Credit Card Purgatory - A 7 Step Comprehensive Plan to Get and Stay out of Credit Card Hell

Does this Sound like You? There are 100 shopping Days left until Christmas and your Credit Card Balance is Higher now then it was in the beginning of the year. You may have thought of using your home and getting a debt consolidation loan, A Debt Consolidation Loan without a solid Long Term financial plan is a Recipe for Disaster. A One way ticket to Credit Card Purgatory

The Debt Consolidation Loan

Most credit cards require a Minimum Monthly payment of 3% to 5% of the Outstanding Balance. On a 10,000 Balance that is $300 to $500 Monthly. On a $20,000 Balance that is $600 - $1,000 Monthly. The Interest on your Credit card payments would not be Tax Deductible,

If you Refinance your House and Consolidate your Bills even at an interest rate of 6% you would only pay $60 a Month for $10,000 or $120 a Month for $20,000 (For many homeowners this would be tax deductible)Your Monthly Savings will be between $240 and $880 a Month. The Key to a Good Financial plan is to use this extra $240 to $880 a Month to build a Failsafe, your Economic Life Preserver. (If you don't own a home and still have fairly decent credit you might be able to get a signature loan from your bank or credit union.)

If you currently have a mortgage paymet based on an interest rate of 3% or Higher you may want to look at refinancing your House using a Loan where the payments are fixed for 5 Years based on a 1.95% interest rate. On a 200,000 Loan this can often mean an additional $400 a month or more in savings.

Let's Assume you save $700 a Month with a Combination of the above 2 Methods.

1 - Emergency Savings

You would want to keep at least 2 Months worth of Bills (3 Months would be Better) in a Savings or Money Market Account. Bills would include Rent or Mortgage, Utilities, Medicine, Food and Insurance Premiums. You need to make this account a Priority. Place at least $300 a Month into this account until you have reached your Goal of 2 Months Worth of Bills or $5,000 whichever is Higher. After you Reach Your Goal Continue to place $50 - $100 in this Account until you have reached Double your Goal. (4 Months worth of Bills or $10,000 whichever is higher) Once you have reached Double your Goal you no longer need to place money in this account.

Some People will just Borrow an Extra $5,000 and place it directly in there Emergency Account.

2 - The Debit Card

After you have established your Emergency Savings you will want to establish a Debit Card Account. Open a Bank account and get a Debit Card. Deposit $100 or More Monthly into this account until your balance reaches $1500. Now If you have an Emergency car Repair, Home Repair, Dr Bill or any other type of unexpected expense use your Debit card rather then a Credit card. Your Goal should be to maintain this account at $1,500 to $3,000

3 - The Credit Card

Most people don't need to rip up all there credit cards they just need to manage them better. Cancel all but 1 or 2 of your credit card accounts. Credit Cards are an Important Part of Life, An unexpected car repair or Dr. Bill can be handled very easily with a credit card (If you don't have enough money in your debit card account). With the exception of an Emergency never charge more in any month then you can Pay in full when the bill comes. Pay off all new Charges in full within a week of getting the Bill.

4 - Insurance Needs

Insurance needs would be things like Life insurance, Health Insurance and Long Term Care Insurance. Contact an Insurance professional to discuss your needs. If you don't have any Life or health insurance look into low cost options like term Life and Discount health care until you have extra funds to go for the higher cost options (After your emergency account is established) Life insurance can often be combined with retirement planning see step 5.

5 - Retirement Savings

Use at least half your savings from your bill consolation loan to fund an IRA for you and your Spouse. Speak with your Accountant to see your IRA Funding Limits. In 2005 people who qualify could place up to $4,000 a Year into an IRA or Roth IRA. People over 50 who qualify can place up to $4,500 in an IRA or Roth IRA. For more information and phase out rules you can view the IRS publication here http://www.irs.gov/publications/p590/. If you don't qualify for an IRA or you already have it funded look into other options like Universal Life and annuities.

6 - Some Girls (or Guys) Just Need to Have Fun

Everyone Needs and Enjoys to have a good time. Don't get so hung up on getting that emergency fund or building a retirement nest egg that you don't have fun. Budget something fun a few times monthly. Movies, Bowling, The Zoo a trip to the water park, a Nice dinner whatever it is. Even if it is only $10 or $20 a Month in the beginning when things are tight. You can always add $50 a month for a vacation fund later.

7 - The Budget Review

Once or twice a year review your budget. See how your Emergency and Retirement funds are doing. Look over your credit cards and make sure you are paying those bills in full.

