Budgeting your money for a vacation

Want to start off the year feeling relaxed in the warm sun in the Caribbean? Or, how about jumping on a cruise and sailing one of the seven seas? Heading down to Florida for a week? No matter where you would like to go on vacation this winter, it’s probably not worth it if the price tag is too high. Of course, you want to go away and come back feeling better about yourself, but will that be possible if you’re coming back to a mountain of debt? In order to avoid this, think about how much money you can afford to spend on a vacation to someplace warm this winter and then find the appropriate place. It’s probably not a good idea to start planning a vacation for next week. Instead, give yourself time to adequately pick a place and find the best deal. This might even give you some extra time to save up some extra cash. This way, you can go away without worrying about how it will affect your financial situation once you come back.

Avoiding excessive spending on vacation

So, you’ve found the perfect deal on a winter vacation, paid it off in full (hopefully!) and avoided resorting to dragging your credit card more deeply in debt for the sake of getting away for a week. Nice job. But, how do you plan to pay for everything involved with taking a vacation? If you were able to secure an all-inclusive vacation, all the better! But, chances are, you’re going to need extra spending money for food, transportation, some souvenirs, etc. Before the date of your vacation even approaches, be sure to think about these aspects and carefully take into consideration that you will most likely need extra spending money for your vacation.

Creating a plan to eliminate any unnecessary debt

With all of this in mind, how can you still avoid debt before you even set sail or jump on a plane for your vacation? Have a plan! Ideally, you will have enough cash on you to handle all your vacation expenses. Many Americans tend to be more carefree on vacation and spend money without thinking about the consequences on vacation. You only get the chance to get away and let loose once in awhile, right? Well, before you start thinking like that, anticipate the money you will need and plan for it. This way, you won’t be looking back at your trip and wondering how you spent so much money. Instead, you’ll return debt-free, relaxed and ready to get back to your life—without any unnecessary hangovers from your vacation!

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Finding the problem quickly

Welcome to 2008—the year you’re going to make plenty of changes in your life. Right? Well, while you’re getting ready to throw the cigarettes into the trash can and step out onto the treadmill to the future, think about this. You could try and stick out that nicotine craving or keep heading to the gym every day after work, but that would be hard. It would require effort and would mean you would need to make tons of sacrifices. But, did you know that there’s something you can do that will completely change your life without forcing you to completely change your life? Managing your debt! Sure, it seems like it might be hard, but it actually can be simple and only requires you to make some minor changes to your life. If you follow them, you could be a different person at the end of the year. So, admit that you need to make a change with concerns to your debt and set out to make that change. Let’s go!

Steps to help you manage debt easily

Do you have a budget? Do you know how much debt you currently have? Do you know how long it might take you to pay off that debt? Do you know what steps you might have to take to eliminate the debt? If you don’t know the answers to these rather simple questions, chances are you need to start thinking about your debt in a new way. How? Well, for one, sit down and make a list of the things you would like to change about your financial status. And then start doing them. Figure out how much money you make every month versus how much you spend. Could you be doing things differently to put more money in your pocket? Maybe it requires you to pack a lunch twice a week instead of buying your lunch at that fast-food joint. Second, figure out how you could use some of that extra cash to pay down your debt. If you can figure out how to save just a few dollars every month, you could be paying off more than just your minimum payments on that credit card debt that’s sill haunting you. The key is to simply sit down once and figure out where your money is going every month. You’ll be able to find new ways to allocate that money and save cash in no time at all by giving up just an hour or two to get a better hold of your situation.

Seeing positive results before 2009

The best part about reducing your debt for the New Year is seeing results. Like any New Year’s resolution, you’ll want to see them to keep going, right? Well, it might take you months to see the results of running on the treadmill or doing extra crunches. It might take you years to see the results after you quit smoking. But by changing your mindset and attacking your debt, you could see positive results in just weeks. You’ll feel better about yourself and you’ll feel better about your life. And isn’t that the point of a New Year’s resolution?

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Write down the deadline and take action

Admit it: You just found that “2007 New Year’s Resolutions” sheet that you filled out back in 2006. Get more exercise? Quit smoking? Contribute to your IRA? If you’re like most Americans, you joined the gym on January 2…and made your last visit of the year there sometime later that month. You quit smoking shortly after the New Year…but then found yourself so stressed out that you couldn’t bear to put the pack down. You wanted to throw some extra cash into your IRA…but then spent the money on that new car you’ve had your eye on for a couple of years now. Well, there’s no way to go back in time and put in the extra time on the treadmill. And there’s no way to not smoke those packs of cigarettes that you did last year. But you can change your ways, scrape together some extra cash and make a contribution to your IRA for 2007 now. It’s not too late!

