Alright, it is a new month so i post a new update. A few things have changed!

As of this week i have completely paid off the loan from my parents (Started at $2,800 Jan 2009).

Also happening this week is my last payment to a loan from a friend. Actually i bought something from him a few weeks ago and now paying him back. $200 bucks off my “Debt Chest”.

I also finished filing my tax return last night, should have my money direct deposited within 8 days. When i get that i will annihilate my Line of Credit debt of $500. That is a huge bonus for me.

All that will be left after that is my Credit Card  and my Auto Loan.

I also checked my credit score Feb 1, and it increased another 20 points! i am at 660-680 range.

As i am getting closer to being debt free i am getting more and more into it. I am living on a LOT less than i used to. Rarely going out to eat, not going out with friends, or spending frivolously. I went out to eat once last month and it was because my favorite restaurant and former work place was going out of business and i needed a last supper.

The website has been a little weird lately, For some reason my Pictures on posts are not showing up. Please email me with any other bugs you come across. The site has been getting more and more visitors, and more comments! Lets keep it going!

Yeah you heard me, bite the bullet, face the music, take responsibility for your irresponsibility.

I have a friend how came to me for help the other week, his situation, debt that had gone to collections. He knows i am knowledgeable of this topic and came to me for help, one of the first times this has ever happened within my group of friends.

I was excited first off to help, and to make his life better. “Alex” had a credit card that had went into collections, a phone bill that had went to collections, a store credit card in collections, and a small amount of money left from his last car loan that went to collections.. That is a lot of missing payments.

I told him the first thing we needed to do is check his credit score. So we did and it is not terrible, 500-550 range. I have seen worse. Using Creditkarma.com allows you to do a few things that almost replicate a credit report and it said that he had 2 missed payments. This didn’t sound right, but we just assumed some debts were not reported to agencies yet.

“Alex” also was not sure of how much he owed to most of these debts. He had a vague idea, but after late fees, interest charges and what not we were not even close to his estimate.

The next step is to negotiate some of these debts to lower amounts. Debt collectors are usually down to settle for a lower amount than you owed to the original creditor. They do this because they buy your debt for maybe half of what you owed, then they try to get more than they paid out of you. It is Win Win, they make money, and you save money. This doesn’t mean be irresponsible and miss payments, the key is to not get into consumer debt and miss payments.

We started to call each Collections agency one by one. The first we called was actually the collections agency portion of the bank he owed money to. They were not going to negotiate or cut a deal. A majority of the debt is to this bank. The bank was using its own people to collect this debt, and they want the full amount.

Next we called was a collections agency and the results were very surprising. He originally owed his cell phone company $536 and to get a lower settlement, all my friend had to say was, “I really want to pay off my debt, what can you do to help me out?” Right there the guy offered a settlement of $375 (that is almost $200 saved!) if he had the money by his next pay check. Debt collectors will make deals because they are still earning money. You can negotiate with them, haggle, and make offers.

Debt Collection Script: What to say!

You: Yes i have a debt that has gone to your collections company and i would really like to pay it off.

DebtCollector: What is your name? I will check to see how much you owe.

You: Yes my name is Pete and my debt is from so and so bank.

DebtCollector: Ah yes Pete i see you right here and it looks like you owe $3400. Can you start making payments this month?

(This is where you have the option of settling or negotiating. Settling usually only works when you can pay if off right away.)

You: I really want to pay this debt off as soon as possible, what can you do to help me? Can we settle at $2000? I can pay $2000 next week.

DebtCollector: I am afraid i can not settle for $2000, but what i can do is settle for $2400 if you make the total balance payment within 2 weeks.

You: That is possible, and i will do that. Thank you.

OR

You: $3400 is not working for me, i really want to pay off this debt but do not have a large sum of money.

(It is at this point where they might suggest you borrow the money from someone else.. They just want their money and they do not care if you have to borrow it from someone else! Hilarious)

Debtcollector: What i can do, is if you set up automatic payments with your checking account and promise to pay 200 dollars a month, i will cut down your total to $2800.

You: Sounds great, here is my checking account number along with bank info, you are approved to withdraw 200 on the 25th of each month.

