Banking tips for teens build a solid foundation for financial literacy.

Why Teens Need Money Management Skills

The age of thirteen or fourteen may seem like a young age to introduce financial skills, but before you know it, your teen will be away from home, maybe leaving for college. You want them to be educated enough to make good financial decisions on their own.

Teaching money management skills can be overwhelming. Therefore, start teaching your young adult gradually. Introduce them to checking and saving accounts as well as banking online. Try setting them up with a financial planning sheet to promote good habits from the start.

How to Build Skills & Other Banking Tips for Teens

A debit card associated with your teen’s checking account makes transactions easier. Online banking allows your teen to check their account on a regular basis and track their spending. Your teen can do it right on their cell phone, which as we all know, they always have readily available. As a parent, if you are the co-signer on your teen’s joint account, you can set up texts or e-mail alerts for your teen, along with spending limits on debit cards if overspending is a concern. Your teenager should also know how to balance a checkbook, and when they write a check or go to the ATM that they remember to record it in the register as soon as possible. You also need to teach your teens that they cannot spend more than they have in their checking account. This is one of the fundamental banking tips for teens.

Skills That Keep On Giving

Make sure your teen is familiar with banking vocabulary such as a deposit slip, insufficient fund fees, overdraft fees, Electronic Funds Transfers (EFT), transfers. Show them how to use a mobile banking app to deposit a check. When you and your teen are choosing a banking institution, look for a bank with competitive programs such as free checking, no minimum balances, and free ATM in and out of network. You can also inquire about fee waivers if your teenager is a student. Also, check with the bank on requirements of bank accounts for teens under the age of 18. Make sure you choose a bank that is convenient, and be aware of the available number of ATM machines.  Consider a bank or credit union that has 24/7 customer support.

Reading a bank statement can be daunting even for adults. When your teen’s bank statement comes, sit down with them and show them how to read it. Get your teenager in the habit of saving a portion of what they earn. Money from a part-time job will add up over time. It will be the best advice they ever get. As their confidence with money increases, so will their responsibility. Getting comfortable with money is an important skill that can pay off through life, providing independence to responsible children.

If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today.

Guest Author:

Donna Conley is the Vice President and has been with ACCC since 1993. As Vice President, Ms. Conley assists the Chief Executive Officer with the day to day operations and assists with the strategic planning and growth of the organization.

Simple Habits That Make a Financial Difference

Open your mail daily (or at least weekly)

Opening the mail can be a tedious task, especially given your busy schedule, and mail can contain both good news (i.e. checks) and bad news (i.e. bills).

However, establishing a regular routine of quickly going through your mail (like right when you get home from work) can save you money and headaches. Also, unless it is absolutely clear that the item is junk, make sure and open it before you toss it in the recycle bin.

Review your credit card (and bank) statements

Those credit card and bank statements can be so long and boring. Besides, who wants to be reminded of money that you have spent?

It’s important to review the activity on your statements. Make sure you recognize each item. You might find a recurring charge for a streaming service that you had turned off. You might find an interest charge or a fee that shouldn’t be there, or a payment that didn’t get posted. Most importantly, if you see charges that you don’t recognize, it may be a warning that your identity or credit card information has been stolen. Staying up-to-date with your statements can minimize your risk of identity theft.

Set up a change jar

Throw your leftover pocket change in the jar at the end of the day. You’ll probably be surprised how much money will accumulate in the jar over the course of weeks. Also, if you need change to wash a car, pay a toll, or feed a parking meter, you know right where to get it. This is just one of many simple habits that make a financial difference in the long run. Change adds up!

Create a “Receipts” box

Put an empty box in the location where you store important documents. Toss your receipts, paid bills, statements, or other documents that you want to keep in that box. That way, if you are looking for a receipt or other document that you haven’t filed yet, you’ll know where it is. This is a great money management technique that can help make sure you stay on track financially.

It’s a good idea to start a new box each year and label the old one with the previous year if you’re going to keep it around. Be sure to shred any documents that contain personal information when you don’t need them anymore.

Make a grocery list

A grocery list helps keep you focused on what you’re there to buy and reduces the risk of impulse buys. Making a list also prevents buying redundant items when you check your list against your pantry and refrigerator. Grocery lists are a great tool to help consumers stay within budget, particularly while managing debt. We keep a central grocery list in the kitchen that everyone in the family edits. That helps to reduce the total number of trips that we make to the store and prevents two people from buying the same things.

Developing these simple habits in your daily routine can have a significant impact on your finances. Good habits have a way of accumulating and reinforcing each other while improving your financial condition over time. Hopefully you can implement some of these simple habits that make a financial difference into your daily life!

Author Bio: Joel Fink is a retired CPA and financial services executive living in Dallas, Texas. He enjoys writing articles that help real people with simple ideas to manage their money and improve their lives. The Dollar Stretcher.com.

If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today. 

