debt management

January 21, 2006 6:49 PM

Debt management. I'm considering seeking debt counseling but I'm affraid that it might be scammy. I did fairly well as a single guy with a full time job, but now I have a family, a house and seemingly insurmountable bills.

I'm not looking for a bankruptcy or consolidation. I just need to learn how to get my stuff together so that we can quit losing sleep over it.

posted by snsranch to work & money (16 comments total)

If you have good credit, you might talk to your bank or a credit union about getting a loan. You can use it to pay off bills and credit card debts, and then you have only one payment a month to worry about in place of them, and usually it will be lower- and credit unions generally have better interest rates. Though this might be what you consider consolidation and not what you're looking for.

I have never sought debt counseling myself, but I know some people who have, and there are legitimate firms out there who can help you get on track to managing your finances. I am pretty sure "we can fix your credit for $99" places are scams, but real debt counselors, to my knowledge are not.
posted by Meredith at 7:16 PM on January 21, 2006

Google shows that there is a non-profit in San Diego called < a href="http://www.cccssdic.org/" ?consumer credit counselling services/a>.

I think it's great that you have the courage to ask for help. Far too many people choose to ignore what's going on and they're the ones who end up over their head.

Your financial institution may be able to offer your a loan so that you can pay off higher interest rate loans and credit cards, as Meredith mentioned. However, this depends on your credit rating and the interest rates you currently face.

I could provide some other tips for better managing your money, but I don't want to threadjack. It sounds like the non-profit above may be able to help you all this in a confidential setting.
posted by acoutu at 7:43 PM on January 21, 2006

Sorry about that link. I really should not type with a toddler at my feet. Link is here.
posted by acoutu at 7:44 PM on January 21, 2006

I would call each of your credit card companies and approach the call from the point of view that you are calling to cancel your account unless they can lower the rate. By that simple switch in emphasis, I bet you you can get a drop, because the companies then seem to approach it from a perspective of "I need to prevent us from losing this business" and enter it in a more negotiating state of mind. I lucked out, and managed to get DiscoverCard to drop my rate a whole 9%, if you can believe that.

Any overdue bills -— if you will have to pay that out of your own money, I suggest you contact each of the creditors and essentially propose a payment plan that you can keep to. Say to PowerCo and PhoneCo, "Listen, I owe you $125. I am dealing with several large bills due to some bad personal circumstances. I can put a check for $30 in the mail to you from my December 15 check, $65 from my January 15 check", etc. Essentially, call them with a preplanned payment schedule. That level of preparation will convey to these CSRs that you are serious about paying your balance, and often, that will make a difference.

One conceptual thing I suggest you do is tally up all of the finance charges on all of the bills, and realize that this is how much your outstanding debt is "costing" you each month. Let's say you have five cards, and the finance charges are $30, $50, $65, and $15. Maintaining these credit cards is costing you $160 a month and over $1,900 a year — money that could go towards whatever important thing you'd prefer it to go to in your life (savings, a new TV or computer, your child's college fund, whatever). It really makes a conceptual difference when you realize that you're essentially spending a large portion of money to have the right to keep paying those minimum balances.

There used to be a fantastic program called Debt Minder, by iThink Solutions, which allowed you to work out a very detailed debt repayment plan. The author unfortunately seems to have disappeared, and his site now redirects to a spammy sort of MasterCard "Debit Freedom" website, ironically enough. If you can find a copy anywhere, that's the way to go — or see if you can have Quicken do it, or something else. Or try this debt reduction calculator, which is the best I've seen on a website.

Also, I have an Excel spreadsheet which I've used to handle my per-paycheck budget for years. It's served me well, and a few friends who I've passed it along to have spoken well of it as well. I'd be happy to e-mail you a copy (scrubbed of my own data, of course) — again, shoot me a line if you'd like a copy.
posted by WCityMike at 8:04 PM on January 21, 2006

Also, consider taking a full-on personal finance course. Hubby and I took an evening class at Mesa, taught by an absolutely incredible woman. Homework was minimal, and limited to actually doing stuff with your own money. It covered a variety of topics, from budgeting to buying a home to getting the most out of your insurance without being screwed over. Priceless. Really. E-mail me for more info if you like; the teacher comes highly recommended. Anything you learn here or from a debt counselor will barely scratch the surface.
posted by moira at 8:09 PM on January 21, 2006

Previous AskMefis:
http://ask.metafilter.com/mefi/22299">
http://ask.metafilter.com/mefi/22299

http://ask.metafilter.com/mefi/22726

http://ask.metafilter.com/mefi/15274

http://ask.metafilter.com/mefi/23220

no offense, but there are even more! Credit counseling / debt management comes up fairly often here.

