Now aside from the obvious addage of not getting into debt, what is the best strategy for getting out of financial debt? BTW, it's mostly business debt that has me worried. It's like creating a monster that ends up eating alot more than anyone thought it would.

Percentage payments? Juggling around for the lowest interest rates? Debt consolidation? Run away?(not an option!) What do you think?

-- Doreen (animalwaitress@yahoo.com), December 23, 2001

Answers

The big "B"?

-- Daryll in NW FLA (twincrk@hotmail.com), December 24, 2001.

Hi Doreen! I would say the best thing to do is to try to pay off one thing at a time. Make a list of all of your debts and the amounts.

While you continue to make the minimum payment on all of them, really concentrate on paying off one of them. You choose which one, some people go with the highest interest ones, or the one with the least amount of payments left, or the one with the lowest dollar amount (my favorite) Then throw EVERYTHING you can money wise, onto that bill.

It is a great boost when you pay one off. Then move on to the next one. There was a time when we had no health insurance, and we had 22 different doctor bills we were paying on. I did this and was able to pay off a large sum of money in about 2 years. I hope this helps a little, or gives you an idea.

-- Melissa (me@home.net), December 24, 2001.

Hi Doreen, Well, if you do not want to do the big B...which I have seen someone do and it stays on their record for longer than the seven years it is supposed to.... You can do many little things. Consumer Credit Counseling service basicly talks to the creditors and asks for no interest if you make good on payments. They may have some free info. You can do this step yourself (lower interest), especially now, with banks wanting to keep your money. Find a alternative bank, seek loan information, See if you can lower interest with them, go back to your origional loan co. and say "they offered me this... can you match that?" (Example..I had a credit card that was 18%ish. Missed a payment way back and it jumped to 20%. I never bothered to talk to them, and when we got a different card and transfered the sum this year it was to a 6.9% introductory card. Maybe you can go lower?) Second way is to lay out your budget and cut out any fat if you have some. Do you really need your magazine subscriptions? Newspapers? Do you limit your long distance...(you can buy a calling card for 5-10$ and quit calling when it is used up)..Can you save money on nick nacks? Have you ever read "It's your money or your life" ?? GREAT book. Makes you keep track of every penny.. for good reason. You find out what blows your budget, where are you leaking money. With me it is those extra trips to the store to get butter on special and I come out with a DVD, butter, milk, snacks for the kids, etc. Limit your store trips! ONce a month or once every two weeks, and it will cut down your spending and gas money. You have to plan lots, but it is worth your pocket book, and once you get used to it, it is not so much work. Have you been to "budget101.com"???? They also have a Yahoo group. GO THERE and check out their $10 grocery list. You may not be able to go that low, but I am cutting down from $250 to $130/2 wks (The worst you could do is make something you don't like and spend your regular amount..just put the extra aside until you find out the dishes you like)!!! THat is for a family of 7. Basicly involves making LOTS from scratch, cut out processed snacks, etc. and buy when things are on sale and grow what you can!! (hard work making stuff instead of buying expensive ready to use stuff) Coupons I do not use, because they are for expensive stuff anyhows. You may be able to find a good coupon or two though to justify the weekend paper. Anyhows, cut back cut back cut back.

Next.. raise your food if you can. My garden was big this year, but not near big enough for seven people. Raise your own seeds as well? I saved it from a few plants and tried them out on the sun porch and they grew. I have lettuce on the sunporch from my saved seed right now. If you do not like to garden, what about chickens? I can not remember if you have them. :o)

Anyhows, you get the idea. You know your budget best and how drastic you are willing to go to pay off debt. I wrote down the cost of every meal I make, instead of saying.. it has to be low, since I make it myself. I have found I use many ingredients in some dishes that up the cost, and other meals are great with really low cost! Even coffee compaired to soda if you like caffine. (Coffee is cheep, tea is cheep).