Find the IRA that will help you

That’s right. If you still want to make good on your promise and contribute to your IRA for 2007, you can do it now—and you’ve got until April 15 to do it. Write it down on your calendar now and don’t forget to do it. That being said, do you know where to look to set up your IRA if you don’t have one yet? Well, it’s not hard! Simply find the financial institution out there that suits you best. Your bank may even offer one. Typically, all it takes is a phone call to find the company that will help you to set aside a little bit every paycheck to contribute to your IRA. Or, you can go ahead and make larger payments to the IRA at the time that suits you best. Whatever you choose, it is not too late! Think about it.

Beat the clock and benefit now!

So, what do you say? Are you willing to let your New Year’s resolutions from last year go by the wayside as you move into the New Year? It’s too late to go back in time and attack many of the resolutions you made, but it’s not too late to do this. An IRA is a great way to save money for retirement and increase your chances of living a more successful life once your working days are over. It’s not too late! Do it now and start living your life the way you want to do it.

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Establishing a budget for yourself

Chances are, if you’ve found yourself in debt after Christmas, you either failed to stick to a budget or failed to create a budget at all. How could a budget have helped you? Well, first, it would have forced you to sit down and think about how much you realistically could spend on your Christmas shopping without falling into debt. It’s a helpful solution to preventing debt and something you should think about for next year. However, if you have not budgeted properly and find yourself in debt today, don’t worry! You can still use budgeting to help yourself out now and to work your way out of debt. Simply sit down and start analyzing the money you spend and take in every month. How much do you have coming into your bank account every month? How much do you typically spend on rent/mortgage, food, clothing, etc.? How much extra do you have to throw towards reducing debt? Find a figure you are comfortable with right away and start applying it to your debt, credit card or otherwise. You will see immediate results and will stop yourself from falling deeper into debt.

Making minimum payments on time

So, you’ve made the decision to budget your money and start eliminating your debt today? Great! But, that is just the start. It’s one thing to say it and an entirely different thing to start doing it. But it’s not always hard and it requires taking some simple steps at first. To start, make certain that you always make your minimum payments ON TIME. This is vital to eliminating your debt because it will help you to avoid any unnecessary charges and will help you to maintain stability on your credit report. So, if you’re trying to make a dent in that post-holiday debt? Make sure you’re equipped to do so in a timely fashion.

Looking into credit card consolidation

Maybe you’re having trouble keeping up with payments or maybe you just want to look into a better option to pay off your credit card debt. Well, there are other ways to avoid debt and eliminate it all together, depending on how much debt you have amassed over time. How, you ask? Well, for those suffering from a mountain of debt that seems impossible to pay back, credit card consolidation might be the answer. Credit card consolidation, offered through a variety of financial institutions (always be sure to use someone you trust!), will take all your debt, lump it all together and then, most likely, offer you a better interest rate than you currently have. It will save you both time and money, setting a goal for you to pay off your debt in a timely fashion. This is typically only useful when you’re looking to pay off large amounts of debt but it’s worth looking into no matter how much debt you’re suffering from! Try it today and get relief now.

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Identifying the problem

When Congress stepped in to help both lenders and borrowers involved with subprime mortgages, they were tackling one of the biggest financial problems in the country. A “subprime mortgage,” as they are known, often offers borrowers teaser rates or rates that start off extremely low, sometimes as low as just one percent, but often increase dramatically after a set amount of time. This leaves many borrowers searching for a way to keep up with payments and many lenders hunting down missing money. After analyzing the situation, Congress suggested that lenders must now speak to borrowers beforehand and spell out all the details of subprime mortgages, explaining exactly how the mortgage will increase terms later and affect the borrower.

Establishing new mortgage standards

So, aside from alerting borrowers how the increases in the interest rate will affect them, what else did Congress suggest to borrowers and lenders to help subprime mortgages become less of an issue in America? Well, for one, Congress analyzed why so many borrowers were being approved for subprime mortgages and what they found was astounding. Many lenders were approving mortgages to people with bad credit. However, they were doing so only after finding out if they would qualify to pay off the mortgage at the teaser rate. In other words, many of the borrowers being approved for mortgages could make payments when the low-end rate was applied to their mortgage but could not afford to do so once the rate went up eventually. That said, many of these people would not normally qualify for a mortgage but were able to do so and subsequently found themselves in massive amounts of debt. Congress encouraged lenders to approve only those who qualified at the adjusted interest rate as well as the teaser rate. This would help both the lenders and the borrowers at the same time.

Seeing consumer results

By making these suggestions, Congress was able to address a very important issue in this country: Stopping lenders from approving mortgages for those who are not necessarily equipped to make mortgage payments after a year or two. Subprime mortgages, contrary to popular belief, affect both the lender and the borrower. Sure, it may not seem like a big deal to a lender when he or she is owed thousands of dollars by a borrower. They will see their money eventually, right? Unfortunately, many borrowers are being forced to declare bankruptcy as a result of subprime mortgages. By establishing these new standards, Congress is hoping to stop this trend immediately and to help both the lenders and the borrowers to stay out of debt as they both move forward.