My recommendation: Ignore Dave Ramsey's politics (they are reprehensible) and take his hard advice about getting out of debt. http://www.daveramsey.com/ and http://www.mytotalmoneymakeover.com/

If your parents are still around, and you can swallow your pride, ask for help. You don't have to do this alone. I'm not saying ask them to bail you out... just ask for advice.
posted by bobot at 8:09 PM on January 21, 2006

sorry about link formatting problems
posted by bobot at 8:10 PM on January 21, 2006

Ah, and taking care of debt was covered in lovely, wonderful detail. Our anxiety level over our finances has dropped considerably.
posted by moira at 8:12 PM on January 21, 2006

I would advise against non profit agencies. They are the scammers. They have to pay the bills somehow. usually they are owned by a loan shark company and the consoler just happens to secure you a loan through them with a low intro offer and high rates later. They are only going to try to sell you on another loan.
posted by arruns at 9:16 PM on January 21, 2006

Talk to your local non-profit Consumer Credit Counseling. They'll help you, teach you good habits, and will put you on a plan to get out of debt. They also make it easy for you by consolidating all your payments into one. This is a much better way to go than bankruptcy. I went to them right after college and they put me on the right track. Good luck.
posted by lunarboy at 9:19 PM on January 21, 2006

Some non-profit agencies are perfectly legit, arruns; I worked with CCCS of Chicago about 10 years ago to help get me on the right track, and it wasn't a scam at all, nor did they try to sell me any loan of any kind. There are good non-profit credit counseling services and bad ones; you've might have to do a little homework to make sure you're working with one of the good, legit ones, but plenty of them do indeed exist.
posted by scody at 9:42 PM on January 21, 2006

Even the non-scam non-profit credit counselors have to pay the bills somehow. The way they pay the bills is, your creditors pay them $10-$15 for each payment you make through the credit counselor. So if you have 10 bills through CCCS, they're probably getting $100-$150 a month from your creditors. The creditors are willing to do this because it means they still get more than if they sent it to a collection agency, but keep in mind that the CCCS works for your creditors, not for you, and it is in their interest that you make as many payments as possible. This isn't necessarily a bad thing, but it's important to keep in mind.
posted by kindall at 9:51 PM on January 21, 2006

I struggled with financial problems for a long, long time. Believe it or not, borrowing (and reading) a bunch of financial self-help books from the library helped me get some money sense, helped me see that I could dig myself out of the money pit. It's been a while since I linked to my summaries about how to get rich slowly. There's a lot of useful info there; some of it may be applicable to your situation.
posted by jdroth at 11:45 PM on January 21, 2006

All of the advice you will get depends upon your actual specifics, so obviously all this comes with a huge grain of salt, and for sure read those past Ask's, because a lot of them are really good.

Now, our strategy at this time to pay off our major debts (other than house) is that all "extra money" -- year end bonuses, tax refunds -- go into paying off the debt. Doing That cut our debt pretty quickly and felt good. Second, we have some money saved, and so we put a portion of that toward paying off the debt, because it's not really saving anything when you're paying finance charges. Third, we moved debt to low or zero rate cards, and we've set up a payment plan that we're going to keep. My advice on that front is to find out what you will have to do to pay it off within the timeframe (say 12 months) and then set the payment to pay it off in 9 months. That way, if something happens you have a minimum payment that you've set for yourself. (Example: you have 7K to pay off on a zero percent card - $584.00/month for 12 months, but you pay $778.00 to pay it off in nine -- no matter what you pay between those two figures, the thing will be paid up in 9-12 months.)

Good luck.
posted by Medieval Maven at 8:37 AM on January 22, 2006

Most credit counseling is a scam, however some are not. Clark Howard has some good advice. A snippit:

Don't be taken by a phony credit counseling outfit! There are many companies out there, that because of a loophole in the tax code are able to call themselves "tax exempt" and claim that they want to help you eliminate your debt. In reality, they want to eliminate money from your wallet in the way of high monthly fees.

I also hear from many consumers that the money they paid in to the "counselor" never made its way to the creditors, making the person's credit rating plummet even more.

To find a legitimate counselor, contact the National Foundation for Credit Counseling, at www.nfcc.org or call 1-800-388-2227.

More from Clark at Money: Credit problems
posted by mumeishi at 8:59 AM on January 22, 2006

Seriously fellow mefites, after reading these comments, I feel so much better about the situation. I'm going to comb through every facit of this post and use all of your advice. I'm sure now that this wil be resolved in a great way. RE previous posts on the topic, for the last few month my google searches come up with garbage. Thanks again.
posted by snsranch at 7:27 PM on January 22, 2006