Debt Relief Blog and Resources

There’s a reason so many books and blogs are dedicated specifically to women and finances. Like many other areas of life, women don’t always face the same financial problems and situations that men do.  Compared to men, women generally earn less money throughout their lives, leaving them with leaner resources to cover higher healthcare expenses and longer lives. But that doesn’t mean women are doomed to falling short of their financial goals. Key Takeaway: Financial management is worth your best efforts. Negotiating salary and other perks yields dividends throughout a career. Investing is an important part of wealth accumulation. A health savings account, or HSA, allows people to set aside pre-tax money to pay for certain medical expenses. Funding traditional IRAs and 401(k) plans is especially beneficial because that allows the owner to make use of pre-tax contributions. Women who need help paying off debt can use the services of one of the top debt relief companies. Here are five money tips for women: 1. Increase income Women who worked full-time, year-round in 2017 made about 80 percent of what their male counterparts did, according to the U.S. Census Bureau. The Pew Research Center says this gap in earnings has stayed about the same over the past 15 years.  Some experts theorize that this is at least in part due to women not negotiating their salaries as frequently or successfully as men do, which stifles their earnings for years to come. Linda Babcock, an economics professor at Carnegie Mellon University, said in an interview with NPR that people who don’t negotiate salary at the start of their careers risk losing more than $1 million in earnings over a lifetime. Women should negotiate their salary and other perks often throughout their careers, but especially at the beginning, as those early negotiations will yield dividends over time. 2. Invest A 2018 study by Merrill Lynch and consulting firm Age Wave found that women are less confident in their ability to manage investments than men are. The same study also found that 41 percent of women report that their biggest financial regret is not investing more. But women’s comparatively lower confidence doesn’t mean they’re actually worse at investing. “Practically every competitive trial of paper trading and stock market games has shown that women make better investors than men,” says financial advisor Jeremy Britton. Investing is an important part of wealth accumulation. Just saving is often not enough; the interest rates on many savings accounts don’t allow wealth to grow fast enough to keep up with inflation.  Whereas the average interest rate for savings accounts is 0.09 percent, the S&P 500 Index has an average annual return rate of 8 percent since 1957. Investing involves more risk, but often also higher rates of return. Britton advises investing in companies where you spend money regularly — for example, your bank, insurance company, or phone service provider.  “Technically it may be seen as ‘inside knowledge,’ but every shopper will know when a product or service deteriorates, and if you feel like taking your money elsewhere,” Britton continues. 3. Plan for healthcare expenses Many women deal with healthcare expenses unique to their gender.  There’s the cost of general reproductive health — including regular tests, birth control, and feminine hygiene products — that one HuffPost writer estimated to be about $15,000 over the course of a woman’s lifetime. Then there’s the cost of maternal care, which has been rising for insured patients: an analysis by researchers at the University of Michigan found that average out-of-pocket spending for maternity care rose 49 percent from 2008 to 2015.  There’s also autoimmune diseases. According to a 2004 study, autoimmune diseases are the most common type of disease in the United States, after cancer and heart disease, and they disproportionately affect women. The study notes that 78 percent of people with autoimmune diseases are women. Even looking at just the retirement years, a study by Fidelity Investments found that women can expect to spend about $15,000 more on healthcare than men — $150,000 in total. These considerations make it extra important for women to plan for foreseeable healthcare expenses — and keep a good emergency fund for unexpected medical expenses. Financial experts generally advise setting aside three to six months’ worth of expenses for an emergency fund.  And Dr. Lacey Book, a serial entrepreneur, encourages women to make use of health savings accounts. A health savings account, or HSA, is a type of account where people can set aside pre-tax money to pay for certain medical expenses. “This allows them to save, take advantage of tax benefits, and have the freedom to choose where you spend your money in regards to your health,” Book points out. A flexible spending account is a similar tax-advantaged account that can be used for certain medical and dental expenses. 4. Save for retirement Women generally live about six to eight years longer than men do, according to the World Health Organization, which means many women’s retirement savings have to last much longer than men’s do. Even women who share income and expenses with a male partner may outlive him and be solely responsible for years more of general living expenses, and potentially long-term care, depending on their health.  One way women can shore up their retirement funds is to consider retiring later than they’d planned to allow more time for their earnings to increase and their retirement funds to accumulate interest. Another is to take full advantage of retirement accounts, including any matching contributions their employer may offer. Funding traditional IRAs and 401(k) plans is especially beneficial because that allows the owner to make use of pre-tax contributions. 5. Repay debt Women hold almost two-thirds of the outstanding student debt in the United States, according to an analysis by the American Association of University Women. And data from FINRA, the Financial Industry Regulatory Authority, shows that women are more likely than men to incur fees for late payments and going over their credit card limits.  The interest women pay on these debts can also be a big factor that holds them back from accumulating wealth. The sooner debt is paid off — especially debt with higher interest rates — the better.  Whichever strategy you use, be sure to make at least the minimum payment on every debt each month so those debts don’t accumulate even more fees and interest. Women who need help paying off debt can look to the best debt relief companies, which offer help with credit counseling, debt management, debt consolidation, and debt settlement.