Lots of ideas out there, I could go on and on. Sorry.. :o) Next on your bills, CCCS also rolls your payments to the next bill. Catagorize by least amount to highest, pay off the small bills, roll that next month up to the next bill. (I have also heard that you pay off the highest interest first, it is not always so easy to get breathing room if the highest interest is also the largest amount of money owed. You just have to wait longer for any visable sign in the budget) Is your business losing money or is there just very little room to spare? If it is draging you down, you need to rework the business idea or get help there. (I have nothing for ya there, unless these principals can be applied to you business budget) Hope this helps. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ AND TRY TO BUILD SOME SAVINGS :o) So you do not lose your place if things are tight. I'm still working on that one. They say 3-6 months in savings. I'd be happy with a couple house payments.

-- notnow (notnow@blabla.net), December 24, 2001.

It's mostly my business that is troublesome. We had a terrible blow this summer when the lease of our press was supposed to be finished with a 10% buyout and they bashd us with fair market value....NEVER lease. EVER. We have done two leases and both times (different companies) they tried to kill us at the end.

See, we thought we were going to be clear of paying quite a chunk out for the lease, but instead we had to get a loan and a lawyer and all of this came about on the day I just bought property in another state as I thought my bills were going to go down at work....HA. See how that works?? Anyway, I have my place here paid off and eat just about as cheaply as a person can...

I was assessing the credit cards and believe that if I cancel a few and play two of them off of eachother I can get a low low rate. I was just wondering if there was any kind of rule of thumb for paying down balances that I didn't know about....We always pay more than the minimum payment, but that might be a thing to change in lieau of paying down the higher percentage rate balances first.

I heard a message last night right after I posted this that gave me a reminder of what I need to do first!!! One compounding problem is that busines is off by at least 40% since 911....grrroannn.

Thanks for your tips,friends (especially the websites!!). I can't do the big B- just have to fight this out. :)

-- Doreen (bisquit@here.com), December 24, 2001.

The MOST IMPORTANT consideration to reduce business debt is to reduce overhead, then increase sales and profitability. This is why most corporations will layoff first then do marketing blitzes right after. Same concepts work with small operations. I had a friend running a flea market store who was losing his bohunkus some months due to the $600 a month building rent. I convinced him to lower his overhead to the $4 cost of a parking place for a trailer on sunny days (which was when folks went to the market) and his per hour profit margin increased 800 %. The overhead reduction also allowed him to lower his prices by about 10% , which helped his sales

-- Jay Blair in N. AL (jayblair678@yahoo.com), December 24, 2001.

be careful with consumer credit couseling, they can't get reduced interest rates with companies except the ones that are signed up with them, which is few. the rest, that aren't signed up with them, go to the bottom of the list of payees! we got out after we got a notice from a credit card that they weren't being paid each month. when we checked it out, we found that the amount we were giving them wouldn't pay them all in the "order" of their importantence. i.e. the people signed up with them. we got out and were able to pay them all, in the mean time our credit report got hit hard and we had to write many letters to get it fixed. we were signed up with them 6-8 years ago for MAYBE 6 months, i recently had to contest an entry on our credit report that said we had paid with a debt management program (CCC!!), which most people view as 1. wage garnishment, 2. bankruptcy sp?, 3. didn't pay full balance but worked out a deal, etc..... i still don't know if it is worded right, we'll see with the next credit card app. which isn't going to be soon. we are trying to go cash only.

-- steve (stevetamara@mindspring.com), December 25, 2001.

Yikes, that is scary about CCCS Steve. Thankfully we were able to do the lowering interest ourselves. I did not know they put the ones at the top that sign with them. Anyhows, if you can get into a place where you can transfer the money to a lower account, the origional company will usually try to work with you. One guy at a credit card place asked what he could do to keep our account with them.... I was closing it at the time. :o) Why don't they do that when you have no choices~!!!! UGH!

-- notnow (notnow@blabla.com), December 27, 2001.

