Mind On My Money #200: Serious Debt Overload

Folks, things are getting tight out there.

I don't know about you, but I may need a new engine in my car. Are you prepared for such an emergency, or will you be reaching for the credit card?

Perhaps you're walking around in "denial" (and you have never been to Egypt). It's a joke, but debt is no laughing matter. Lets take a look at: WARNING SIGNS OF DEBT OVERLOAD

* Using credit cards to pay other credit card debt

* Skipping Payments because you can't afford them

* Constantly switching cards to get a lower interest rate on a new card

* Arguing with your partner about the bills

* Loosing sleep or constantly stressing out about your debt

* Using your credit card to make everyday purchases like gas

* Not knowing how much debt you owe

* Getting calls from creditors

If even one of these sounds like you ... here are three things you can do!

1) Pay cash for everything!!! When the money runs out... game over (until your next check).

2) Don't run, contact your debtors. They've got all yo' info, so where can you go? Call each of them and say something like, "I'm in a difficult situation right now and I can only pay $35.00 right now . I know that $35.00 is not a lot, but it shows my commitment to paying this debt. I will call you in 4 weeks on September 13 and either make the same payment or more."

Now once you have said all this (and they will probably bump you up to $50.00 a month), YOU MUST CALL THEM BACK WHEN YOU SAID YOU WOULD!

No exceptions, even if you do not have the $35 or $50 dollars. So get a calendar. If you don't call on the exact day your credibility is shot and then they get nasty. Repeat the above process every month until you get straight.

3) Combine your credit card debt. It is better to make one payment than four. If your card companies have not sent you consolidation checks in the mail, find out which card has the most space to put all the others balances on. Ask what interest rate they are giving for consolidation/debt transfer requests. Go with the card that gives the best rate and has the most space for the other cards.

You can consolidate over the phone, but you never know when their paper work will go through. It is better to have that consolidation checks mailed to your house and you mail them out like an "on time" payment to the other card companies. Your debt may be so high that you have to consolidate from eight cards to two. What is important, is that this process is only worth your time if the new rate they offer is guaranteed for at least a year.

Stay tuned next Saturday when we will hit three more moves you can make.

MIND ON MY MONEY: TAKING A BITE OUT OF MY STUDENT LOAN

If you are like many people, you have a student loan.

Now if you have done your homework you first have taken two or three loans and have consolidated them into one.

Second, you've contacted your lender and explained your full intentions to pay back the damn ...er generous loan if they would only negotiate the outstanding balance down to the lowest possible interest rate.

Third, if you didn't like the newly negotiated rate, you found another lender to take over the debt at a more acceptable rate, right? So now all that said and done you have say ... a $94,000 outstanding balance.

Now for those who are ready to go forward, let's proceed. You got this huge "nut". It's ugly and you can't stand to see it every month. So you get the brilliant idea to throw some extra money at the principle, even make double payments! And after two years you don't seem to see that principle move much at all and you think "Hell, I'll be in a wheel chair paying this off."

But don't despair. If you have done steps 1, 2, and 3 listed above, your student loan is lower than any other type of loan you can get on the market today.

Your principle is not going down real fast because just like a mortgage the first few years most of your payment is going to interest and not principle.

If you do decide to make extra "principle payments," always make out a separate check with the words saying "extra principle payment" and each month you call the lender to make sure they have applied it to your principle.

Now if you don't make that extra payment, don't sweat it. You probably have better things to do with your money than pay off a low cost lone. Like paying off that 23% credit card. How about funding that retirement every month with the maximum contribution. How about keeping you life insurance policy paid up for your wife, kids etc.

I know, pay that child support so you can get your karma together! What, don't own a house? Let's get that down payment together, cause it's hard as hell to get those no money down mortgages right now!

Whatever, you do -- handle it folks, and make your life a little easier!