Relief News

Archive for February, 2011

Even though the phrase may be a bit confusing, the fact is the debt snowball is a form of self managed debt relief. It is a way to finally get rid of your debt once and for all. If you think this won’t work, let me assure you, it is possible – and you can do it regardless of how much you owe.

Debt Didn’t Suddenly Show Up

To begin with, you have to realize that your debt didn’t appear overnight and it won’t go away overnight either. The fact is your debt most likely took several years to accumulate and it will certainly take months or perhaps years to pay it off. Now that you have that fact in front of you, forget about winning the lottery as your means of escape! If you want to get out of debt you will need to develop patience coupled with determination. You will also need to stop using your credit cards for all of those impulse purchases!

Okay, Let’s Get Going

You need to know exactly how much money you truly have available and then start paying down that debt. For example, look for ways to decrease your expenses. Eliminate any repeat billings that are not strictly necessary, such as that gym membership, those magazine subscriptions or your cable service with 500 channels and nothing on! Do whatever you can to trim the fat from your monthly expenditures to free up that money for what comes next.

Establish An Emergency Fund

The next step is to start building a cash reserve. Before you can operate the debt snowball you should accumulate a minimum savings of $500 for a single person or $1000 for a couple or family. This money will be earmarked for emergencies – not food or rent. You will need to cover those from your income. If possible, find ways to increase your income so that you have enough to live on, pay your essential bills and make the minimum monthly payments due on your debts to then have the money to begin building your emergency fund. This emergency ‘slush fund’ will be for true emergencies, such as the need to repair your car, because you need a car to get back and forth to work.

It is important for you to understand why you need this amount of savings only for emergency situations. The one thing you don’t want to do is use the money you set aside for emergencies to pay your regular bills. This will only result in you taking that much longer to enact the debt snowball effect. Even though this will take some time, even a year or more, you don’t want to make it any longer than necessary.

Begin Paying Off That Debt

Now that you understand this reasoning, you can start the debt snowball effect. Begin by making a list of all of your debts regardless of their size. Include everything on the list; even that $5 you borrowed from a friend that they never expected you to repay. Arrange the list in order of how much you owe, with the lowest total amount owed at the top of the list. For example, the list would begin with the $5 you owe your friend and end with your mortgage or whatever your largest debt is.

Now, here is where the initial savings discipline you exercised to establish that emergency fund comes in. You will now begin to take all the spare money you have each month – the money that you were putting toward building that emergency fund – and begin paying off those debts, beginning with the smallest debt first.

One Thing To Note

Some well-intentioned people may advise you to pay off the highest interest debts first. While this makes sense in theory, it does not work in practice because the goal is not to be saving a few pennies here and there. The reason you are putting into practice the debt snowball effect is two-fold: You are motivated by a sense of achievement, and you get that whenever you can cross one debt off your list! In addition, as you will see, the end will most certainly justify the means.

Reward Yourself

There truly is a sense of well-being experienced when paying off a debt, no matter the size. For example, imagine how you will feel paying back that $5 ‘loan’ to your friend. There is something to be said for paying off a debt. It is actually a source of encouragement to keep going! The effect of the debt snowball is to motivate you to keep paying off your debts by giving you a great sense of achievement.

To maximize that sense of accomplishment, reward yourself with a treat whenever you pay off a debt. Of course, make sure it is an inexpensive reward! However, it is okay to indulge in something that you enjoy. If you are married or have a family, the treat should be for all of you. In this way, you make getting out of debt an experience the whole family can participate in.

Stay The Course

Now comes the important part: You will need to take that debt amount satisfied and apply it to the next debt amount on your list. This is where the debt snowball effect really begins to kick into gear. Not only are you using all available funds to pay off debt, you are also using the money you were applying to pay off the first debt amount. This will really begin to accelerate paying off your debts and begin to eliminate the interest payments on that debt as well.

There is no doubt about it; once you have experienced the feeling of paying off the first few debts, you won’t want to stop. This is why it is known as the debt snowball effect. You essentially begin at the top of your debt mountain with a small snowball and send it rolling down that mountain. After a while, the momentum of that little snowball begins to pick up both speed and size. Once it reaches the bottom of your debt mountain, it is the equivalent of you becoming debt free. By using the debt snowball effect, you will be getting the best kind of debt relief money can buy!