How do you start teaching about money?

Before the Internet and different currency technologies, money was a bit simpler. In this day and age, technology is changing constantly, which can be both a blessing and a curse when it comes to teaching your kids. Because many kids have screen time with their parent’s phones, children may spend money without you knowing it! However, if they understand money has value, they might think twice before making those in-app purchases.

One of the oldest ways to teach children about money is to start giving them an allowance. An effective way to start this is to give them a dollar value for each chore they usually do. This will teach them that work gets rewarded, and money has to be earned. Maybe let them spend their first allowance on something they want. This example will give them the start of the building blocks for personal finance.

Start Teaching Savings Early

The next step in teaching your child about personal finance is to talk about savings. Children can be impulsive, and that will show as soon as they get their hands on any amount of money. It is essential to show them the benefits of saving versus spending, as you must try to have some safety net in life. This will not be an easy task, but your children deserve to get all the knowledge they need to be successful adults.

A simple way to start their good saving habits is to find an item, like a toy or a game, that they want. At this point, they should have a basic understanding of the value of money and that you need it to purchase things. Make sure the item is worth more than they would earn in a typical week from chores, then show them the difference in price mathematically.

The Internet Age Changes Things

Long gone are the days of paying for everything from a checkbook and then balancing it at the end of every month. Everything you do can be accessed at the tip of your fingers, and that can be advantageous. Having access to real-time financial information is an excellent way to keep you honest and grounded about your personal finance. Show your children how some of these apps and websites work but also explain how to write a check and balance a checkbook. Your children need to be exposed to real-life finances so they can understand and comprehend them better.

Teaching Children Personal Finance Is Up to You

In the end, it is your responsibility as a parent to ensure that your child gets the best education that they can. By taking control of your children’s financial learning, you can trust that they are going to learn responsible money management habits.

Start them learning about money as early as you see fit, as there is no limit as to how young they can be. Make an effort to include kids more in the financial talks, even if it is to make them feel included.

Author Bio: Erica Sunarjo is a digital nomad, writer, and localization specialist. Due to her background in psychology, she works with the medical-legal translations department ofThe Word Point. The articles she writes are directed towards making peoples’ lives better.

If you struggle to pay off debt, ACCC can help. Schedule a free credit counseling session with us today. 

Here’s what to know about secured vs unsecured credit cards.

Secured vs Unsecured Credit Cards

What is a secured credit card?

The biggest difference between a secured credit card and an unsecured credit card is that a secured credit card requires a security deposit.  You are more likely to get a secured credit card due to previous credit card debt. Your credit limit is usually, but not always equal to the size of your deposit.  The deposit is to ensure that the cardholders do not default on the consumer debt.

The issuer will only tap the deposit if the cardholders do not pay the bill.  Most secured credit cards have an annual fee without any extra benefits.  It is a powerful tool for rebuilding credit. A suggestion is to use it sparingly for only one or two small purchases per month. Remember to pay the balance in full before the due date to prevent interest charges. By implementing this strategy you will improve your debt solution.  Also, you will improve your credit to move to an unsecured credit card.  At this time you can close or convert your secured card to an unsecured credit card. This is a better option for your credit score because it doesn’t require you to open a new account.

What is an unsecured credit card?

An unsecured credit card does not require a security deposit.  It is intended for individuals with good or excellent credit and may have little to no other credit card debt. Many unsecured credit cards offer rewards programs, including cash back, miles and points.  Unsecured credit cards typically have lower interest rates.  An unsecured credit card is not secured with any collateral as a secured credit card is.

Customers typically qualify for unsecured credit cards based on their credit history, their financial strength, and their earnings potential.  If you default on payment from not managing your credit card debt, the credit card issuer can initiate collection efforts, including referring your account to a third party debt collector, or for serious default. Furthermore, the card issuer may take you to court or even garnishment of wages.

Not all cards are equal.  Be sure to read the fine print.

Take the time to shop around for both secured credit cards and unsecured credit cards.  Some cards are better than others. However, you need to be vigilant of hidden fees.  For unsecured credit cards be careful of teaser rates. This is when cards offer initial low rates that are appealing to people who carry a balance.  Some card issuers even carry 0% introductory offers.  Read the fine print to see how much the rate can rise to when the introductory period is over. Whether you pay on time with either a secured credit card or an unsecured credit card has a big impact on your FICO credit score.  Always monitor your credit card statements each month to ensure that the charges are legitimate and you are not being assessed any fees.

Read the fine print to see how much the rate can rise to when the introductory period is over.  Whether you pay on time with either a secured credit card or an unsecured credit card has a big impact on your FICO credit score.  Always monitor your credit card statements each month to ensure that the charges are legitimate.

If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today. 

Author Bio:

Donna Conley is the Vice President and has been with ACCC since 1993. As Vice President, Ms. Conley assists the Chief Executive Officer with the day to day operations and assists with the strategic planning and growth of the organization.

