-20 percent above its 2000 level, according to Eurostat, the EU statistics agency.

"Of course the issue of prices concerns us. There's a problem, and we're aware of it," Athanasios Skordas, deputy minister for economic development and competitiveness, told Reuters.

Inflation is falling - it was 0.9 percent in the year to September - and economists expect it to come down further.

But to thoroughly convert wage to price competitiveness will entail a daunting array of reforms, such as making it easier to start a business and removing barriers to competition in key markets such as energy.

Platon Monokroussos, head of financial markets research at Eurobank in Athens, said these market rigidities were one reason why falling wages had not translated into a quicker drop in inflation.

FAT PROFITS

Another reason, Monokroussos said, is rent-seeking - making excessive profits.

Eurostat figures show average food prices in Greece are higher than in the rest of the EU except for meat, fruit and vegetables. Milk, cheese and eggs are 31 percent more expensive than the EU average; cereals and oils cost 16 percent more.

The Organisation for Economic Cooperation and Development says profit margins exceed the EU average in many key sectors, especially retailing, due to a lack of competition.

"This is a structure as old as the Greek state," said George Zombanakis, an economist with the Bank of Greece, the central bank. He stressed that he was speaking in a personal capacity.

"This is something that can only be tackled by structural reforms, and everybody tries to do anything and everything except structural reform because then it becomes a political matter," said Zombanakis.

Firms across the EU are frequently fined for price-fixing. But in the case of Greece, ending what the Commission calls "price rigidity and collusion in prices" means breaking a particularly strong nexus between politics and business.

"They've cut wages but haven't touched monopolies," said Costas Lapavitsas, an economics professor at the School of Oriental and African Studies in London.

"And the reason they haven't intervened is because of the strength of the incumbents. The strength of big business is paramount, and it will take profound political change to alter this," he said.

FISHING FOR CARTELS

Dimitris Kiritsakis, the head of Greece's Competition Commission, acknowledged the lack of competition and said his watchdog, with just 120 professional staff, was probing 30 sectors to see if cartels operated.

"You can't just make cartels disappear," Kiritsakis told Reuters. "People think I can say 'Come out, cartel, so I can catch you'. But you need to be lucky. It's like fishing: you need to be in luck for the shoal to swim past in front of you."

Other nefarious practices keep prices high.

Since March, doctors have been required to prescribe, and pharmacies to dispense, generic drugs instead of expensive brand names. But, as is often the case in Greece, the regulation has not been fully implemented.

This is costing patients money and leaving room "for wrong incentives to doctors, overprescription and outright fraudulent prescription behaviour", according to the European Commission.

What's more, as part of their strategy to minimise taxation, multinational companies export goods to their Greek subsidiaries at inflated prices, said Vassilis Korkidis, president of the National Confederation of Hellenic Commerce.

Skordas, the deputy development minister, said he had filed an official complaint with the local representative of Apple Inc , charging that the company's new iPhone 5 sells for more in Greece than anywhere else in the EU.

THE DRACHMA NIGHTMARE

Addressing all the reasons for Greece's high price levels and lack of competitiveness will take a decade or more, the International Monetary Fund reckons.

But Greece does not have that time. Korkidis said one in five of the 300,000 small trading firms that he represents might not make it through the winter.

Companies are starved of credit, but, just as importantly, they and their customers are unnerved by the spectre that Greece might yet be forced out of the euro.

Why invest and spend hard euros if they might suddenly be converted into devalued drachmas?

"If this drachma nightmare goes away, the situation will probably be much better," Korkidis said.

Asimakopoulos, the cake shop owner, agreed. Every quarterly inspection by Greece's international lenders is the harbinger of more austerity and fresh doubts whether the country will stay in the euro, he said. Uncertainty is asphyxiating the economy.

"The most crucial thing is that there is no hope," he said. "If we had light at the end of the tunnel, we could invest in our businesses."

Which is why, though reforms to tame prices are imperative, it is more urgent to agree on a plan to put Greece's massive debt on a stable long-term footing and banish the threat of 'Grexit', or exit from the euro.

"Greece is making big adjustments, but without a credible solution to the issue of debt sustainability, all that effort is going to be undermined. We need to end the uncertainty," said George Pagoulatos, a professor of European politics and economy at Athens University.

source: abs-cbnnews.com