Guy budgeting at night

Living check to check isn’t easy. But living check to check while trying to climb your way out of debt can be even more daunting. According to NerdWallet.com, the average U.S. household has $15,355 in credit card debt and about $129,579 in total debt. Many Americans are in need of financial solutions to ease debt relief, help save for retirement and move them closer to home ownership.

I recently chatted with Joyce Tan, a compliance officer for Christian Credit Counselors, a nonprofit organization that helps people avoid bankruptcy and improve their financial health. Budgeting was the biggest topic of our discussion. Here are five tips worth remembering.

Nail Down Your Budget

“Budgeting is the key to making people aware of how much they can afford on expenses. It also helps nail down their current spending habits,” Tan said.

Budgeting is the process where you record your monthly income and expenses on paper or in a spreadsheet. A budgeting exercise is critical for pinpointing which expenses need to be cut down.

“Sometimes life happens; medical emergencies come up or your car breaks down,” Tan explained, “but if you haven’t budgeted funds to cover incidentals, it can make emergencies more difficult.”

Explore a Debt Relief Program

Tan shared advice she learned from clients in their debt relief program. Her average program participant takes three to five years to become debt-free.

“When clients contact us, the first thing we need to do is understand how much debt they have and how they got into debt,” said Tan. “Our program seeks to lower our clients’ interest rates through a ‘snowball’ pay-down method for their debt.”

This debt reduction strategy suggests starting with the smallest balance owed, while paying the minimum payment due on the larger debts. Then once the smallest debt is paid off, move on to the next smallest balance owed, and so forth.

Tan suggests lower-income earners take advantage of programs that simplify payments. Tan’s nonprofit provides a free budget and debt analysis before her team works with creditors to lower interest rates and consolidate bill payments into one monthly payment.

“Program participants only make one fixed payment to us, then we disperse their money every month. This helps them to get one step closer to debt relief,” she said.

Financial Literacy Classes

“Classes are a great way to learn how to get control of your finances,” Tan suggested. “They help with basic tasks like how to read your credit report or understand your credit score.”

Tan’s organization provides free classes on credit and budgeting, student loans and even special classes for military service members. Their education team offers classes in person, online or via conference call. Consider searching for financial literacy or coaching classes in your area.

“Without some solid solutions, debt can become a never-ending cycle because of the interest that builds on credit cards and from late fees,” she said.

Get Educated About Credit

Sonny Douglas, a senior Fresh Start consultant with Quicken Loans, said he thinks there’s room for more credit education when it comes to debt relief. He helps clients improve their financial situation so that they can boost their credit score and achieve homeownership.

“One of the biggest things that I see is people not knowing what debt to pay down or off first,” he said. “A lot of clients believe they should pay off collections or installment loans and then start closing credit cards out. But the only way paying off collections helps to increase your credit score is if the collection is deleted once paid off.”

Douglas recommends his clients try using less than 10% of the available balance on their credit cards.

“I tell them if they plan to pay a credit card off and close the account, then they’ll lose the payment history they may have built up over time,” Douglas said. “Some people don’t realize that closing out all of your credit cards can hurt your score.”

He also recommended some clients pace themselves when paying off debts – one debt at a time.

“Probably the best advice I can give is that less is more. The less credit you have to work with, the easier it will be to control,” he said. “A $10,000 credit card can help your credit in the same way as a $100 credit card if you use it correctly.

Double-Check Resource Credibility

Douglas suggests avoiding quick and easy debt solutions that may cause you to fall deeper into a financial hole.

“Sometimes I talk to clients who hop online and reach out to the wrong resources,” he said. “Credit is extremely tricky and there aren’t many places clients can go to get the help they need. Beware of the many scams out there.”

Douglas often refers his clients to CreditKarma.com because the company allows you to update your credit report weekly. We also use AnnualCreditReport.com because anyone can go there to get a free report and score once every year.

If you have limited funds, tackling your debt may seem like a tall mountain to climb. But these tips will help manage your bills or limit monthly spending. Credible resources are available and credit counseling is a great place to start. If you have questions or other valuable debt-relief solutions, please share them below.

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This Post Has 25 Comments

  1. I’m 62 years old and would like to retire in 3 years. I’m in debt with a car title loan that should be paid off in October 2019 and pay day loan debts. I’m making some progress, I started in May 2016 working with a reputable consolation debt program plan for 4 years that help cut my debts from $20,000 down to under $9,000. I an still paying on a small students loan $1800. I work 10 month and my salary is around $28,000 a year. My credit scores around 503. I’m unable to put any money away. I’m ready worry about my car, because of the hidden fees they can tact on your payments. So far I have not miss a payment, but if you don’t pay on your due date, you still occurred charges. Just found that out. Is there any advice you can give me?

    1. Hi Josephine:

      Your credit score isn’t very high which will make it harder to take any equity out of your if you have one. That said, it would probably be beneficial for you to check out our friends at QLCredit. You can see your credit score and report, but you can also get tips on how you can improve based on information in the report. If you could get your credit score, you would have more options. Given your age, you can also take a look at a reverse mortgage to eliminate your mortgage payment & get a monthly or lump sum payment amount. One Reverse Mortgage could help you with that. That’s one option I would consider if you have a home.

      Thanks,
      Kevin Graham

  2. I would recommend Godstym Loan Firm to any business owner who is looking for funding with competitive interest rates, streamlined process and speed. kindly contact whatsapp:+1267-657-9398

  3. I have about 10,000 in debt. One of those things being a yaMaha credit card, that I used to buy a four wheeler, I lost my job and couldn’t make payments…this was in 2017. I recently filed a dispute with Trans union because the collection agency wouldn’t work with me and the account had been paid off to Capitol one by this collection agency and this collection agency was harassing me, insulting me, and trying to get my bank account info… so Trans union deleted it from my account. Being that it was through credit karma..I don’t really trust it. The rest is student loans and medical bills… please help. I am 22 years old and am really struggling.