Guest Post by Allison Kade One of my favorite things about the new year is that it’s an opportunity to reset. This can mean different things to different people: Maybe you want to repair or invest more deeply in your relationships with the people you love. Maybe you want to get healthy. And if you’re like many Americans, maybe you want to refocus on your finances to finally feel more secure about your money in 2022. New year’s resolutions often get a bad rap because so many people can’t stick to their goals, but there’s evidence that we’re doing better than you might expect — in fact, nearly half of those who made financial resolutions in 2019 actually kept them. All of which to say, financial resolutions can be a powerful tool to restart the clock, stop focusing on old mistakes and embark on a fresh financial future. Among financial goals, these three top the list: Save more Pay off debt Spend less At the end of the day, however, they’re all different perspectives on the same core principle: Spending less than you earn. You can save more by spending less, or by earning more. And you can pay off debt by doing either of those things and dedicating the difference to your debts. So really, for many people, the key to mastering new year’s resolutions will come down to acing that equation: Can you spend less than you earn? One way to master this savings equation is to start the year with a financial detox to help you reset some of your negative patterns from the year before. This process can also help you focus on the resolutions you’ve chosen for the future. Here’s how to pull it off. Study your 2021 patterns Dig up your old credit card receipts from the past year, or at least the past three months. What are you spending the most on? Is there anything you’re spending on less than expected? You can either do this audit by hand, or you can use an app such as Mint to group your spending into different categories. Write down your values Ask yourself this question: What matters most to you? Write out a mission statement for you and your family. Do you prize travel and exploration? Do you prize self-enrichment? Do you prize down time relaxing? This will help guide your spending. If you particularly look for travel, then maybe it’s okay that you spend your money on trips. And if you choose to place your money behind nighttime courses, that makes sense if enrichment is a top goal. But if, for example, you say that your main value is relaxing time with the family, is it the best use of time and money to shell out for five different after-school classes for your kids? If you most care about enrichment, does it make sense to spend thousands of dollars on travel if that isn’t a top goal? Now compare your values to the money patterns you’re actually finding in your own life. Are they aligned? If they’re not, what else could you do to align them? Highlight where your values are misaligned with your budget If you determine that you have some line items that are out of whack with your spending goals, write them down so you can work on them going forward. Be specific. Instead of “I’m going to spend less on coffee,” try “I’m going to cut out those mid-afternoon lattes, so I can dedicate that money to a travel fund instead.” The first part, notes exactly where you’re going to cut. The second part is just as vital: What’s the point? Keeping the larger goal in mind can help you keep up the motivation to make sacrifices in the present. After all, that coffee (or Hulu subscription or cocktail or whatever) is pleasurable right now, and there’s nothing wrong with getting it if you can afford it. But if you have to compare this specific purchase to your larger goal — which would you choose? Try a challenge To start your year off right, you might choose to do a spending/savings challenge. There are lots of versions of this, such as saving the dollar amount of the week it is during the year (for example, save $1 in the first week of the year and $52 in the last week, for a total of $1,378). Striking up a challenge can make the whole thing feel like a game, add an element of fun and help you focus on the task at hand (saving $27 because it’s the 27th week, let’s say) rather than fixating too much on a goal that feels weightier than that. Conquer your triggers with an "If/Then" Some experts suggest that framing your resolution as a trigger and an action can make a big difference. Choose an “if” or “when” as your trigger and a “then” to describe the action you’ll take to replace the negative one. For example, if you were trying to resist dessert but found yourself tempted whenever you’re out at a restaurant, you might say, “If the waiter comes over at the end of a meal asking if I want anything else, then I will order a tea.” Similarly, you can anticipate your spending triggers this way. Maybe you tend toward emotional spending, like popping into a store whenever you have a bad day at work. You might try something like: “If I have a stressful day, then I will go home and take a hot shower.” Think about the bigger picture Not everything is about spending and saving, at the end of the day. Once you achieve a stable financial base — like having enough of an emergency cushion that you won’t get in trouble if you run into any unexpected events like a car breakdown — then it’s time to think about your longer-term picture. Especially if you have a family, kids, or anyone who depends on you financially, writing a last will and testament can become important. Many people put off making a will because they don’t have a lot of assets and think they don’t need one. The truth, however, is that you don’t have to be rich to need a will: If you have any “stuff” at all, or even basic financial accounts, you have assets. A will lets you determine who gets what (that chess set from your grandfather — should it go to your sister?). The other really big reason to make a will is if you have kids. A will is an opportunity to designate legal guardians for your children. That’s who would take care of your kids if you were no longer around. Generally speaking, the default is that your children would probably go to their other parent, but what if (heaven forbid) you and the other parent passed away together? If you don’t have a will, then these decisions will be made by the probate court. That often is determined by who the closest living relative is. It doesn’t, however, take into account the fact that your child may have a closer relationship to your cousin than to your brother, or the fact that your cousin has kids and you’d like your child to grow up as their sibling. Your choices in your will are typically still subject to the judgment of the probate court, but a will can help the court understand your preferences and wishes. Generally speaking, guardianship wishes tend to be honored unless there is a specific reason why the appointed guardian is deemed unfit. For specific questions about your situation, speak to a qualified attorney. Starting 2022 off right Your resolutions should be about what matters most to you. That includes money, and also your family and values: How can you be closer to the people you love? How can you prioritize the things you care about? How can you help protect your loved ones in the future? Whatever your passion, here’s to making it happen in 2022. Allison Kade is the editorial director at Fabric, a one-stop shop for families to organize their finances. She has written about money for publications like Bloomberg, Forbes, The Today Show, Business Insider, The Huffington Post, TheStreet, Credit.com, Fox Business News, and The Fiscal Times. In addition, her work has appeared in lifestyle publications like Real Simple, Travel + Leisure, Lifehacker, xoJane, and BoingBoing.