Credit card debt is an issue that looms large amongst a majority of American consumers who have become accustomed to a way of life afforded by the ease and immediacy of buying on credit. Reckless materialism accounts for a smaller portion of the nation’s consumer credit card debt, however. Many debtors end up in over their heads in a sea of credit card demands as a result of a struggle to survive in the midst of economic hardship – a job loss, medical bills or divorce are common factors leading to credit overspending and massive debt balances defying the potential for timely repayment. Too often, these individuals in debt crises are at a loss as to where to turn for practical advice and debt relief assistance vis a vis managing their daunting credit burdens.

The grim option of filing for bankruptcy can then become fretfully anticipated when contemplating solutions (and in many cases it is viewed as the sole response to the problem), presumably because many people are not aware of alternative debt relief methods that can lift a debtor out of despondency and illuminate a path toward a debt free future. Besieged borrowers can also take heart in the arrival of the latest federal mandates designed to regulate practices within the debt relief industry in the interest of promoting and protecting the rights of consumers looking to these programs for help.

The Federal Trade Commission has passed legislation aimed at curbing abusive and deceptive debt relief practices. Upon initial consideration, one may find the idea of anyone targeting and swindling a cash strapped segment of society not just especially cruel but theoretically ludicrous. Yet, by adopting a broader appreciation of the desperation and sheer will to survive the odds that overwhelmed debtors are guided by day in and day out, it is comprehensible (though by any interpretation altogether deplorable) that the exploitation of the urgent need for help shared by these vulnerable citizens can be a con man’s gold mine.

The assessment of fees charged by debt relief agencies will vary – some companies determine these charges based upon a percentage of the total debt prior to negotiations, while others use the total amount of money saved through the plan as a reference point. The newly instated laws prevent the classic debt relief scam that entails demands of payment up front for services that have not been rendered. Disreputable businesses looking to cheat borrowers out of what precious little money they possess will eagerly make empty promises and gladly collect fees in advance with little or no real intention of providing clients with any actual solutions to their debt problems. The latest laws aim to ensure a level of fairness and prohibit the debt relief companies from demanding advance charges by implementing legal provisions permitting the collection of fees only after some or all of a client’s debt has been settled.

Additional laws enacted this year seek to set standards supporting and fostering honest business conduct within the debt relief field. Beginning in September of 2010, companies offering debt relief are required to furnish potential clients with clear and accurate documentation disclosing specific details associated with their services, including statements indicating how long it will take to attain results and the truthful and full account of the costs of enrolling in their program. The law furthers consumer protection by requiring that disclosures of this nature are made in full to prospective clients prior to the introduction and signing of any contractual agreement.

Even the IRS is feeling the festive holiday spirit! And this means possibly a bit of tax relief in time for the holidays. The bureau announced this month that they have over $164.6 million in undelivered refund checks and want to deliver them to their rightful owners. What does this mean for you? If you are one of the 111,893 taxpayers who are owed a refund check but never received it because of mailing address errors, you’re in luck!

IRS Commissioner Doug Shulman stated, “We want to make sure taxpayers get the money owed to them. If you think you are missing a refund, the sooner you update your address information, the quicker you can get your money.”

As a taxpayer, you only need to update your address once for the IRS to ensure they send out all checks due. Many taxpayers are owed more than one check, so it is worth making sure your details are correct.

To find out the status of your refund or how to update your address, take a look at the “Where’s My Refund?” tool on the IRS website. Check out these two tax tips that will make filing your taxes easier and quicker:

Tax Help Tip 1: To help eliminate lost checks and IRS communication, consider a direct deposit when you file your return. If you are due a refund, you will receive it directly into your bank account.

Tax Help Tip 2: E-File eliminates the risk of lost paper returns. Choosing to file your tax return electronically is a smart move that reduces errors on tax returns, not to mention simplifies the process and speeds up refunds.

While this is merry news for taxpayers who are expecting a refund, if you don’t feel Uncle Sam owes you anything this year, keep your head up! Not every taxpayers receives a refund every year. If you are one of the many taxpayers who are worried about how to pay your tax bill without breaking the bank, check out our list of options and tax help tips.

While these payment tax tips from the IRS are very useful, if you feel you need serious IRS tax help, it is essential to take that first step. Expert tax help from a Certified Tax Resolution Specialist is a safe and secure way to ensure you don’t end up in the IRS deep end.

Dealing with the IRS can be very frustrating. If you need tax help you need a qualified expert to assess your unique situation and offer the most favorable solution to your specific tax problem. Whether this be an IRS installment agreement or an Offer in Compromise, a professional Certified Tax Resolution Specialist will ensure it is negotiated with the IRS on your behalf if you qualify.

View some of our tax debt settlements including audit results, offers in compromise, partial pay installment agreements and statute of limitation cases and have a look at our success rate.