Extravagant Vacations

Who doesn’t love a trip to Disney World or a week on the beach? While vacations like these are memorable and a great recipe for a good time, they are also expensive. If you have multiple children, they can cost thousands of dollars once you factor in hotels, airfare, and other activities. You do not have to stop going on vacations, but in order to prevent high debt, it is crucial for families to create a vacation budget. They must know what they can afford and not spend a lot of money in the short term that they cannot handle in the long term.

 Too Many Extracurriculars for the Kids

Every parent wants the best for their children, but some of these investments into your kids’ futures have heavy price tags. Between sports equipment, band instruments, tutoring, theater productions, or whatever else your child may be involved in, it can cost hundreds of dollars every month. Instead of committing your child to everything, find out what they want to try that’s new every few months or so and only pay for one or two things at a time.

Pets

Pets can be a wonderful addition to the family, but they can also be very expensive to properly care for. The vet bills, food, medicine, day care, and other essentials can also add up to hundreds of dollars a year if you are not careful. If you cannot properly care for an animal financially without going into debt or struggling to take care of the rest of your family, it might be best to hold off on getting a pet.

Not Checking Credit Reports

To maintain better financial health, the heads of a household should regularly review the family credit reports. By doing this every year, you‘ll be able to fix any inaccuracies. These may include catching any mistakes made by your lenders and clearing up charges that should not appear on your report, which can improve your overall credit score. A higher credit score offers many advantages. It may allow you and your family access to things like lower interest rates for credit cards and mortgages.

 Not Maintaining a Budget

Perhaps one of the biggest and most common reasons families fall into debt is that they do not keep a proper budget. Food, clothes, school dues, extracurricular activities, vacations, and generally just paying the essential bills can be extremely expensive. Having a set budget, especially one with savings, is crucial to ensuring the family’s success. It’s also important to make sure to educate your kids about money management, so they learn these lessons too.

Plan for What Your Family Wants and Needs

We all want our families to be happy, healthy, and successful. The key to starting that process is to sit down and look at what you can and can’t afford. Be open with your significant other and your kids about what’s going on. Find ways to have fun and grow with each other that won’t break the bank!

Author Bio: Katie Tejada is a writer, editor, and former HR professional. She often covers the latest developments in HR, business communication, recruiting, finance, law, real estate and investing, but she also enjoys writing about events, travel, and home trends.

If you struggle to pay off debt, ACCC can help. Schedule a free credit counseling session with us today. 

Five Important Financial Conversations Newlyweds Should Have Before Getting Married

1. Assets and liabilities

It’s vital that you start off your marriage with an honest foundation. And one of the first conversations you should have is about your debts and assets. What are your debts? What’s your credit score? What’s your net worth? Sit down together and figure out your combined assets and liabilities. Because you don’t want any big surprises down the line.

2. Bank accounts

Will you have a joint bank account for expenses like rent/mortgage, utilities, and health care? Would you like separate accounts for personal expenses? Figuring this out now can help reduce any stress over expenses.

3. Short- and long-term goals

If your financial goals don’t align with your partner’s, this can create tension in the future. Discuss both short-term and long-term goals. What are your priorities? Do you want to pay down debt? Are you saving for a down payment on a house? Are you ready to start planning for retirement? If so, find a plan that works for both of you.

4. Investing

Achieving your financial goals may require investing, but you and your partner may have different strategies for reaching your objectives. For example, your partner is a more aggressive investor and willing to take more risks. If this is the case, you’ll have to compromise on investment tactics. This may involve working with a financial advisor.

5. Life insurance

Do newlyweds need life insurance? After all, you’re likely relatively young and focusing on more short-term goals like buying a house and paying down debts. The short answer is yes. Life insurance is an important safety net, even for newlyweds. It can help protect your finances, including paying final costs, paying off debts, and replacing income. You are building a life together, including financially, and should the worst happen, much of what you have built could be taken away. Get a few life insurance quotes online, and you’ll see that it is affordable for young couples. Not only does life insurance for newlyweds help protect you, but it also offers couples peace of mind—which is important for long-term wedded bliss.

If you are recently married, congratulations! May your life be filled with happiness and financial security. Therefore, make sure you expend as much energy, if not more, toward planning your life together as you did in planning your wedding, and that finances play a central role in these discussions. Also, talking about debts and assets, bank accounts, financial goals, investing, and life insurance will ensure that you are on the same page. Because this way it will help reduce any financial stress that might lie in the road ahead. HAve these financial conversations now so you are together in everything.

Author Bio:

Richard Reich is President of Intramark Insurance Services and has more than 25 years of experience in the own-occupation disability insurance and life insurance field. He has helped countless individuals and families get the coverage they need for peace of mind. You can learn more at http://www.lifeinsure.com.

If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today. 

Credit counseling takes time, because debt has to be analyzed.