Debt is overwhelming and can keep you from pursuing goals or life dreams. You can take steps to regain control of your finances and get out of debt. The chapters below will help you explore your options and decide which one may be a good fit for you. Chapter 1: Credit Counseling Credit counseling is financial education. You can get help from a personal finance professional with setting a budget and making a plan to pay down debt. Credit counseling is great because it allows to your explore your options and get specific advice for your financial situation. Chapter 2: Debt Management Debt management programs are offered by credit counseling companies. Enrolling in these programs freezes your credit, so you won’t be able to open new accounts. These programs can also simplify your bill paying because you’ll make one monthly payment to the credit counseling company, and they’ll divide it among your creditors. The credit counseling company will also work with your creditors to negotiate interest rates and late fees. You’ll pay a monthly administration fee and a one-time enrollment fee. If you make regular monthly payments, debt management can have a long-term positive effect on your credit. Chapter 3: Debt Consolidation Debt consolidation means taking on a new loan to immediately pay off your current debts. You’ll need to make regular payments on your new loan to get out of debt and build your credit. Ideally, you’ll want to find a loan that has a lower interest rate than your current loans. However, it can be difficult to qualify for a new loan and good interest rates if your credit score is low. If you have a lower amount of credit card debt, you can try a balance transfer instead of taking on a personal loan. This is only advantageous if you can pay the bulk of your existing balance off during the zero interest promotional period. Debt consolidation is a good way to take on your debt if you’re committed to making monthly payments. It ultimately helps your credit. Chapter 4: Debt Settlement Debt settlement allows you to settle your debts for less than what you owe. However, you may have to stop making any payment on your debts to help incentivize settlements. This will have a negative effect on your credit. Settled debts will be marked as settled on your credit report. Some creditors may not accept settlements. However, debt settlement can be an effective strategy to get out of debt if you’re overwhelmed. Chapter 5: Bankruptcy Bankruptcy is often viewed as a last resort in debt relief. However, it can be beneficial because it quickly resets your finances. Declaring bankruptcy is a legal process that discharges some kinds of debt. Once debt has been legally discharged, you are no longer legally obligated to pay it. Bankruptcy also helps protect some of your assets so that you still have the things you need to work and live. Keep in mind that your definition of need may be different from the court trustee’s definition. Bankruptcy stays on your credit report for seven to ten years and can have a negative effect on your credit score. If you're considering filing for bankruptcy, work with a lawyer with that specialty. They can ensure that everything is done correctly and avoid legal pitfalls.

This is Chapter 5 of 5 in our Ultimate Guide to Debt Relief series. Bankruptcy is a legal process and a formal acknowledgement that you cannot repay your debts. You may find it intimidating. However, bankruptcy is a good option to consider, helps protect your assets, and helps you quickly move on with your life once the process is complete. Because laws can be complex and intricate, this guide focuses on general information you should know about how bankruptcy works and the best way to approach it before deciding to file. What is bankruptcy? How does bankruptcy affect your credit? When is it a good idea to file for bankruptcy? What happens when you file for bankruptcy? How do you file for bankruptcy? What is bankruptcy? Bankruptcy is a legal process that allows you to hit reset on your finances if your debts are beyond what you can pay. A trustee or judge reviews all of your finances to determine whether or not to discharge the debts, which means that creditors can no longer collect. Creditors cannot take any action to collect once you’ve started the bankruptcy process without first seeking and getting permission from the judge. Bankruptcy does not discharge all of kinds of debt. Alimony and child support are not dischargable. In most cases, income taxes overdue less than three years and student loans are also not dischargable. Meeting with a bankruptcy lawyer to review your situation can help you understand which debts can be discharged and which ones can’t. You can file bankruptcy as an individual, maried couple, or business. There is even a process for filing bankruptcy if you have debts internationally. The two main kinds of bankruptcy for individuals are Chapter 7 and Chapter 13. Chapter 7 bankruptcy fully discharges eligible debt while protecting your assets. Chapter 7 bankruptcy typically protects all of your assets. Chapter 13 bankruptcy also helps protect your assets, but it doesn’t fully discharge your debt. Instead, Chapter 13 bankruptcy reorganizes your debt and creates a payment plan that lasts up to five years. “In Chapter 13, clients can reduce the amount owed on secured loans, reduce interest rates, reamortize loans, remove certain liens, extend the time to pay back taxes, reduce the amount owed on unsecured loans sometimes down to zero, and legally break leases,” says Dai Rosenblum, attorney and counselor of law. To get the best outcome, it’s wise to work with a lawyer with Chapter 13 expertise and experience. “You need a Chapter 13 specialist. If that lawyer does things correctly, you end up with a confirmable plan that the creditors are stuck with. There is no negotiating,” he adds. Depending on your situation, you may have to file a Chapter 13 bankruptcy. Otherwise, Chapter 7 is the ideal. “As a general rule, you prefer to do a Chapter 7. That eliminates all of your debt, and is completed, start to finish, in a few months. You do a reorganization plan because you need to, not because you want to,” says Rosenblum. While bankruptcy is an effective way to reset your finances and start over, it does have long-term effects on your credit. Back to List How does bankruptcy affect your credit? Bankruptcy stays on your credit report for seven to ten years, so it can make it difficult to qualify for low interest rates, new loans, and credit cards. But, it’s not all bad news. Bankruptcy can have a positive effect on your overall credit, too. “One surprising thing about bankruptcy is that it can improve your credit. All the debt that was formerly on your credit report is reduced to zero. Your credit ratio drastically improves, even though your credit score goes down. That shows a potential new lender that it will be easier to make future loan payments,” says Rosenblum. However, even though bankruptcy can lower your credit score and stays on your credit report for seven to ten years, bankruptcy can be a wise choice if you really need a reset on your finances. Back to List When is it a good idea to file for bankruptcy? If your debt has become overwhelming and impossible to pay, bankruptcy is worth considering because it can protect you from creditors. Consulting with a bankruptcy lawyer to learn more about how bankruptcy can help you understand it more and determine if it’s a good fit for you. “Without legal advice, many take assets that are completely exempt, such as 401(k)'s, and pay on debt that they don't have to. Most consumer bankruptcy lawyers offer a free first consultation, so there is no downside to gaining knowledge about how best to deal with debt. You shouldn't go to a credit negotiating company. They generally charge more than a lawyer does and reduce the amount of debt less than a bankruptcy does,” advises Rosenblum. Back to List What happens when you file for bankruptcy? Before you file for bankruptcy, you will be required to take a credit counseling course to help you determine if bankruptcy really is the best choice for you. Once you file for bankruptcy, you’ll have a meeting with your trustee. Your creditors can attend to ask for more information on your financial situation. Rosenblum offers more insight: “You attend a Creditors Meeting, which is conducted by a lawyer appointed as the court trustee. There is no judge and no courtroom. It is rare for creditors to be there. What rational business would pay to send someone to a meeting where they can't get anything out of it? You get a document called a 'Discharge Order' in the mail. With rare exceptions, that's the entire process,” he says. Once the judge determines which debts to discharge, you’ll no longer be legally required to pay those debts. Back to List How do you file for bankruptcy? While you can represent yourself when filing for bankruptcy, it’s a good idea to work with a lawyer. The judge and the court trustee must remain impartial and cannot help you if you represent yourself. A lawyer can help you avoid pitfalls and help you get a good outcome. Lawyers can be expensive. If you have a hard time stretching your budget to pay for one, you can find resources available to help or get free legal counsel. Depending on which kind of bankruptcy you’re filing, you may have the option to represent yourself. However, that may not result in the best outcome for you. “If you qualify for a Chapter 7, you can be your own lawyer, but there many traps for the unwary, and it is a bad idea. Even lawyers who are not bankruptcy specialists would probably not be able to get a confirmable Chapter 13 plan if they represent themselves. The list all of the things to look out for would be book length,” says Rosenblum. As you’re choosing an attorney, you’ll want to find one who specializes in bankruptcy law. “Bankruptcy law is complicated and unlike any other area of law. Lawyers should not dabble in bankruptcy,” says Rosenblum. Understanding what bankruptcy is and how it works will help you be more confident when seeking professional help with your debts and empower you to take control of your finances.