    1. Hi Shawna:

      I don’t think there’s any reason to distrust it just because you’re getting the credit report where you see that TransUnion deleted it from Credit Karma. We have a service from our friends at QLCredit that operates in the same space. The information they get for all of these services is actually from the credit bureaus. For example, QLCredit lets you pull your Equifax credit report for free without affecting your score and you can get personalized tips on how you can improve.

      That said, I think you could really use professional help with this. One thing you might check into is credit counseling. That way, someone could give you one-on-one help. That might be where I would go from here. I’m sending you a link to a blog post on credit counseling and perhaps you can decide whether it’s right for you.

      Thanks,
      Kevin Graham

  4. I am a 24 year old mother of two. My husband and I both work as much as possible but can’t seem to even pay our rent and utilities, let alone pay off any of my personal loan, student loan, and medical collections. I am about $5000 in debt right now and I still need to be able to fix my car (it broke down), and pay for other unexpected expenses. Please help!

    1. Hi Allison:

      It sounds like you’re in a tough situation. I think the best I can do is recommend you talk to a financial advisor to see if you can get things back on the right track.

      Thanks,
      Kevin Graham

  5. Help! I quit my job to stay home with my new baby. I have about $6500 in credit card debt from 6 different credit cards . We only have my husbands income which won’t cover the the 6 even minimum monthly payments. I also suffer from postpartum depression and anxiety and this credit card situation is making it worse! I just want a lower monthly payment for all the credit cards combined. Paying the 6 minimum monthly payments isn’t even putting a dent in any of these credit cards 😞

    1. Hi Jessica:

      Sorry to hear about your situation. I’m going to give you a couple of options you can take a look at in order to consolidate the debt. If you have a mortgage with some equity, you could take a look at doing a cash-out debt consolidation. In that case, I recommend checking out Rocket Mortgage or giving one of our Home Loan Experts a call at (888) 728-4702.

      Alternatively, you could look at a personal loan from our friends at Rocket Loans in order to accomplish the same effect and consolidate the balances. Hope this helps! Good luck!

      Thanks,
      Kevin Graham

  6. I have an incredible amount of debt due to graduate school……I want to pay, but due to the interest accrued, I don’t think I can ever put a dent in it…..please advise.

    1. Hi Damien:

      I sympathize. College is getting more and more expensive.

      The first tip I have is not to get overwhelmed. Look for anywhere you can cut back in your budget and put the extra savings toward a debt that you have. You may choose the one with the biggest balance or the highest interest rate. Whatever works for you, just focus on paying off one debt at a time.

      You might also take a look at any debt relief programs that might be available to you. If you follow the program requirements, they can negotiate with your creditors to bring payments down. A payment as agreed isn’t as good on your credit report as something that is paid in full, but it’s better than nothing.

      Thanks,
      Kevin Graham

  7. Hi,
    I am a single parent divorced 2.5 years, unemployed , with a special needs teenage daughter…
    Credit is poor, living in an apartment way too expensive for nearly 4 years.. I need a place for us to call home, tired of the high rents and confinement, I have income through various sources, indefinite
    I’d like to buy a mobile home but cannot do this on my own with no down payment and my credit being poor
    Can anyone take me serious enough to get us out of this dilemma? Thank you

    1. Hi Cathy:

      Your situation is a bit difficult, but I’m going to have someone reach out to help look into this with you. We can help give you some good advice even if we can’t help you with a loan. Someone will be reaching out to go over your options.

      Thanks,
      Kevin

  8. I need help with a strategy to pay off my bad credit debt and student loan. I’ve had it for over 3 years ad never paid anything. Now my credit score is under 500. Please help.

    1. Hi Joseph:

      The best strategy starts with figuring out whether there are any areas where you can cut back in order to save a little more money. After that, set a budget and put as much as you are comfortable with toward your credit card debt and student loans every month. You won’t get rid of everything at once, but if you start paying off a little at a time, you can start to systematically chip away at the problem. Hope this helps!

      Thanks,
      Kevin Graham

  9. I’m glad you are here to help. I lost my job and I can’t find work. I need to get some bill’s caught up. I also need help lowering my credit card intrest rates. Can you give me some tips on what I need to do.

    1. Hi Cathy:

      I’m going to forward you to someone that can really look into your situation and see what the best plan might be for you going forward. They’ll be reaching out! Have a great night.

      Thanks,
      Kevin Graham

  10. Thanks for posting this. Budgeting (and sticking to that budget, very important) can help borrowers prioritize their spending responsibly and make significant payments toward their loans. I also like that you acknowledged the risk that comes with shopping around for help with debt. A large number of people are out there looking to make money on debt repayment, and borrowers need to be aware of that.

    1. Thanks for your comment John. I find that with budgeting, you just have to force yourself to start! It takes a concerted effort. And preying on people with high-interest schemes is a real problem that I wish had more regulation! Thanks.

    1. Hi Margaret:

      I know it can seem endless, but there are always options to consider. You could consolidate the debt at a lower rate with a cash-out refinance on your mortgage or a personal loan. I’m going to have someone reach out and see if we can help you out here. Have a good day!

      Thanks,
      Kevin Graham

    1. Hi Andrea:

      I’m going to have someone reach out to you about Rocket Loans. Have a great night!

      Thanks,
      Kevin Graham

    1. Hi Darlene:

      I’m going to have someone reach out and help you look into your options. They’ll be in touch.

      Thanks,
      Kevin Graham

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