All in all by making this 15 minute phone call you can save yourself hundreds if not thousands of dollars in payments or a settlement.

The rest of the day we spent planning his budget on how he was going to pay off the other debts. Such thoughts such as taking out a big loan and paying off all the other loans was thought of (consolidation) but not implemented.

With just a few phone calls my friend was able to save himself hundreds of dollars worth of payments, and is now back on track to paying off his debt. If you owe money to banks, stores, or even individuals and you are not paying it back, beware of collections, threats and even the possibility of a law suit. Know your rights as a consumer, stop harassment by knowing these Debt Collection Laws.

Yeah tell that to every celebrity who is in massive debt, went bankrupt, or died only to leave their financial irresponsibility to someone else.

You might think this yourself, but this is only because people tend to forget the root cause of debt, spending habits.

Your spending habits affect debt, not income directly. There are a few instances when debt is created by unforeseen accidents, events or challenges. But the root cause is reckless spending with a credit card.

As mentioned in How i got into Debt i spent money recklessly on unnecessary events or products. I spent on eating out, hobbies, experiences i could not afford, and none of which was really worth it.

Having a few million in your bank account wouldn’t change much of your debt. You probably would say if you had a million you would pay off your debt! Tell that to all the people who win the lottery and go bankrupt. When you give someone who is used to living on 50k a year and give them a huge sum of money, they tend to become very irresponsible. Winning the lottery is the first of many huge complications, first off everyone you know will ask for money, being the nice person you are you will lend them some. They won’t pay you back. Say goodbye to 1/4 of your money. Then you will buy an expensive car, say a Lamborghini, with the mindset of paying it off with your lotto money that is coming in slowly. Then you buy a Mansion. Then people are trying to kill you, sue you, steal your money, you start doing coke, and your money is gone. Your bankrupt and in millions of debt. Don’t gamble, its stupid.

I am going to use MC Hammer as a prime example of this topic. Nothing against him.

“The problem occurs when exorbitant spending goes from isolated incidents to a must-have lifestyle. Apparently, when MC Hammer sang “Can’t Touch This,” he was not singing about his money. The famed rapper’s forty-member entourage outspent his $33 million income on lavish day-to-day living.”- How Celebs Go Bankrupt

So please don’t tell me you would be out of debt if you were rich. We are in debt because we have bad spending habits, if we had a few million it would burn a hole through our pockets.

For the last few months my credit score has been slowly increasing, maybe by 5-10 points max, but this month (November) my score increased 35 points. This may not seem like much, but i was extremely excited!

Now, my score is still pretty Poor (600-650 Range) but it has improved from the 500-550 range.

If you do not know what your credit score is, i advise you check it out. I recommend www.CreditKarma.com (link in the Recommended section to the Right!)

It is completely free, your credit card number is never required. They also offer a lot of insight as to why your score is the way it is.

My score is so low because i have missed some payments in the past by Ignoring My Debt.

Also i have a very high Credit Utilization Rate at the moment. This means all the credit i have available to me, is being used (maxed out cards, or personal lines of credit.)

All in all, i am glad my score is rising because i am paying off my debt, paying on time, not missing payments, and trying to get my Credit Utilization rate down from 100%.

As i mentioned before selling belongings is a great way to get rid of debt, selling off stock that you do not care about much is an even better way.

A friend of mine recently found himself in a bit of a jam with his medical bills. He remembered that his old job offered stock options and he had taken advantage of it and invested about $500 in the company stock. He left the company a few years back and never got around to cashing out his stock, or rolling over his 401k into a Roth IRA. So when he found himself in this credit jam, he cashed out his stocks and paid it off.

“I pulled out my stocks and put it into bills. I was saving it for emergencies but the bills had to be paid so it worked” -Jason

It was an easy fix, it did not cause any problems for him, and essentially helped him out. Sure some might not advise cashing in investments, but any more earned on the stocks would be canceled out by Debt Interest.

Action was the main issue here, he had to act for this method to work. Sure you can talk about all the stuff you can do to get out of debt, but until you do it, you won’t get any further than before.

Note: This method only works if you have invested in stocks in the beginning.