This is Chapter 4 of 5 in our Ultimate Guide to Debt Relief series. If you’re overwhelmed with debt and want to be debt-free as soon as possible, debt settlement can be a good option. It allows you to become debt-free by negotiating with creditors to forgive part of your debt. Debt settlement is not for everyone and carries some risks. It’s important to keep this in mind as you consider debt settlement. Here’s what you need to know: What is debt settlement? How does debt settlement work? What percentage of debt is usually accepted in settlement? How does debt settlement affect credit? Should I work with a company or negotiate for myself? What is the best debt settlement company? What is debt settlement? Debt settlement is the process of negotiating with creditors to settle for less than you owe. You can work with a debt settlement company that will work with creditors on your behalf or you can negotiate on your own. Settlement is typically used for unsecured debt, which is debt without collateral. Credit card debt is an example of unsecured debt. Secured debt has collateral that the creditor can use to recoup their loss if you fail to pay. Examples of secured debt include auto loans and mortgages. Back to List How does debt settlement work? If you work with a debt settlement company, you’ll typically stop paying your creditors to help incentivize a settlement agreement. Instead, you’ll set aside money into a separate account that you control to be used to pay settlements once agreements are made. Once settlements are reached and paid, you’ll owe the debt settlement company for its services. Costs are determined by state law and range between 15 and 25 percent of your total enrolled debt. If you negotiate on your own, you’ll need to determine who each of your creditors are and what kinds of offers you’re going to make to each one. If you’re going to negotiate lump-sum payments, have some cash ready to make those payments. Keep in mind that the IRS considers forgiven debt taxable income. You may owe more taxes due to a successful settlement than usual. Be prepared to set more money aside in withholdings so that you aren’t surprised with tax debt when you file your return. As you consider debt settlement, you should be aware of the risks. “The biggest risk is that you withhold payment for months and then one or more creditors sues you. Then you have the costs of the settlement, the taxes you'll owe on settled amounts, the fees, if any, that you pay to a settlement company, court costs and a judgment to your creditor. That's the worst case scenario,” says Gina Pogol, MoneyRates personal loans managing editor. However, you still have options if a creditor starts seeking legal action, whether or not you’re enrolled in a settlement program. “If one or more creditors threaten legal action, you should contact them and try to negotiate a compromise. If you are truly overwhelmed with debt, consider bankruptcy. That does stop lawsuits and does protect you. Even the threat of bankruptcy can motivate creditors to negotiate with you. Because in a bankruptcy filing, the court distributes payments and the creditors may get much less than if they work things out with you,” advises Pogol. Back to List What percentage of debt is usually accepted in a settlement? It’s hard to say what a creditor will accept in a settlement. A lot depends on the creditor’s own financial situation, how much you owe, and the negotiator’s skills. Some debt settlement companies boast of the ability to negotiate your debt to as much as half of what you owe. However, these statements should not be taken as a guarantee because the creditor ultimately makes the decision on whether or not they’ll settle with you. If you’re negotiating lump-sum settlements on your own, it’s best to have between 20 and 50 percent of what you owe in cash that you can make a payment with. Whether you hire a company or negotiate yourself, you should have realistic expectations about how much you can save on your debt. “​The important thing is to understand that creditors don't settle unless they believe it's in their best interest to do so. And the 'pennies on the dollar' claim that settlement companies advertise has some caveats. You can settle a very old collection account that was purchased by a debt collector for much less than you can a recent default to a primary creditor. That is because the debt collector with an old collection probably paid pennies on the dollar for the right to collect your debt. On average, these guys buy old debt for about 4 cents on the dollar. So they can make a profit if you offer 10 cents. You can settle a $2,000 debt for $200 in that way. However, it might not be a great idea. Collections drop off your credit report after seven years. But settling that old debt makes it new and can harm your credit score. A recent default to a primary creditor, for instance, your VISA card, might be settled for 25 percent to 50 percent of the balance,” says Pogol. Back to List How does debt settlement affect your credit? Debt settlement typically has a negative effect on your credit score and typically shows up on your credit report for seven years. In most cases, you won’t make any more payments on any of your current debts. This will negatively impact your credit score. Luckily, if you change your financial habits, you can raise your score over time. “As long as you keep up with your other obligations, whether it is a mortgage or auto loan, your credit score can rebound within one to two years. To accelerate this rebuilding process, you should try to open up a low limit credit card, or even a secured credit card, which will be easier to obtain. Paying these balances in full each month will slowly but surely increase your credit score and help you return to good standing with your credit,” suggests James Lambridis, DebtMD founder and CEO. Once you’re debt-free, budget carefully and save to avoid debt. As you successfully manage your finances, you’ll be able to start increasing your credit score. Each of the debts that you settle are marked as “settled” on your credit report. These markers stay on your credit report. However, the more time you place between your settled debts with good financial habits and keeping your debt low, the less it will matter. There are also steps you can take to reduce the negative effect on your credit report. “Debt settlement's effect on your credit depends on how you settle and how you negotiate the terms. If you make your payments on time and then offer a lump sum, AND get the creditor to report the account 'paid as agreed,' you have no repercussions. But, that would be a rare occurrence,” says Pogol. If you’re negotiating with a collections agency, you can negotiate a pay-for-delete. “A pay-for-delete means they remove the collection from your credit report in exchange for your payment. More typically, consumers miss payments for months, then settle and it's reported as ‘settled for less than the amount owed,’ which does real damage,” adds Pogol. Keep in mind that even if you can negotiate some things on your credit report, you can’t remove any public record of legal action. Pogol continues, “If any of the creditors take you to court, you have a public record in addition to the collection and missed payments.”   