Been there, done that. Best way to get out of debt: stop spending money except to pay down the existing debt. Sacrifice. Start living like the truley poor. No eating out. Shop only at discount food stores. Cancel the cable TV. No toys or luxuries. Refinance the mortgage. Sell the extra car, or if it's paid for, park it and cancel the insurance until your debt problem is resolved. Establish a strict budget and stick to it religiously. Consider getting a second job to catch up, but remember, increased income will mean increased income tax.

-- Skip in Western WA (sundaycreek@gnrac.net), December 28, 2001.

Skip, my sentiments exactly (but a second job will never hurt).

Added things to cut out: cigarettes (easily $2500 per year for two modest smokers) Can a smoker really be modest??

Alcohol (easily $2000 plus for two modest drinkers) Are drinkers modest? or only before drinking?

-- joj (jump@off.c), December 29, 2001.

A tip for the credit card debt. Credit card companies are very competative these days. So when you get a letter from one announcing an introductory low rate for balance transfers take em up on it but keep track of when you did it so you can switch over at the appropriate time and above all, don't ad to the debt. This'll substantially reduce the rate from 18-21% to less than 5% in many cases. While its down pay off as much as you can manage. Its kind of a pain to keep track of but the effort will be well rewarded in the savings realized.

-- john (natlivent@pcpros.net), December 30, 2001.

Well, I called up all the credit card folks and played let's make a deal with them and got SUBSTANTIAL interest rate action, thank God! I already live like the truly poor. I have an extra car...daily driver is a 77 pick up, back up is a 76 mail jeep that sits and only gets insured if something goes wrong with the pick up. I eat poor, and I don't eat out as I live in a town where it isn't food if it isn't meat and I'm a vegetarian. As far as my habits go, the only place I can really cut is my book addiction.

The real problem is that the economy is tanking and we have have about $15k more debt than we would have if we weren't jacked on the lease. There really isn't a lot of fat to trim, but there is a bit. Thanks for all of the tips folks! I'm going to run this thread past my business partner.

-- Doreen (bisquit@here.com), December 31, 2001.

I am glad that this will give you a little relief. It pays off to call the company I guess!!

-- Melissa (me@home.net), December 31, 2001.

In the for what it's worth dept. An acquaintance of mine was in a similare situation, with similar debts. He was young, at the time, and I felt the credit card companies seduced him, in a way.

Based on my feelings, and my advice to him, he too played "let's make a deal" with the credit card companies. He gave them a choice: drop all the usurious interest accrual, and he'd pay them the principal, plus current bank loan interest rates until his debts were paid off, or he would declare bankruptcy, and they'd receive NOTHING!. Believe it or not, they played ball with him. His debt was overwhelmingly caused by the high interest rates, so he didn't have to pay but a small fraction of what they wanted.

I had mixed feelings about this, since no one forced him to build up a big debt to the credit card companies. But like I said, he was young. I still love him!

-- joj (jump@off.c), January 04, 2002.

joj is right. That's what I did. And start up a couple of savings accounts at your local bank. If you already have an account there, it shouldn't be any problem in starting one. Then stick back $5 or $10 a month back. Or however much you can. Even if it means you only pay the minimum on a few credit cards. At least pay a few dollars extra though. Like if the minimum is $18, pay $20. If it $55, pay $60. Yeah it drags it out, but sometimes you can use that to your advantage.

Then when one of the savings accounts gets a balance of say, $250, pay $200 of it to a credit card. Never keep less than 10% of the account balance. I.E. if the account balance is $250, do not use more than $225. Ideally you would keep a minimum of $50 in each account.

With large accounts, if you offer then a total payoff or a chance at a total payoff, they will sometimes lower the total payoff amount. Like hospital bills. If you owe them $5,000, they may be willing to accept a payoff of $4,500. May not be much, but that's $500 that can go elsewhere. To them losing $500 is better than dragging out the entire debt. They lose far more that way.

-- not this time.... (html5lover@yahoo.com), March 05, 2002.