All posts by Dianne

Debt: The Good, The Bad, And The Way Out

Everyone wants to live a debt-free life. Financial problems brought about by having huge debt impacts virtually every aspect of our lives that is why we do everything we can to avoid it. Debt, in its simplest definition, is just borrowed money used for whatever purpose we have in mind. If we look at it this way, debt sounds neither good nor bad. It’s just what it is. And while it is entirely possible to live a life free from the burdens of having a debt, there are times when taking out a loan is the right decision to make.

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Purpose is What Makes The Difference

As stated earlier, debt is defined as money borrowed for an intent one has in mind. This intent is what makes the distinction between a debt good and a bad debt.

They say that “it takes money to make money.” Good debt is money taken out and used as an investment to help generate income. A loan that was taken out and used to kick-start a small business is an example of a good debt. All business owners expect to earn and gain profit that would soon pay for the loan. Student loans can also be viewed as an example of a good debt. Every student sees a “return on investment” once they graduate and enter the workforce in their chosen field. Real estate mortgages, when used strategically, can also be a form of good debt. A residential property can be rented out, thus making it self-amortizing, and once the mortgage is paid off, the property owners can finally start earning from it.

Bad debts, on the other hand, are debts that are used to purchase anything that depreciates in value and do not generate any income for the debtor. These are the liabilities that have to be avoided at all cost. Cars may be a necessity but it is expensive. Unless you have the money to pay for a brand new car in cash, it would be better to put a hold on your plans for signing up for a car loan. Cars depreciate in value every year. In the event that the car owner decides to sell his car, it would be for a much lower price than its original value. Consumer loans such as credit card debts and payday loans are probably the worst kinds of debt. These debts are often used to make ends meet, or to sustain the “wants” of a person. Bad debt doesn’t do any good for parties involved: the debtor loses money in paying the interest alone, and may soon be buried in a mountain of debt, assuming the debtor no longer has the capacity to pay for it. Creditors lose money on bad debts that are no longer collectible.

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The Backup Plan

Taking out a loan is always a risk. A fresh graduate may not find a lucrative career opportunity right away which may lead to struggles in paying off their student loan. Real estate properties may suffer damages brought about by unforeseen circumstances such as fire or natural calamities and will definitely cause a loss of income. Startup businesses may take a while before it generates the expected income. As for bad debts, these could get worse when a debtor lacks financial management skills and is stuck in the dreaded minimum payment loop.

Good debt and bad debt have one thing in common and that is they are both accruing interest. If the debtor hits a financial snag along the way, unpaid debts, along with its ballooning interest rate can be a problem.

It is essential to have a backup plan in case things don’t work out. Having ample savings to cushion one’s fall during hard times is perhaps one of the best backup plans a debtor may have. Savings should be enough to cover basic necessities and loan payments for at least three to six months. For business owners, emergency funds should be enough to cover operating costs and other expenses. This will give any indebted person time to recover and get back their finances back on track much easier than having no savings or emergency funds to count on.

In the event that a debt becomes too much to handle, an indebted person may consider entering a debt relief program. Debt relief programs, as its name states, offers relief to a person whose debt burden becomes too much to bear. These programs may offer either partial or full relief from one’s debt. Most debt relief companies offer a free consultation to their clients to see which program best fits their current financial situation and capacity to pay. Once enrolled in a program, it is best to commit to the agreed plan to have the debt problem resolved, otherwise, noncompliance to the plan may get a debtor kicked out of the program which may lead to even bigger financial problems.

Final Words

Money is best handled with wisdom and discipline, especially if that money is borrowed. Keep in mind that even those considered as good debts may turn into bad debts when handled thoughtlessly. Most of all, debts should be paid off as soon as possible. Do not let yourself get stuck in the minimum payment trap and suffer the consequences later on. Good decision-making along with sound financial management skills will make any debt less of a burden and more of a much-needed help to anyone who needs it.


How To Get Out of Debt

Let’s face it: debt is a way of life for Americans. We place such a high importance on our credit scores and creditworthiness so we could get more loans and obtain more credit. We religiously make minimum monthly payments to our creditors thinking that it’s the right thing to do. We also have this mindset that as long as we maintain a good credit standing, it’s alright to get more loans or apply for more credit cards. It’s okay to swipe the plastic as long as minimum payment is made on a monthly basis. What you don’t realize is that it is turning into a vicious cycle and the next thing you know is that you have fallen into a trap of your own doing.

What do you do then, when you find yourself drowning in debt? How do you get yourself out? There are three things that can be done: change your attitude towards spending, come up with a plan, and commit to the plan.


Debt is not the enemy


Unsecured loans such as credit card debts and personal loans make up a large percentage of anyone’s debt problem.

If there is one thing you need to keep in mind, it’s neither debt nor the exorbitant interest rates and finance charges that go with it that is the problem. It is a person’s irresponsible and unwise spending habit that is to blame. We all know that once we live beyond our means, and it becomes a habit, we are headed for trouble.

Therefore, the first step to getting out of debt is to make a conscious effort to change your attitude towards spending. We’ve all heard about the cliché that we should live within our means. Try this: live below your means. Prioritize your needs over your wants, and do this willingly.


So, what’s the plan?


Now that you have decided to change your attitude towards your spending habits, it is now time to come out with a plan to get yourself out of debt for good.

To help you reach your financial goals, it is best that you keep track of your monthly expenses. Create a budget planner. Allocate a portion of your income for savings so you will have something on hand when a need arises. The rest of your money may be spent on basic necessities and paying off your debts. If your budget tracker shows that your income is not enough to cover your basic needs and your debts at the same time, it is best to consult a professional to see how to best manage your debts without having to jeopardize your necessities.