Once you finish settlement, you should carefully review your credit report. “One step in improving credit is to continue to check all your credit reports to make sure everything is reported correctly. This will help you to catch errors that need to be disputed. It also helps you to discover information that is not included in the reports that should be,” advises JeFreda R. Brown, Provision Financial Education CEO, Certified Financial Education Instructor, and Adjunct Finance Professor. Rebuilding your credit after completing settlement can take some time. The most important part of rebuilding and moving forward is to develop strong financial habits and be consistent. “An important part of improving credit is to also seek education. Getting personal financial education is vital. You need to be able to understand how your emotions, desires, and value affects your financial behavior. Financial psychology is a part of personal financial education that helps people learn these things and how to start changing negative financial behavior,” suggests Brown. Understanding how you got into your financial situation will help you make different choices in the future. Maybe you’ll prioritize savings as you budget or limit your credit card use to certain kinds of purchases. “Pay your bills on time, begin a savings fund, and begin to regularly monitor your credit report. Awareness is the first step towards improving the overall picture,” recommends Mike Weaver of Money Ladder. Back to List Should I work with a company or negotiate for myself? If debt settlement is the approach you want to take, you’ll have to decide between negotiating yourself or hiring a company to do it for you. Negotiating on your own The largest advantage of negotiating on your own is that you are fully in charge. You don’t have to rely on recaps from someone else. You also won’t have to spend money on negotiation fees, which can add to your total “get-out-of-debt” costs. If you negotiate yourself, you may be able to explore other items that can be negotiated in addition to lump sum payments. Settlement companies may not explore these other options on your behalf. These additional options include interest, minimum payments, creating a hardship plan or workout agreement, and debt management. You may also be successful in negotiating how your settled debt will show up on your credit report. The biggest drawback of negotiating yourself is the time commitment and the emotional work it can take. Negotiating for yourself can be an empowering experience. However, negotiations can take time and not always seem like they are getting somewhere. This aspect of the negotiation process can take an emotional toll because of heightened stress about your finances and working out a deal. Another drawback is that your success negotiating on your own depends largely on your own negotiation skills. If you have great negotiation skills, that’s great. If not, you may not get as good settlements as you might by working with an experienced negotiator. Tips for negotiating on your own “If someone is negotiating their own debts, they definitely need to learn some key terms (definitions) so they understand credit and debt better. They also need to be able to have a knowledgeable conversation with their creditors to show the creditors that they cannot be taken advantage of. This will also show creditors that you are serious about paying your debt,” says Brown. Gather information. Know the full amount you owe on each account. Create a monthly budget and understand what your regular income looks like. This information is important to share with any one you work with who’s giving you advice on your debt strategy. Be familiar with financial lingo. If possible, it’s worthwhile to consult with an attorney. An attorney may be able to give you insight on how debt laws apply to your situation, which can inform your strategy going forward. Know your creditor. If your initial creditor has sold your debts to a collections agency or another creditor, you need to know so that you start negotiating with the right person. Once you know who you’re working with, you also need to research each creditor’s policies regarding settlement agreements. This knowledge will help you create acceptable offers. Have a plan. Before you contact your creditor to start negotiations, you need to have an offer ready. Your initial offer should be based on what the creditor will accept, your current situation, and should be the most ideal situation for you. “The most important thing for a person to know when negotiating debts involves knowing your terms. If you have an expert’s advice before going into the negotiation, and you don’t allow yourself to be pressured or swayed regarding what you can and can’t do, you’ll be in much better shape,” says Weaver. Being certain of what terms you can accept and knowing your other options if a settlement is not accepted will help you be more successful. Before you make your initial offer, be sure that you have the funds on hand to pay it if it is accepted. “You'd first need to come up with a sum of money to offer the creditors — say 25 percent of what you owe. Then, you'd send them all a letter offering that 25 percent as payment in full. Or, you'd offer an upfront sum plus a series of payments totaling some percentage of the balance owed. You would not send them anything without confirmation in writing that they will accept this,” says Pogol. It can be helpful to have a counteroffer ready in case the creditor doesn’t accept your first offer. Before you make a counteroffer, you need to understand why the creditor rejected your first offer. This can help you decide how to approach your counteroffer or next step. Explain your situation. While creditors probably don’t want to hear a bunch of excuses for not being able to make payments, it’s important to let them know if there’s anything uniquely challenging about your situation. “You should always be sincere and truthful to the credit card companies. If you have a serious financial hardship, whether it’s a job loss or unexpected injury requiring you to take on medical bills, be sure to convey this to your creditors. They are more likely to work with people who are experiencing a hardship. In the end, they would rather recoup some money rather than nothing,” says Lambridis. Before you talk to creditors, practice brief statements that clearly explain your situation and why you need some concessions from them. Be honest and don’t overstate your reasons for being behind on payments. Ask questions. As you work with creditors, keep asking questions. The more questions you ask, the more information you’ll have about how the creditor handles settlement negotiations and what other concerns they might have. Brown recommends a few topics to ask questions about: “If someone is negotiating their own settlements, they need to understand how the creditors will report the settlements on the person’s credit report. The way that the debt settlement is reported has a major effect on the credit score. It would have a negative effect on a person’s credit score if a creditor reports the debt settlement like a bankruptcy. Additionally, find out from the creditors what the effects of the settlement will be on your credit score. Stop using credit, and do not apply for more credit while negotiating settlements and while in the program. Find out from the creditor how long it will take them to report that the debt is being paid and has been paid. It should typically be reflected within 30 days.” Take notes and save your mail. Document your interactions, especially if they are verbal. Taking notes will help you remember how things stand with each creditor, which is important when negotiating multiple accounts. Review and keep any communication you receive about your accounts from the creditor. Get everything in writing. Before you make any payments, be sure to get the agreement in writing. Make sure that the agreement has everything you discussed with the creditor and that you understand the terms. If you have a question or