How Long Does Credit Counseling Take?

When seeking credit counseling advice, a counseling session can take at least an hour or more. It all depends on your financial needs. A credit counselor will analyze your current financial situation, and supply the best debt solutions for managing your credit card debt. One option is a Debt Management Program. A credit counseling agency typically deals with unsecured debt. They do not handle any secured debt such as mortgages, car payments or utilities.

How Long Does a Debt Management Program Take?

During the intake process, the credit counselor will gather all of your unsecured credit card information. These include creditor names, account numbers, current balances, and whether your accounts are current. The credit counselor will prepare a budget for you and will analyze all of your current household expenses. This portion of the process will include an assessment of your ability to pay back your debt.

A Debt Management Program is designed to make workable payment options to assist with credit card debt. Debt Management Programs, in most cases, can reduce interest rates and monthly payments. These are determined by creditor guidelines that credit counseling agencies must follow when enrolling consumers into a DMP.

The length of a Debt Management Program depends on how much debt you have, but most are completed in five years or less. This can be a great option for relieving financial stress and becoming debt free. A DMP is not something that happens overnight, but it will give you peace of mind, and financial success.

Preparing for a Credit Counseling Session

The best way to prepare for your session to receive credit counseling advice is to gather all of your financial information ahead of time.  By preparing for your call, this will better assist your counselor during the intake process. At the end of the session, you will have a better handle on your personal financial situation and can then make an informed educated decision on the debt solutions that will work for you.

If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today. 

Author Bio:

Donna Conley is the Vice President and has been with ACCC since 1993. As Vice President, Ms. Conley assists the Chief Executive Officer with the day to day operations and assists with the strategic planning and growth of the organization.

What is A Promissory Note?

A promissory note is a written document officially recognizing a legal relationship between two parties – a lender and a borrower. Promissory notes create a legally binding promise with a mutual understanding regarding the borrowing and repayment of money.

A comprehensive and thorough promissory note should address six simple questions:

1. Who the parties are
2. How much the loan is for
3. How you will repay the debt
4. When the debt must be repaid by
5. What happens if there is a default in payment
6. Miscellaneous provisions

Promissory notes are invaluable legal tools to bind other individuals to an agreement for goods or money; they carry the full weight of the law and are legally binding on both parties. Use promissory notes in routine and straight-forward contractual relationships between parties to avoid costly legal expertise. Next time you are entering into an agreement for goods or money, turn that handshake and bar napkin into a legally enforceable promise with a promissory note.

But, how is this different from an IOU or a Loan Agreement?

Think of IOUs as your standard “bar top promise,” scrawled on a napkin, kissed with lipstick, and barely legible. IOUs are informal and flexible. However, they carry no legal weight in a court of law. IOUs are the least protective of all notes and agreements, while loan agreements carry the most weight and are legally enforceable. Loan agreements are used for complicated repayment arrangements offering legal recourse (foreclosure) for a lender, should a borrower default.

So you’re probably wondering where a promissory note fits in? It’s right in the middle. Promissory notes are legally binding, however, they fail to provide remedies and recourse for a non-defaulting party.

When to Use Promissory Notes

1. Installment Payment

When to Use One? Installment payments are commonly used when you are looking to purchase expensive items. Such items may include a new refrigerator, stove and other appliances.

Pros: When repaying the loan, payments are divided up into equal monthly payments (the installments), along with interest. It is discharged only after the principal balance has been repaid. Borrowers usually put up a “down payment,” or a fixed sum of money upfront, to reduce the amount of interest due. Installment payments allow for flexibility through gradual repayment of the debt or loan. This allows you to customize and adjust the repayment to your income.

Cons: Installment payments are usually subject to high-interest rates, increasing the sum of money you will have to repay. Lenders often disallow prepayment of loan balances, capping the amount you are able to pay back per month.

An installment payment would be useful for making a $150 monthly payment on a family car to get the kids to school everyday in. $50 of the payment goes towards the outstanding principal, while $100 goes towards the interest. Ultimately, $150 will be due on the maturity date (when it’s time to pay the entire amount).

2. Installment Payments with a Final Balloon Payment

When to Use One? In the case of mortgage loans, use balloon payment notes. Short-term borrowers typically use balloon payment notes because they favor borrowers who are short on cash at the start, but are expecting to refinance or pay off the loan in the future.

Pros: Dissimilar to traditional installment payments, balloon payments boast lower interest rates. The trade off? For a lower interest rate, the borrower repays the principal and interest in consecutive, equal installments. And, at the end of a specified period, the borrower has two options. They could “reset” the loan (sometimes at the expense of a higher interest rate), or pay off the remaining balance (the balloon).

Cons: Keep in mind that balloon payments can carry extra risks. Oftentimes, borrowers will take out a new loan in order to pay the balloon payment. Doing so is a gamble. You gamble that interest rates will stay the same or lower over the payment of the loan. In regards to assets, you are gambling that the asset will not depreciate and become worthless.

