Getting out of small consumer debt – Some ways how you can do so

The following is a guest post from Martha Jackson, a contributing financial writer working for debtconsolidationcare.com. Since I myself have a student loan this article from Martha is about getting out of small consumer debt.

Consumer debt is the debt that results from any money owed due to buying goods or items for personal use. This debt usually arises from credit cards, installment loans and other kinds of financing. They may take up a huge part of your income every month. You can get out of debt problems if you want to enjoy a debt free life.

6 Ways to get out of small consumer debt

Read on to know about the 6 ways how you can get out of small consumer debt.

  1. Purchase goods with cash – You should try to purchase goods with cash only. Skip the idea of using credit cards since this will lead to increase in debt problems. It is advisable that you need not carry credit cards with you when you go out to buy something. Keep in mind that credit cards should be used only to meet your necessities.
  2. Make more than minimum payment – You can reduce your credit card debt by making more than the minimum payment. Start with small payment and then try to double your minimum balance to eliminate the credit card bills. As your income increases with time, you should make more than the minimum payments on your credit card dues so as to get rid of them soon. You may use fund from the employment bonuses or income tax returns to come out of consumer debt.
  3. Request for a decrease in interest rate – You can negotiate with your creditors and request for decreasing the interest rate on your credit card dues. The creditors will assess your credit score at first and then find out if you can qualify for a better interest rate. Thus, the debt payments will become easier for you.
  4. Look into your personal savings – Managing your money wisely means you will never touch your personal savings at any cost. However, if you are handling high consumer debt and high rate of interest, you may use your savings to wipe away your credit card dues. Once you get rid of credit card bills, you will be able to enjoy being debt free.
  5. Try to make some sacrifices – You may assess your monthly expenditures and try to cut down the unnecessary expenses to as much as possible. Go through the credit card statements very carefully and calculate how much money you can spend on entertainment, shopping and dining out. Make use of the extra money to pay off your credit card dues.
  6. Suitable ways to boost your monthly income – If you are finding it difficult to pay down your consumer debt with your monthly income, you may look for suitable ways to improve your earning capacity. Take up some part-time jobs that you can do during your leisure hours and boost your monthly income. Earning extra dollars will enable you to pay down the credit card debts with ease.

By following the above ways, you will be able to get out of consumer debt soon.

Planning for Big Purchases

As you may know from my earlier articles I am a college student and I was talking about the cost of books in the last post. I have since bought the last text book only to receive my car insurance bill in the mail. Which had me thinking on how I should purchase costly items in the future. Which I consider anything over $150 a costly purchase cause I am paid $500 every month.

Currently when I make a big purchase I look at all my accounts, even my business ones. Then I decide if it’s really worth the cost. Which in most cases I end up paying myself extra to cover the price. Making me wished I didn’t do that or that I would pay myself more. Each time I will get the thought of just being like everyone else and using only what I have personally, only to keep on doing this.

So where I want to be is a point where I have enough money in my (personal) account to cover the purchases I know I will be making. One purchase I know is coming up soon is Christmas gifts, even though there’s still another three months I know now I need to make these changes.

  • Keep to the budget, keep to the budget, keep to the budget – I cannot express how lazy I’ve gotten on budgeting. I used to set one each month but here lately I haven’t set down and actually created one.
  • Have a minimum balance of $100 in my account before I pay myself - I used to have this, until recently. Now by the time I’ve paid myself it seams like half of it is gone since I will delay filling up my tank (~$50/$60) along with funding my E. Fund and other expenses I transfer out. (sometimes $65, other times $25). Which I’m lucky if I have even $20 in my account before payday.
  • Set aside money for fun/gifts - This will be new because I haven’t ever set aside money for gifts. But I have had fun money ($15/mo) but I haven’t had a set amount in months so it back fires now since I no longer track it. So when I see an object I want I just check my accounts like I said above and buy it, without thinking if I have any bills or transfers coming up.
  • Increase my efforts of paying off my Student Loan - This doesn’t fit here but I can’t help but think about it when I see how much interest I have accrued in 2012 that I have yet to pay back. It’s in the $200 range right now, and the last thing I would want is for it to be capitalized.

So these are the things I need to start doing and change to better be ready for big purchases, with a few goals mixed in. I am going to start working extra on projects I subcontract on and divide the differences between the goals I have listed. I figure that having an extra $50 here or $25 there that I can throw at any of the goals will be a start.

Making Excuses to Cutting Expenses

I am not sure about yourself but I know that I invent all kinds of excuses instead of taking care of the tasks at hand. One of those tasks is looking at my expenses and seeing which ones to cut.

Before my income went up I would often keep a spreadsheet printed out that I would fill out every time I bought something. I also used to keep cash in envelopes. Well as time went on I stopped using envelops and spreadsheets. Now when I record expenses I just put it into the computer and make sure money is there.

Eating out is one of those expenses I know I have to cut, but I have used excuses like not enough time or no point in avoiding it. I used to use cash and when the cash was gone I would stop spending. But with a debit card it is now easier to over spend then with cash. I also tried to use one account just for eating out, yet when it’s empty I end up just using my other accounts.

There are two options I know of to do

1. Continue on as is This is the easiest and most simplistic. I can keep my own laziness up and not curb the expenses.

2. Try to use cash one month and when it is gone it’s gone this is what I should do, but each time I run into the issue of how much is enough?