something is missing, work with the creditor again to get those things corrected. Stick to the terms. Carefully stick to the terms of the agreement. If you do not keep the terms, then the agreement is void. It’s unlikely that the creditor will renegotiate with you, and you’ll be back in the situation you negotiated out of. Hiring a settlement company The best part of hiring a company to negotiate settlements is that you’ll have an experienced negotiator working on your case. Having someone with negotiation experience on your side can help you get the best settlements possible. Furthermore, you won’t have to deal with the emotional work of negotiating for yourself. Because you won’t be doing the negotiating yourself, you’ll want to pick a company that offers good client communication. Most companies offer an online portal that clients can use at any time to check the status and progress of their account, which is helpful and convenient. However, you’ll have to pay the company for its services, which can be expensive depending on how much debt you enroll and how much the company charges. Depending on state laws, debt settlement companies charge 15 to 25 percent of the total debt enrolled in the program. Fees are only collected once settlements are reached, so there are no upfront costs. Stay away from settlement companies that do charge upfront fees. Take advantage of a free consultation to learn more about a company’s settlement program, cost, and how to disenroll from the program if your situation changes. Most settlement companies have minimum debt requirements. In order to qualify for their services, you’ll have to enroll at least that much debt. Most companies won’t accept total debt amounts under $7,500. Some companies have higher requirements. Tips for choosing a good debt settlement company “People should definitely find out beforehand what a debt settlement company’s procedures and policies are. Read the fine print. Don’t sign anything or agree to anything that you do not understand. Definitely do not enroll in a program if you have been pressured to do so by the company’s representative(s),” advises Brown. As you’re vetting debt settlement companies, you need to ask questions to make sure you understand the program and feel comfortable trusting the company with your case. Below are questions you should ask as you evaluate settlement companies. What is the company’s track record and experience? You’ll want to pick a company that has several years of experience and a good track record of successfully negotiating settlements. What do customer reviews say? While the company’s website will tell you plenty of positive things about the company, it is usually biased. Visit third-party review sites to read customer reviews to get a full picture of how well the company serves its clients. Does the company offer a free consultation? It’s standard for debt settlement companies to offer a free consultation to review potential clients’ cases. If you’re considering a company that does not offer free consultations or are asked to pay upfront fees, you should find another company. Upfront fees and no free consultations are red flags in debt settlement. Will I have one point of contact for questions and updates on my account? This question will help you gauge the kind of communication that you can expect throughout the settlement process. Will a single representative or a team handle my case? Asking this question will help you understand the company’s approach to customer service and negotiation. There are pros and cons to each scenario, and you just need to be comfortable with the process. How does the savings account for monthly payments work? Keep in mind that the monthly payment goes into a bank account under your control to save up for paying settlements. Make sure you understand how to access information on your account. You also need to understand if and how the available funds in your account will be accessed and used on your behalf. What happens if I want to withdraw from the program? You should be able to withdraw from the settlement program at any time. “In their contracts, most reputable debt settlement companies have a 'notice of right to cancel' which you can simply sign and send to them to withdraw yourself from the agreement. You should be wary of companies who make it difficult to cancel, as these are the ones who may not have their clients’ best interests in mind,” advises Lambridis. Program withdrawal policies and processes may vary by company, so be sure to understand how this process works before enrolling. Asking the questions above will help you understand a company’s approach and determine whether or not it is a good fit. Back to List What is the best debt settlement company? Because debt settlement has so many risks and the reward is more uncertain than with other methods, it’s important to choose your debt settlement company carefully. The questions in the previous section will help you vet companies to find a good fit. Best Company also ranks debt settlement companies by weighting customer reviews and considering other industry factors like time in business. No company can pay for a ranking on our site. For more information on how Best Company ranks debt relief companies, visit our “How We Rank” page. To see which company gets the top recommendation, visit the debt relief homepage. Back to List

This is Chapter 3 of 5 in our Ultimate Guide to Debt Relief series. Debt can strain your finances. It can make your day-to-day more difficult. Finding the best way out of debt is the first step to gaining control of your finances. While debt consolidation can sound like an odd idea — why would you take on new debt to get out of current debt? — it can be a good strategy for some. Here are questions you may have about debt consolidation: What is debt consolidation? What is credit card consolidation? How does debt consolidation affect your credit? How do consolidation loans work? How do you get a debt consolidation loan? How do you get a debt consolidation loan with bad credit? What is the best debt consolidation company? Key Takeaway: Debt consolidation can be a good option. Debt consolidation is transferring several debts into one. Debt consolidation typically has an overall positive effect on a person's credit score. You’ll want to consolidate debt with a stable and transparent company that serves its clients well. What is debt consolidation? “Debt consolidation works by transferring several debts to one centralized source, ideally with a lower interest rate than the original accounts and with a fixed repayment period,” says Matt Frankel, CFP and personal finance expert at The Ascent. In many cases, personal loans are used to consolidate debt. However, depending on your situation, you may be able to use your mortgage or do a credit card balance transfer to consolidate your debt. Instead of keeping track of multiple payment deadlines, you’ll just have one to remember if you consolidate. If you’re considering consolidation loan offers, pay attention to the annual percentage rate and loan length. “Debt consolidation lumps all your debt into a single monthly payment at a lower monthly payment, but usually for a longer period, higher interest, or a combination of both,” says Jacob Dayan, Finance Pal and Community Tax cofounder and CEO. Ideally, you’ll want a loan that has a lower overall interest rate than your current debts. A loan with a longer term length or higher interest rate may not be the best fit. However, in some cases it can make sense to get a longer term loan for a more affordable monthly payment when you consolidate your debt.. Keep in mind that you’ll need to pay