3. Due on a Specific Date

When to Use One? Due on specific date (DOSD) promissory notes are straight-forward and true to their name; they require the repayment of a loan or debt before a certain date. A good time to use DOSD promissory notes are for small amounts of money. For example, you could likely use a DOSD when you loan a friend $150 for the purchase of a new bicycle or minor car repairs.

Pros: With a DOSD, you don’t have to worry about a borrower defaulting on monthly payments, as there is a fixed, definite date of repayment for the loan and interest. Immediate legal action can be brought against borrowers by the lender.

Cons: A fixed date of repayment can create issues for borrowers who are insolvent and unable to repay the debt when the date comes. This can result in hassle and uncertainty when negotiating additional arrangements for repayment.

4. Due on Demand or Default

When to Use One? Use due on demand or default promissory notes between friends and family or other informal relationships. A due on demand or default promissory notes would be best suited small loans, such as one for your sister’s small business, or nephew’s first car.

Pros: They are a “pay when you can” type of note, with no concrete repayment date. This allows borrowers to make good on the loan when they are financially able. Flexible lending and repayment can allow you to skip traditional, drawn-out, lending processes, and both notes usually offer no or low interest rates.

Cons: Even strong foundations of trust are susceptible to abuse. Trusted friends and family may take longer than expected to repay the debt and may take advantage of your good nature. Only use this style of promissory notes where there is a strong foundation of trust between lender and borrower. This way, there is no hurry for repayment.

Here are a few common situations where a borrower default occurs:

1. Borrower fails to make any payment or pay any obligation when due under the note
2. The borrower becomes insolvent
3. The borrower files for voluntary bankruptcy petition or has an involuntary petition filed against them
4. Borrower makes a general assignment for the benefit of creditors
5. Lender or holder discovers misrepresentation was made to the lender by the borrower or on the borrower’s behalf, and absent misrepresentation, lender would not have entered into the transaction.

Familiarizing yourself with four types of promissory notes and when to use them has many benefits. First off, promissory notes can save you from loss of friendship and familial trust. They can also save from expensive legal fees and future litigation over recovering property and debt collection. So, memorialize your next money loaning agreement with a promissory note. Hopefully, this way your Uncle Donny doesn’t end up in a wheelchair with two broken legs after failing to pay off his bookie.

If you have trouble paying off debt, call ACCC at 800-769-3571 for free credit counseling. 

Guest Author:

Rachel Ryan a legal writer for LegalTemplates.net. Rachel specializes in providing professional, diverse and creative articles, equipping individuals with the perfect tools for a variety of legal issues. When she’s not writing awe-inspiring content, she can be found trying to become the next Martha Stewart.

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A year and a half on, coronavirus (COVID-19) is still having a significant impact on how we live and work. Many people have faced a cut in pay or job loss, making it difficult to pay off student debts, mortgages, credit card bills, and other obligations.

Dealing with debt is never a pleasant experience, but the backdrop of a global pandemic may seem to tip the scales in your favor.

Don’t give up hope if you’ve found yourself in a tight place as a result of the COVID-19 crisis, like so many other Americans. In reality, after the pandemic, now is the time to take steps, even in difficult circumstances, to effectively and proactively manage debt and credit. It will give you a better long-term financial picture and a stronger position when things are improving. You can participate in a formal debt management program through a nonprofit credit counseling agency, or you can create your own debt repayment strategy!

Here are the options that may help you manage debt and credit in the post-COVID world:

Get help with unsecured debts first

In some ways, we see the situation improving. Businesses are reopening and employees are going back to the offices for in-person work. But, many people are still suffering from unemployment and reduced income. For these consumers, credit card companies, such as Capital One, Chase, Citi, U.S. Bank, and Wells Fargo have issued statements on their websites promising various types of aid. They’ve offered help such as credit line increment, collection forbearance, and skipped payments. Lenders are providing payment extensions and other opportunities to customers who can’t make their car payments.

If you’re struggling to make payments on a personal loan or a small business loan, different banks, credit unions, and other financial institutions are giving loan extensions and deferred payment options.

If you need cash, many lenders and the US Small Business Administration (SBA) are offering loans to coronavirus victims.

Avoid scams

Scammers try to take advantage of people who are in a difficult financial situation. COVID-19 is no different. But how can you identify these scams?

It’s almost certainly a scam if you find the program or service “too good to be true.”

You should understand what type of service the company is giving you:

• Credit counseling
• A consolidation loan
• Debt settlement

Stay away from any for-profit debt relief or settlement company that:

• Asks for a fee or any sort of charges before they settle your debts. Unless it’s a non-profit credit counseling program, upfront payments are a huge red flag for debt relief programs.
• Claims to provide help in taking advantage of “new government schemes.”
• Makes assurances they will settle your debt for less than what you owe
• Does not inform you of the consequences of enrolling in the program.
• Asks for your personal financial information without providing free information on their services

Also, be aware of “bait and switch” sales tactics, such as a “loan program” that needs you to first join in a credit repair or debt settlement program.