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Lots and lots of debt consolidation options!

If you’re in the market for a debt consolidation, you’re inevitably going to see one thing: More options than you can handle! With the growth of the Internet, it seems like anyone with a dial-up connection and a web site can and has started a debt consolidation firm. While that may be a bit extreme, be careful when you’re looking for a debt consolidator. Do you know someone who has consolidated before and could recommend a good company? Do you have a credit counselor who could help you out with the process? Do your home work before you start and find out which companies are out there that will work for you. Don’t get tested by the many scams that exist and don’t run into more trouble than you can handle. At the end of the day, you’re trying to improve your situation, not make it worse. So be sure to research all your options and find a safe and reliable company.

Providing your credit history

Before you start the debt consolidation process, gather all your facts and go in prepared. Organize yourself, crunch some numbers and find out how much you owe in debt. Have a plan mapped out in your head. It’s better to approach a debt consolidator with all the facts and your expectations than to have them decide how you’re going to repay your debt. It is your debt after all! Once you have that prepared and you’ve selected a reliable company, they will help you map out your income versus your debt, some solid repayment options and a light at the end of the tunnel. Ask lots and lots of questions throughout the process so that you are crystal-clear on what to expect from the consolidation. The company should be in touch with your frequently and should be revealing everything they are doing to help your situation.

You need results!

You’re not consolidating your debts just to avoid a financial headache. You’re doing it to eliminate the potential for any headache at all! Make sure you are comfortable with the situation. At the end of the day, you’re going to be paying some sort of fee for the consolidation process—usually some sort of monthly service fee—so the company isn’t really all that concerned about you actually eliminating your debt. They’ll get paid either way. So stay on them to see that they are doing all they can do to help you stay out of debt and to eliminate the debt you already have. You’ll thank yourself for being so involved in the whole process.

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Bringing all your debt together

If you’re like most Americans, you have several forms of debt currently lingering over your head. Credit card bills are stacked up in one corner of the house. Some old student loan payments need tending to in another part of the house. And, of course, there’s the house, the one that’s a product of that mortgage that requires your attention every month. Regardless of whom you owe money to, though, debt consolidation can help. Rather than running around your place tidying up a bunch of little messes, debt consolidation brings everything together so you can attack the problem universally. However, while this process can be helpful, it can also hurt you in the long run if you are not careful. So be sure to do your homework and find out which consolidation process works best for you and understand what to expect when you consolidate your loans.

Avoiding scams or overpriced consolidations

First things first: Don’t be yourself in a worse position than you’re already in! Chances are, if you’re interested in debt consolidation, you’re already in a bit of trouble with debt or simply find yourself searching for a way out of debt. You don’t need to add to the problem by getting stuck in a situation where you end up paying more by consolidating than you would otherwise. So be careful about who you consolidate with. Always find a company that is certified. There are literally hundreds of online sites that will offer to “help” you consolidate your loans but very few who come through on the promise and actually help you. Ask friends who have gone through the process or find a credit counselor who can recommend the right one for you.

Stop spending and fix your credit

So, you want to know what to expect from the process? Well, first, you should know that you are consolidating your debts to get a better interest rate. That’s the key. Most credit card companies charge high interest rates that are hard to manage. The consolidator will help you to lower those interest rates and make them more manageable. Likely, you will be required to stop using credit as a source of funds. While some consolidators may let you use credit, most require you to stop using the credit cards during the course of the consolidation. This is for your own protection. After all, how can you eliminate debt if you are still amassing more debt in the process? You should be patient. Many consolidators will map out a plan for how long it will take you to pay off your debt. Overall, do the research before consolidating your debt and see which plan works best for you.

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Phone

Debt collectors are allowed to contact debtors by phone. Whether or not a debt collector can leave messages on answering machines varies from state to state. Federally, it is illegal for collectors to even inform third parties that you possess a debt, let alone the amount or to whom. Because of this, any messages they do leave on machines are usually limited to a fairly significant level. Exact laws vary, ranging from nothing specific beyond the federal limits, to banning answering messages entirely. Federally, there are no laws specifically stating a collector can or cannot leave messages on answering machines. Because of varying state laws and the chance of being heard by third parties, most legitimate debt collection agencies will not leave answering machine messages beyond a request to return the call.

In person.

This is the second lease recommended method of dealing with debt collectors, as well as the least preferred. Collectors can meet with debtors in person, should the situation call for it. For the collection agency, this is detrimental because it requires transportation, manpower, and time over most other methods. For a debtor, it is a problem because, like phone contact, it does not allow for any documentation of what was said or done. For these reasons, debt collectors rarely contact debtors in person.