origination fees when you accept a loan offer. You should also pay attention to the APR and interest rate. Note whether or not there are prepayment penalty fees. What is credit card consolidation? “Credit card consolidation involves transferring several credit cards into one debt, using the aforementioned options or sometimes even a new 0 percent interest credit card via a balance transfer,” says James Lambridis, DebtMD CEO. If you have a low amount of credit card debt, around $5,000, a balance transfer can be a great option. However, there are some key differences between a balance transfer and a consolidation loan. “Using a credit card balance transfer is different than using a personal loan to consolidate credit card debt for a few reasons. First, it's quite common to find a balance transfer credit card with a 0 percent APR, whereas you'll certainly pay at least some interest on a personal loan. Second, credit card balance transfers don't have a set repayment period, just an expiration date for the 0 percent APR. If you have the ability (and discipline) to pay off the entire amount you're consolidating within the 0 percent APR window, it's an option worth considering. If you can't, the fixed repayment schedule and interest rate of a personal loan could be the better way to go,” says Frankel. If you’re considering a balance transfer, compare several different credit cards and check the length of the period. Ask what fees exist for completing a balance transfer. Before you apply for the credit card, divide your debt over the total length of the interest-free period. Are those payment amounts you can fit into your budget? What happens if you make lower monthly payments? Will you still be able to get ahead of your current debt? Asking these questions will prevent surprises when you transfer the balance, pick the right card, and help you take advantage of the interest-free period. Keep in mind that your credit score will affect the rates you qualify for. The better your score, the better the rates. If you don’t quite finish paying off your debt with a balance transfer, don’t plan on using this tactic again. In some cases you may be able to, but ultimately applying for and getting new credit cards regularly has a negative effect on your credit score. Once you’ve transferred your balance, be disciplined in making regular monthly payments so that your debt is paid off before it starts accruing interest again. For the best results, do not make any new charges on your credit card because it will make it harder to pay off your current debt if you keep adding to it. How does debt consolidation affect your credit? Debt consolidation’s effect on your credit varies depending on your approach. However, the overall effects are typically positive if you make the monthly payments. If you get a consolidation loan “If you get a debt consolidation loan to pay off your high interest loans and credit cards it will actually help your credit score. Credit utilization ratio is the amount of available credit you're using and the lower your card balances the higher your credit score will be. So when you pay off your card your credit score will likely increase significantly,” Randall Yates, The Lender’s Network CEO. While this can have a nice positive impact on your credit, it only works for credit cards if you keep your current credit cards open. “However, there may be negative consequences if you close the accounts that you've paid off. But if you leave them open you may end up with greater debt as a result of continued use of the credit in addition to the consolidation,” Morgan Taylor, finance expert and LetMeBank CMO. As you look at consolidation loans, you’ll want to be careful about how many you apply for. Lenders do a hard inquiry into your credit every time you apply. If you have too many hard inquiries into your credit within a certain amount of time, your credit usually is negatively affected. “It can drop your score because it is another hard inquiry being pulled. It also turns short term debts into long term debts. Still, if you are having financial issues and debt consolidation will help you fix those issues, do it. You shouldn’t be worried about your score at this point,” says RJ Bryan, Credit Reps cofounder. If you do a balance transfer “Consolidating your credit card debt to a single credit card may not have as much of an effect,” says Frankel. Opening a new credit card to do a balance transfer increases your overall available credit. If you do not add any charges to your credit card, your debt-to-credit ratio will be better. If you close the old credit cards once you transfer the balance, your credit score will typically be negatively affected. Your debt-to-credit ratio also won’t benefit for having the additional unused credit. Keep in mind that many credit cards are considered revolving debt, which is not the best kind of debt. Revolving debt means that the card issuer has approved you indefinitely for a set loan limit that you can use at your discretion. Since the approval remains whether or not you use it consistently, it’s considered revolving. “If the new loan is a revolving account and if by consolidating your debt you maximize the revolving debt limit, this, too, will hurt your credit and your credit score,” says Bryan. Keep in mind that credit card issuers also do hard inquiries when you apply, so do your research beforehand and limit your credit card applications to protect your credit score. “While there is no way to know for sure how debt consolidation will affect your credit, it's likely to be a positive catalyst, especially if you consolidate your credit card debt and don't run it back up,” Frankel concludes. Bryan agrees. “Overall, it all depends on your situation. It could affect your score hugely or just knock off five points for the hard inquiry.” How do consolidation loans work? Consolidation loans are typically unsecured loans or personal loans that make it easier for you to pay off current debt. An unsecured loan has no collateral that can be seized if you fail to pay. A car loan is a kind of secured loan because the bank can take the car if you fail to pay. Unsecured loans usually have higher interest rates than secured loans because there is no collateral. You can also find secured consolidation loans. While lower interest rates are a plus, you’ll need to put up collateral for the loan. “Keep in mind that some debt consolidation loans are secured by collateral. Which means the loans are secured (another term for insured) by things such as your home, property, business, etc. So, if you default on your loan, the lender will be able to recoup their loss when you sell the home, property, business, or whatever you may have put up for collateral,” Dayan says. Consolidation loans can offer easier payment terms with lower monthly payments, though the term length of the loan may be longer. Longer payment terms can mean paying more in interest overall. Determine how much you’d pay to get out of debt, including interest, by making your current payments. As you consider loan offers, calculate how much you’d pay to get out of debt with each offer. Include any origination fees and interest in your calculations. Compare the two totals and consider the payment terms. Are the payment terms of the consolidation loan better for your monthly budget? How large is the total difference between making current payments and getting a consolidation loan? If you have a better shot of successfully paying off your debt through a consolidation loan, it may be worth paying more overall to have monthly payments that you can afford. If you get a bonus or have extra cash, some loans allow you to make