Reconnect with your lenders

Several banks and lenders developed COVID-related relief plans to help borrowers financially devastated by the pandemic. They offered deferred payments, no late penalties, and guaranteed that short-term solutions would not be reported to credit bureaus.

Most of the relief programs, however, only lasted a few months. As things are getting back to normal slowly, check in with your lenders and creditors to make sure you’re on the right track.

Do you continue your payments on the same schedule as before the pandemic? Did you pay interest on the money you are paying later?

Make sure you understand what’s going on with your debt and credit in the long run, and don’t expect everything will be “business as usual” after the pandemic.

Check your credit report

It’s recommended to check your credit report once a year. This is especially crucial post-pandemic. If you’ve had financial difficulties that have resulted in missed payments or increased debt, you want to know how your credit has been impacted. You also need to make sure that all the information is correct, and that there are no signs of identity theft on your credit report. Using annualcreditreport.com, you can request a copy of your credit report from each of the three credit bureaus. Everyone is entitled to a free copy of their credit report from each bureau once a year. So avoid any company charging a fee for access to your credit information.

Double-check that your report accurately reflects your financial situation.

For example, if you negotiated with your creditor for a lower payment or a deferred payment plan, make sure your credit report doesn’t show that you were late or behind on payments.

Similarly, if you were current on your mortgage payments before requesting forbearance during the COVID crisis, your report should state that you were not behind on your payments prior to the forbearance.

Develop a credit repair strategy

You’re not alone if you piled up a lot of debt or skipped payments during the economic crisis resulting from the pandemic. However, now that the situation is improving, the sooner you take steps to improve your credit score, the better.

Create a debt-payoff strategy, starting with any accounts that are past due. Make on-time payments on any accounts that require immediate attention to stay current and avoid fines or further damage to your credit score. When your accounts are up to date, look at your credit utilization ratio, and check how much of your available credit you’re utilizing.

People should keep their debt to less than 30% of their available credit, according to FICO. If your credit card has a 10,000 limit, for example, you should attempt to keep your debt below $3,000. This applies to both your credit card debt and your overall debt.

Paying down your debt will help you improve your credit score. The credit bureaus recommend you should not cancel unused credit cards at this time because they’ll assist you in maintaining a high level of available credit while you pay down your debt.

Finally, come up with an effective strategy for reducing your debt. Prioritize paying off debt with the highest interest rate first, or, if possible, try consolidating your debt onto a lower-interest card.

If you find that you are having trouble coming up with a debt repayment strategy on your own, you may want to contact a nonprofit credit counseling agency. A certified credit counselor will help you determine the best option moving forward, which may include enrolling in a debt management plan.

Make a budget for the post-COVID situation

After the pandemic, everyday life is getting restored slowly. You can look forward to a brighter financial future once you start going back to the office or your company is able to re-opening its business.

However, make sure you prepare a budget that accounts for any recent changes in daily household costs and monthly income post-COVID.

Analyze your monthly spending, make a budget, and cut back on your expenses to help your debt repayment strategy. Also, you can redirect the money you would have spent on entertainment or travel to debt repayment or savings.

Creating an emergency savings cushion, if possible, can also keep you from having to rely on high-interest borrowing in the future if you face another financial hardship. Most financial experts recommend saving three to six months’ worth of spending in a high-interest savings account.

Tara Falcone, Chartered Financial Analyst (CFA), CFP, and Founder of ReisUP LLC, suggested, “This pandemic has highlighted the need for all of us to be a lot more proactive when it comes to protecting our financial health. Both while we’re alive and in the event of our, or one of our family members’ unexpected passing. To protect your finances from unexpected events like lockdowns and job loss, you need to prioritize building an adequate emergency fund.”

Finally, keep an eye on your credit during the recovery process. To ensure that the information in your credit report remains accurate, you can sign up for a credit monitoring service.

Prepare strategies to control spending

There are several ways to help you keep track of your spending. Here are a few important ones to pay attention to:

• Avoid impulses – Try not to compare yourself to others, especially on social media, since this can lead to overspending due to a fear of missing out.
• Shop locally – Shopping locally and in person can help you be more aware of your spending, especially if you set a budget ahead of time.
• Think and buy – Before going shopping, consider giving yourself one or two days to think about items you truly desire.
• Invest your money – You’ll miss out on some short-term pleasure, but you’ll reap significant long-term benefits. Overspending due to impulse buying can be fatal for your finances and your monthly budget.
• Stick to your budget – In the end, sticking to your budget will enable you to determine where and when you should spend your money.