Telegrams

Like in-person meetings, telegrams are rarely used for communication. They are now so far out of date that it is unheard of for someone to be contacted in this manner.

Fax

This is the closest to an “ideal” form of contact with a debt collector that is covered by the Fair Debt Collection Practices Act. It is faster than standard mail, and often than email, and provides both the debtor and the agency with documentation of what was said and done, to whom, and when.

Post cards

The federal Fair Debt Collection Practices Act prohibits debt collectors from contacting debtors by post card, due to the inability to prevent information from being spread to third parties.

Other methods

Some of the more modern methods of contact are not covered under the Fair Debt Collection Practices Act, leaving them up to states to legislate. These include voice mail, email, and instant messaging. Most states have legislated whether and how debtors can be contacted in relation to these methods. Even if a particular method is not legislated, however, any contact must still follow the FDCPA standards of behavior.

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Know the process.

Typically, collection agencies contact you because your name has been used to charge up a debt that was left unpaid for several months (or longer, if the payment period is longer). Generally, creditors wait several pay periods before resorting to collection agencies, although this varies depending on the debt and the locale—creditors in areas with short statutes of limitations generally go to collections and court faster than those in states with long statutes.

Know your rights.

Make sure you know both the federal Fair Debt Collection Practices Act and your own state laws regarding what rights you have. These include when and how you can and cannot be contacted, what that contact can and cannot include, required information you must receive, and investigating to ensure that your debt really is yours. If there is an argument over whether or not someone else charged a debt in your name, the collection agency is required to investigate the possibility.

Get information

Find out specific information. You are allowed—and in fact legally entitled—to ask as many questions as you want, as many times as you want, regarding your debts. Initial contact is often via pre-recorded phone messages, but once you do speak to a person, find out the names of the person to whom you are speaking (and every person to whom you speak in the future, should that person change), who claims the debt, the agency’s name, contact information for the agency, and how much they believe you owe them. Most of this information should be provided to you in a written statement within a few days of the initial call.

Assert your rights.

This is the extension that is why the first 3 steps are necessary. When you know your rights accurately, you are in a much better position to assert them. You have the right to ask them not to phone you, and to request a certain type of contact—fax, email, etc. The collector is not required to abide your particular type of preferred contact, but IS required to abide by your requests to NOT contact in a specific manner. You also have the right to tell a harassing agency not to contact you at all. They must abide by this, although they are also allowed 1 future contact to alert you to their intended proceedings.

Document everything.

This should be done with all financial information, particularly if the debt is contested in some way. This is also a good reason to avoid phone contact and use written, which provides an existing record of everything you’ve done. Legitimate agencies should have no problem dealing with you in this manner, assuming you respond to them in appropriate time. Keep a file of every document they sent you, everything you sent them, and notes regarding who did what when. Dating documents is also important. This is especially important in disputed debts, which can be resold to other agencies, and if you make a repayment agreement with the collector.

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Unsecured debts

Most debts fall under the category of “unsecured debts”, that is, debts where something was not put up as collateral that the creditor can take if the debt is not paid. The largest type of debt that usually falls into this category is credit card debt. Other unsecured debts include funerary costs, medical costs, and utility bills. All unsecured debts must be paid off before the estate is distributed to heirs.

Secured debts

The largest single debt payment most people have is usually a secured debt. Mortgages, home loans, car loans, and the like are all secured debts. These debts can be distributed without being paid off. In the case where this type of event happens, the debt does not disappear; it simply transfers to the heir. Thus, if you leave a $100,000 house to your children, but still owe $25,000 on the mortgage, the house will not be sold. It will be passed on to the children, but they will still owe the remaining $25,000 on the mortgage.

Debts exceeding assets

If a person dies with more debts than assets, the result is similar to what happens when a person declares bankruptcy without sufficient assets to cover the debts. All of the assets in the estate will be liquidated, sold off, and the resulting funds used to pay off the debtors. Any overage in the debts is simply forgiven; the deceased debtor’s heirs will not be held responsible for the dead person’s debts. The exception is if an heir has specifically signed on to pay off the debt, in which case it will be treated as the heir’s. If the debts equal or exceed a deceased person’s assets, no heirs will inherit anything, regardless of what may have been arranged beforehand.

Debts owed to deceased

Death does not eliminate debts owed to a person. If a person was owed a debt in life, that debt is still owed to the estate. The estate, and whoever responsible for handling it, is still entitled to take whatever actions the deceased creditor would have been entitled to. This can include contacting the debtor, turning the debt over to a collection agency, or taking legal action against the debtor. Any debts collected towards a deceased creditor is applied to the creditor’s estate, and then split according to whatever standards set for the estate. The exception to this case is if the decease specifically forgave the debt in his or her will or final documents. This functions similarly to granting someone or something a gift in a will, except that instead of giving them money or assets, you are forgiving a prior debt, in effect turning the prior debt into a gift.

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