The solution


Debt relief programs are designed to help solve debt problems without having the need to take out a new loan. When you consider this option, it is best that you get the services of a reputable debt relief agency rather than solving your debt problem on your own. This is for you to be guided accordingly, and to keep you from being enslaved by your creditors. Once you get yourself in a debt relief program, stick to it. Failure to comply could mean you getting kicked out of the program and would cause even bigger problems on your part. Remember, restoring your financial health takes commitment, not a miracle.


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Is Tax Debt Forgiveness Possible?

Owing debt to the IRS or the State is a scary situation to be in. Unlike having an unsettled credit card debt or other forms of unsecured loan, the IRS or the State can impose legal sanctions against you such as wage garnishments, levy assets, and file a tax lien to seize properties until the tax debt that you owe is satisfied.

This is why it is best to have your tax debt issues addressed as soon as possible, regardless of your current financial situation. Fortunately, you may be considered for an IRS debt forgiveness program that can help you with your predicament.

Does this mean that I don’t have to pay my tax debt anymore?

Just like any lender, the IRS will do whatever it takes to collect on what you owe. And just like any debtor, it is your responsibility to pay off your debt, especially if you have the means and the capacity to do so.

The IRS Forgiveness Program offers a resolution for taxpayers who could not pay their tax debt in one go. However, this doesn’t mean that you are no longer liable to pay the IRS and your debt has been zeroed out. Your financial capacity to pay will be assessed to see which program best suits your situation in order to for you to pay off your debt without causing any hardship on your part. In the event that a taxpayer is undergoing extreme financial hardship, the IRS may put a halt on the collection proceedings until they see an improvement in the taxpayer’s situation.

What are my options?

Here are some of the IRS Forgiveness Programs that can help resolve your tax debt woes:

  1. Offer in Compromise (OIC)

An Offer in Compromise is an agreement between you and the IRS that lets you settle your tax debt for a reduced amount.

2. Installment Agreement (IA)

An Installment Agreement lets the taxpayer pays off their tax debt in low monthly installments.

3. Penalty Abatement

Typically for first-time taxpayers, this program is usually tied up with an installment agreement to reduce the interest.

4. Currently-Non-Collectible

This program is for taxpayers undergoing extreme financial hardship. Financial hardship of a taxpayer means they could no longer afford basic living expenses and put a payment towards their existing IRS tax debt. Only a Revenue officer from the IRS can determine whether the taxpayer is indeed experiencing financial hardship or not.

Can I do this alone?

When dealing with tax debt, it is always best to seek the help of an acclaimed tax debt relief organization. Tax issues are complicated, to say the least, and can be very disconcerting to deal with.

Ask for help. Having a professional handle your tax debt is necessary as they are more knowledgeable with regards to tax laws. This is one situation where mistakes are simply unacceptable because it can be very costly and you might end up having more problems than what you already have. Also, take time to research and read reviews regarding the debt relief organization you’ll be working with. Consider the feedback from the company’s former clients and see if the good outweighs the bad.

It is one thing to know that you will not be alone in facing such a daunting problems as a tax debt, but knowing that you will be working with a team that is worth every ounce of your trust will make all the difference.



Three Ways To Earn Extra Income


Do you constantly struggle to pay the bills on time? Do you want to save more money and earn additional income? In this fast pace environment where money flies as fast as time, people never run out of excuses to spend. Despite the global downtrend of the economy, the evolution of political landscape, the rise of extremism, and continuous war in the Middle East, only one thing is constant: the need for money and financial stability. To help you with your challenges, below are three suggestions on earning extra income:

1. A part time job is still a job. Is your current job not sustainable
enough? Help is needed everywhere. Don’t know where to start? Find your strength and maximize your capability. As easy as it sounds, everyone has their own set of skills whether it is as simple as baking, gardening, selling, or even taking care of pets. Develop what you have and offer your services online. Scan the internet and use technology to help you move forward by marketing yourself. Think of long term results. By doing what you are good at, you don’t only make extra income but you also find joy in what you are doing. Find
a good avenue that will need your expertise and make sure you excel at it.Begin by creating a facebook page, think of a good catch phrase. For example, if you are good at baking low fat and healthy cookies, you may use“The Skinny Baker”. Next, look for a local website that can help you advertise your service for free, connect with the right people. And once you got a customer, always prepare a name card for future references. Remember the best way to market yourself is through word of mouth so make sure to treat your customers well.

2. Sell. Take a look at your closet, kitchen, and appliances. Make money of what you don’t need. There’s treasure in your trash. It might be a time for spring cleaning; segregate what you need and what you haven’t use for the past 6 months. Most of the time, we keep things for future use which results to hoarding and piling up of unnecessary things and at the same time, taking up needless space. You need extra income now, and what’s for future use is not a priority. Sell online or at a local marketplace. You may want to do a garage sale, an online shop, or join a forum that specialize in selling second hand items.
3. Review your finances and fine tune your income. Have you ever checked your monthly bills and checked all your subscriptions? From mobile phone subscription, TV, internet service, and other expenses. What can you compromise and what can you live without? Have a thorough check and you will surprised with what you can save. Do you really watch the 100 channels you subscribed on cable TV when you are rarely at home to watch TV? How about the unlimited calls and SMS when you can use facebook messenger? Or the gym membership when you can workout at home? Compare your actual usage and what you have signed up for, and see whether you can downgrade or find an alternative cheaper subscription.
There are numerous ways of earning extra income. To summarize it all, it is about fine tuning your priorities, finding time in believing in what you can offer and how much it’s worth, sorting out your needs from wants, and finding time to rethink it over. And slowly, you will find yourself not only earning more but organized and having clearer direction. Start now. Remember that opportunity is in your hands. It may just be the peace of mind that you’ve been longing for.