Zuzana Brochu, CFP, Certified Business Exit Consultant (CBEC) and vice president of financial planning strategy at People’s United Advisors explained, “There is a two-fold answer to this question because, generally speaking, people fall into one of two categories at this point in the pandemic: those with negative cash flows as compared to a year ago, and those with positive cash flows.”

“For many, the pandemic has meant furloughs, job losses, and associated economic hardship. For this group, the most important thing to do is take stock of where they are financially, particularly from a cash flow standpoint. If their income continues to be negatively impacted, addressing their budget needs to be a priority. I realize that is not a popular thing to say, but this is a time to eliminate as much discretionary spending as possible.”

Consult an attorney

In some cases, you may want to seek legal assistance. For instance, you may require the services of an attorney if:

• A creditor has filed a lawsuit against you.
• You have assets you want to safeguard.
• If you rely on Social Security or another form of government assistance. An attorney may protect you from debt collection.

You can find an experienced attorney in a variety of ways. It’s a good idea to check with the state bar organization before hiring an attorney to be sure he or she is in good standing.

You can check if the attorney has a disciplinary record by searching his or her name on the state bar website, where the attorney is licensed, or by contacting the state bar association.

Some attorneys provide free or discounted services. If you meet specific criteria, there may be legal aid offices or legal clinics in your area that will provide services for free.

Author Bio:

Lyle Solomon has considerable litigation experience as well as substantial hands-on knowledge and expertise in legal analysis and writing. Since 2003, he has been a member of the State Bar of California. In 1998, he graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, and now serves as a principal attorney for the Oak View Law Group in California.

If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today. 

At first, I wasn’t sure what made up such a large amount of debt. We didn’t have any big items like a boat or a fancy car to show off. We fell prey to the death by a thousand cuts mentality. Because we were making only the minimum payments, we were suffering the consequences.

When we were out of cash and wanted something, we used a credit card. We rinsed and repeated these steps for over ten years. One credit card turned in five, and we slowly and steadily sank deeper into debt.

We used our credit cards for things like eating out, gifts, vacations, and the unexpected things life threw at us, like an urgent car repair.

As long as we could manage next month’s minimum payment, we continued to use credit cards to spend beyond our means. That was our financial plan, as long as we could handle the minimum amount, we were okay.

We figured that since everyone else has debt too, we were normal. That “follow the herd” thinking was stressful, and we feared unexpected life events and emergencies, but we continued to march along because we didn’t know any better, and didn’t want to learn any different.

Our years of overspending came to a grinding halt in the summer of 2010. My wife and I were planning a summer vacation for the family, and without any cash savings, we turned to our five credit cards to finance the trip. Little did we know, because we didn’t pay attention, that each of the credit cards was close to the limit.

I figured I would just call the credit companies and get an increase on our credit line. After five calls and receiving five “no” answers, we hit rock bottom moment with our money. (Or as I like to think of it now, as our “a-ha” moment!) Our debt-to-income ratio had ballooned, and the credit companies viewed us as a big red flag.

We were backed into a corner, and with the fear of not being able to provide a vacation for my wife and three kids stuck in the back of the mind, I chose to fight my way out. I knew we made too much money to be in this situation, so to get out of it, we needed a plan.

I did some research online looking for a plan to get out of debt that no one ever taught me growing up or when I was in college. Additionally, I found several resources, including blogs and a popular personal finance guru named Dave Ramsey.

I read as much personal finance information as I could. With my newfound knowledge, I began to build a plan for our money. I reviewed the initial plan with my wife, and we started working together. We built our first budget and agreed on a plan to pay off our debt. We had ups and downs along the way, but overall after just a few months in, we felt money stress lifted from our lives. We became debt free in 2015, after 50 months.

Six months after becoming debt-free, I lost my job from a company I was with for over 20 years. This would have sent me into panic mode if we still had credit card debt and no plan for our money. It merely became a speed bump in the overall scheme of things.

Now with close to ten years under our belts of actively managing our money, here are some of the things I’ve learned about dumping debt.

DON’T FOLLOW THE HERD

“Herd mentality” describes how people can be influenced by their peers to adopt certain behaviors on a mostly emotional, rather than rational basis. The herd mentality is one you need to break ASAP to be successful in paying off debt.

Just because everyone else has debt doesn’t mean you have to too. Your parents, friends, and co-‘workers’ ways of doing things ‘don’t have to be yours. You need to think and act for yourself without following someone ‘else’s script.

Defining your path, and what’s right and wrong for your family should be decided by what’s best for you, given your current financial situation.

EDUCATE YOURSELF or ASK FOR HELP

Any time you are trying to master a new subject or skill, increasing your knowledge on the topic is a must, including when you are working to pay off debt.