I think I’ll try #2, But I do know that at one point $25/mo would be plenty.
But lately I have set $50 and its gone in a week or two. Yet I do know I do not want to go over $100/mo. I will give $100/mo a try and see how it goes. For this weekend I have  $20 in cash, lets see how far I get with it.

What is your suggesting? Just leave a comment and let me know.

Make sure to stay organized

I hope everyone has had a good weekend, I spent a good part of mine searching for documents. I eventually found them right on my desk after shuffling them in with other papers.

One thing that has helped me a bit on my path is to stay organized. I remember when I was younger and I had a savings account how I would loose the statements. I would be in a panic much like I was this weekend. Frantically searching for the paper until after midnight.

What being organized to me means:

  • Have a “to file” box. Right when I walk in my door I have a box I put all my mail, receipts, paperwork, etc. It all ends up there. Once every few days I will go through this pile and sort it and one by one record and file away as needed. Although I do on occasion forget to place a receipt there and then I forget what I spent it on.
  • Have a spot for everything. I have an old UPS box that I keep all my old statement in, as soon as I reconcile my checkbook I place it in this box ASAP. To many times have I forgotten only to have the statement reprinted since I lost it. I also have a file cabinet for my business and I keep everything of important, from letters to permits and everything else you can imagine.
  • Don’t just leave “stuff” out. This is exactly what I did. When I did the article the other day for how much I’ve made thus far I left it on my desk and worked on a paper and it was mixed in with those paper. So when I went to search for it when I was doing book work I couldn’t find it.
  • Use a calendar or reminder system. I can not speak enough good words for Google Calendar. I have it setup to text me a few days in advanced and the morning of all appointments. Before I would use a paper, but it would get lost or torn.
  • Don’t carry your documents around loosely. I have someone I do work for that does this. Instead of having a nice spot to place it, they carry it around with them. When they go home, go out of state, etc. it’s there with them. As you can imagine they lost a few items. Before I got a clip board and a bag to carry around I would loose paper and lucky it wasn’t anything major, but the other person would loose receipts and the likes.

These are just a few of the numerous ways to help keep organized. I invite you to share your method? Is it the simple Shoe Box or do you have an elaborate file system?

Is it okay to play the lottery?

Here is one issue I see regularly on various Personal Finance sites. Is it considered okay to play the lottery? My stance on the issue is it is alright, but in moderation. Below I listed the various Pros and Cons and then I give my argument below.

Pros

  • So long as it’s money you don’t need and you only play every so often no harm should be done.
  • There can be an Entertainment value thinking of what if I win.
  • Several states use Lottery winnings to fund education.
  • It can be a social event like in an office pool and can lighten the mood.

Cons

  • You can have a gambling problem.
  • If you overspend you could end up in debt.
  • Is viewed as a “tax” on the low income.
  • Several views it as a way out of poverty and/or a way to fund retirement.

I’m sure the list could go on, but those are the main point from several sites that I have read. I do believe it’s okay so long as it’s what several other Personal Finance sites and myself call “fun” money. I will have cash on occasion to buy small items such as drinks and snacks. If I was to buy a lottery ticket it would just mean one less coke to buy.

Also, a part of my college cost are paid via a scholarship fund that is funded in part from the state’s lottery. Plus I have over heard several people doing “what ifs” such as “If I won the lottery I would by a new car” and would get all excited and would have enjoyment from the thrills of the possibility, however slim it may be.

Yet at the same time we’ve all seen on the news cases of winners loosing it all or of several people spending insane amounts on the lottery in hopes of winning. In cases like this or when it’s viewed as a means to get out of poverty, then one should not play. For as they say in the TV ads, “Remember, it’s just a game.”

Goals derailment, what if

Even though I set money goals earlier this week, if I wasn’t to meet them I wouldn’t get to upset. I even expect a few to not be achieved this year. All it would mean is to try harder. Case in point, on debt I have been trying to not use my credit card, well I used it today at Subway.

The point of goals isn’t to set in stone events that must happen. Rather it is what I would like to happen. One goal I made was to have $20,000 in gross income from my business and after doing my quarterly Sales Tax return I can say I’m on progress. I was at the $4,500 mark which isn’t half bad in my opinion. It means I must try to beat that the next three quarters, but more on that later on in April.

Some goals I set for myself as a person I end up rolling over into a new year. Take the goal  of loosing weight, which is also related to spending less on junk food. I have had this goal on my plate for a few years now. Yet I will stick to the goal for a few days then I go talk myself out of it. I will say I don’t have the time and/or energy to and will slowly stop.

This is one area I need to change. I should start to care about my goals and not push them off. I need to hold myself more accountable and reward myself for meeting goals. The Subway today was a reward for progress toward the weight loss goal. I went on several small walks, ate fewer snacks, and drank less Mountain Dew. This is a personal weakness, I used to carry cash and would spend it all on Mountain Dew, leading me to stop using cash. As part of starting Staying out of Debt I will start using cash again, slowly.

Time will only tell if changing how I view goals will help. I am only a human with weakness, but if I am successful I will come out stronger and less in debt. I would like to hear from you what you do to stay on track. Just leave a comment below.