If your situation changes for better or worse. You would want to do a review. Things that may trigger a review. A Salary increase or Decrease. An Added Expense like a Car Payment. A Major change to an expense, Much higher Gas Bill or Mortgage. Car Payment is Paid in Full. A child starting college or private school.

By combining a Bill Consolidation loan with the above 7 Step Financial plan you are taking the required actions to help insure you won't find yourself in credit card Hell Again.

About The Author:
Mike Makler has been Marketing Online Since 2001 When he Built an Organization of over 100,000 Members

Get Mike's Newsletter:
http://ewguru.com/newsletter

More Articles by Mike:
http://ewguru.com/tips

Permission Based E_Mail Marketing Methods
http://ewguru.com/hbiz/amazingoffer.html

Copyright © 2005-2006 Mike Makler the Coolest Guy in the Universe

---

Debt consolidation ? More Options for Reducing Credit Card Costs

Borrowing money against your credit cards has always been among... Read More

Financial Aid - When Should I Apply For?

Many different types of financial aid are available to you... Read More

Credit Card Purgatory - A 7 Step Comprehensive Plan to Get and Stay out of Credit Card Hell

Does this Sound like You? There are 100 shopping Days... Read More

Are You Buried In Debt?

Are you having a problem paying your bills? Are you... Read More

Bad Credit Debt Consolidation Loans - Getting a Debt Consolidation Loan, Even With Poor Credit

An online debt consolidation loan allows even people with a... Read More

Why Choose a Debt Consolidation Loan?

Are you wondering why choose a debt consolidation loan? If... Read More

Is There Something Called a Bad Credit Credit Card?

Is there something out there called a bad credit credit... Read More

Bad Credit Debt Consolidation Loan

Nowadays, many people can get into a bad credit situation... Read More

Avoid Bankruptcy

The first but definitely not the easiest thought that comes... Read More

Debt Consolidation: Why And How This Strategy Often Backfires!

Debt consolidation solutions, has found that as good as it... Read More

Getting Your Best Deal on a Consolidation Loan

If you find yourself having to make too many payments... Read More

Finding a Low Interest Debt Consolidation Loan

If you are in the market for a low interest... Read More

What You Need to Know About Debt Consolidation Loans UK

Should you find yourself over your head in debt, you... Read More

Debt Consolidation: How it Works

As long as consumerism flourishes most of us will be... Read More

Debt Elimination 4

Planning For Debt Elimination Without Surplus CashPreviously we looked at... Read More

Credit Counseling ? Get in Line Now to Avoid the Upcoming Rush

Credit counseling is a valuable service for consumers who have... Read More

10 Pointers on College Loan Consolidation

Should I consolidate my college loans or not?1. Still in... Read More

What Your Mama Never Told You About Debt Consolidation Services

When someone is extremely deep in debt, and he or... Read More

Does Working With a Credit Counseling Organization Hurt Your Credit Score?

Credit counseling organizations do not lower your credit score when... Read More

Whats the Difference Between Debt Settlement and Debt Consolidation?

The Debt Settlement process involves negotiating with your creditors to... Read More

Use Caution When Entering Into Debt-Consolidation Loan

To the person drowning in debt, a debt-consolidation loan looks... Read More

Negotiate Your Way Out Of Debt

Eliminating your debt is a daunting task. What can you... Read More

Choosing the Right Credit Counseling Agency for You ? Some Tips

Credit counseling companies come in all shapes and sizes. Whether... Read More

Debt Consolidation Makes Sense Only with Low Interest Rates

Credit that cannot be managed or is not being repaid... Read More

Debt Consolidation: Friend or Foe?

Debt consolidation has become big business in this country over... Read More

Debt Consolidation ? Can You Negotiate with Your Credit Card Company?

The average American household has nearly $10,000 in credit card... Read More

Online Debt Consolidation Services - Lower Your Monthly Payments Now

Consumers looking for a way out of debt may want... Read More

Debt Consolidation for Homeowners: Saving Grace for Inept Borrowers

You cannot understand the importance of being a homeowner until... Read More

Pay Off Debt - Get Out Of Debt And Lower Your Monthly Payments

Debt consolidation can be confusing, especially if you have never... Read More

Pay Off Debt Now: 5 Steps To Getting Your Finances in Order

In our world of dizzying change, nothing is more true... Read More

4 Debt Reduction Tips

If you are overwhelmed by debt, there are options you... Read More

Debt Consolidation Benefits

If you've ever been in a situation where you needed... Read More

Best Debt Reduction Service

There was a time when incurring debts was looked down... Read More