There are many resources you can tap to increase your financial IQ. Consider these:

• Blogs – You can read a personal finance blog like Debt Discipline
• Books – There are many books on personal finance. Two that I started with are The Total Money Makeover by Dave Ramsey and The Millionaire Next Door by Thomas J. Stanley.
• Podcasts – There are plenty of podcasts, too, if audio is your preferred medium. It’s great to listen while commuting or doing work around the home. Planet Money and Freakonomics Radio are two good choices to start with.

If any of the above resources don’t get you excited and you need a more personal approach, find someone you can help you. You might enlist a friend who is successful with their money to help you understand how they have done so. You could speak to a credit counselor at a nonprofit credit counseling agency to help dig into your numbers and assess your overall financial situation to figure out your options to pay off debt.

CALCULATE HOW MUCH DEBT YOU OWE

A core step in paying off debt is to know your debt numbers. Grab all of your statements and begin to write down each debt type. Debt comes in all shapes and sizes, so be sure to include mortgages, student loans, and credit card payments.

Be sure to include the total amount due for each debt, including interest rate, minimum payment, and due date.

Take this exercise a step further to include all spending in your notes, like utilities, personal care, subscription services, etc., as well as all sources of income. Collecting all of your income and expenses for a month’s time frame will give you an excellent basis for a budget.

Getting to know your debt and an overall financial picture will help you prepare to pay off debt fast. Another great way to understand how your money is being spent is to track all expenses for one to three months. This exercise will help identify any money leaks or habit spending that you may be doing and not even realize it.

Finally, once you have all of the information jotted down, it best to transfer to a Google sheet or app to help keep track of your progress.

STOP ADDING NEW DEBT

The best time to pay off debt is today. Well, actually it would be yesterday, but here we are. To avoid increasing your debt total, you need to stop accumulating new debt immediately.

To reverse the trend, you need to avoid new debt. A tool in doing this is some type of cash saving, often called an emergency fund. Having cash savings as little as $1000 will prevent you from taking on new debt when the unexpected happens. Ideally, you should have three to six months’ worth of expenses saved in your emergency fund.

ADOPT A PAY OFF DEBT STRATEGY

Now that you have our debt numbers, you’ve prepared for the change, increased your knowledge on the topic, and have a motivating reason to move forward, let’s review some additional tools to pay off debt.

PAY OFF DEBT CALCULATORS

Many financial apps and calculators are available for free online. These tools are great to use to help calculate how long it will take you to pay off debt.

The also gives you the ability to play “what if” scenarios quickly. What if you had a lower interest rate, or what if you had more money to apply to your debt payment?

NEGOTIATE

When you are trying to pay off debt, let your creditors know. Some will be willing to work with you. You can call credit card companies and ask for a reduced interest rate. If you have a lump sum bill like a medical bill, you can call and try to work out a realistic payment plan. Even better, if you have the available cash, you can ask for a reduced amount if you pay it in full.

Creditors want to know they will be paid. Certainly, if you are delinquent on the account, opening a line of communication with them may not be a bad thing. Make sure you get names when you call and always ask for confirmation to be sent in writing of any rate reductions. This way, you have a record of it.

The worst you can receive is a “no,” and you can call back at another time and speak with someone else or escalate to a supervisor or manager.

DEBT SNOWBALL

The debt snowball is an accelerated debt payoff strategy. It’s called the snowball because, like a snowball rolling downhill, it begins to pick up momentum.

Here are the nuts and bolts of the debt snowball in five steps:

1. List all debts smallest to largest.
2. Make minimum payments on each of your debts every month.
3. Target your smallest debt, and apply as much money as you can above the minimum payment each month.
4. Once the smallest debt from step three has been paid in full, roll its complete payment to your next smallest debt.
5. Repeat step four until you are debt-free.

The fact that you are targeting your smallest debt first helps build the momentum in your debt repayment plan, just like that snowball rolling downhill. Having a win each time you pay off debt helps sustain momentum.

DEBT AVALANCHE

The second method is the debt avalanche is another accelerated debt payoff strategy. It’s called the avalanche because it saves you the most money on interest.

Here are the nuts and bolts of the debt avalanche in five steps:

1. List all debts largest interest rate to the smallest.
2. Make minimum payments on each of your debts every month.
3. Target your largest interest debt, and apply as much money as you can above the minimum payment each month.
4. Once the largest interest debt from step three has been paid in full, roll its complete payment to your next largest interest debt.
5. Repeat step four until you are debt-free.

To best understand which, if the snowball or avalanche payoff method might be right for you, leverage the pay off debt calculator mentioned above to test out some “what if” scenarios to conclude what works best for you.

These are the best tips I can offer from my own experience paying off six-figure of debt. Keep in mind, they call it personal finance for a reason. Find and apply the information that will work best for your unique situation. Good luck!

Bio: Brian is a Dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013 at Debt Discipline, Brian and his family have successfully paid off over $100K worth of consumer debt. Now that Brian is debt-free, his mission is to help his three children prepare for their financial lives and educate others to achieved financial success.

If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today.