additional payments on your loan sooner to help lower the interest that can accrue. Some loans have prepayment penalties, so before taking a consolidation loan, check to see if those exist and what they are. If neither option is feasible given your budget or how quickly you’d like to get out of debt, you may need to consider other debt relief options like bankruptcy or debt settlement. How do you get a debt consolidation loan? As with most loans, you need to apply, be approved, and accept the loan. Before you apply, compare consolidation loan offers from multiple companies. Luckily, you can find plenty of options with a bit of research. “Over the past few years, the personal lending market has exploded. There are dozens of reputable financial institutions now offering personal loans, so the best course of action is to compare several of the best personal lenders to see which best meets your needs,” says Frankel. You’ll want to find a lender that offers favorable terms to borrowers in similar situations. To do this, you’ll want to have all the details about your financial situation so that you can better identify potential lenders. “In the United States, a federal student loan consolidation does not have a credit requirement. Other consolidation loan credit requirement varies. Get your credit score, list your loans and payments, and start shopping around,” says Bryan. In many cases, you can do much of your loan shopping online. “There are many ways to obtain a debt consolidation loan. Most people use online lenders such as Lending Club, Prosper, or Upstart. This is the quickest and most convenient way to secure a loan,” suggests Lambridis. “Another way is to go into your local bank or credit union. You may be better off going this route because smaller institutions like these typically offer lower interest rates,” Lambridis continues. Do some research online then compare with your bank or credit union to see what they can offer to find the best rates. Pay attention to interest rates, length of repayment, origination fees, and what penalties exist for late payments or prepayment. Looking at these factors will help you compare loans and choose the best fit for your debt management needs. Approval for a loan and the rates you qualify for are based on your credit score. The better your score, the easier it is to be approved and get the lowest rates. How do you get a debt consolidation loan with bad credit? It’s hard to find a consolidation loan if you have bad credit. “Typically lenders want borrowers to have at least a 640 credit score to qualify. Borrowers with credit issues may have to look at a secured loan to consolidate debt, such as a home equity loan or cash out refinance,” says Yates. Some lenders may look at other factors, like your job history and income, in addition to your credit score to select the loan terms it can offer you. However, it can still be difficult to find a loan with favorable terms to consolidate your debt. If you find some consolidation loan offers, pay attention to the interest rates and compare it to your debts’ current interest rates. If the interest rates are higher with the loan than your current interest rates, it’s probably not worth it. If the terms are significantly worse than your current debts, that’s a good indicator that a consolidation loan does not fit your situation. It may be better to pursue another option, like debt settlement. What is the best debt consolidation company? As with all financial institutions, you’ll want to consolidate debt with a stable and transparent company that serves its clients well. Research companies to understand their experience and track record. Company websites will tell you all of the positive aspects. Looking at third-party review websites can help you get more objective information. Reading customer reviews can also give you a strong sense of how well a lender operates and treats its customers. Notice when people are leaving reviews — are they speaking mostly to the application and approval process or are they addressing experiences after applying for a loan? Check out Best Company’s top-rated personal loan companies and debt relief companies to read customer reviews. Learn more about how Best Company ranks companies. (Spoiler: Companies can’t buy rankings. Our ranking algorithm weights customer reviews.)

Because the holiday season is often about gathering friends and family, enjoying special meals and treats together, and exchanging gifts, it can be easy to overspend. To keep your spending in check, follow these tips to lower your holiday expenses and keep your budget feeling jolly: Set priorities Be selective and intentional about your traditions Plan ahead Find savings Track your spending Avoid debt Set priorities Think about what matters most to you during the holidays and consider what makes the holidays fun for your immediate family. Is it the food? Time spent together? Decorations? Serving others? Once you’ve narrowed it down, think of ways to focus on those parts of the holiday and reduce focus on other aspects. This way, the money you do spend over the holidays will contribute more to what matters to you and to your immediate family. Be selective and intentional about your traditions If you’re just starting to create holiday traditions with friends and family, be thoughtful about what you really want and how these traditions may affect you in the future. Start simple traditions around the parts of the holidays that matter most to you. You can also start traditions that help you off-set holiday expenses. For example, Kate Raidt, founder of Kate Raidt Sales Coaching, has an annual yard sale. “Every year in November or December, we have a yard sale. It's amazing in one year how much the kids outgrow. We make $500–$1,000 every year selling stuff that has collected dust,” she says. If you already have holiday traditions, take some time to evaluate them. Which ones do you enjoy most? Are there traditions that your partner or kids value? See what you can do to adjust or reframe your holiday traditions to make them easier on your finances. For gift exchanges, try setting limits or limiting who you exchange gifts with. Logan Allec, personal finance expert and owner of of Money Done Right, suggests, “It’s often made fun of in movies and TV, but a gift limit with your loved ones is a win-win for everyone. Without a gift limit, it’s easy for someone to accidentally over-spend. Not only will this make the other people feel bad for not buying as nice of a gift, but you can quickly end up spending a significant amount of money.Instead, talk ahead of time to agree with everyone on a limit for your gifts. Whether it’s $10, $20, $50, or more per person, you all will now have the freedom to buy an affordable gift.” You can also talk to relatives and friends about alternatives to gift giving, like spending time together. Holly Wolf, the Director of Consumer Engagment for SOLO Laboratories, Inc., says, “Most people are agreeable to not exchanging gifts if you approach it kindly. Suggest that you spend time together rather than exchanging gifts.” Plan ahead Planning ahead for the holidays includes organizing activities with friends and family. As you plan for holiday celebrations, be sure to include a financial plan by budgeting. Your holiday budget should include all holiday-related expenses — travel, food, gifts, decorations, and anything else you buy specifically for the holidays. “If you set an overall spending limit first, you can then decide how all of your different costs will fit into your budget. Furthermore, this will help you define what overspending truly means and discover cost-saving options,” advises Chris Terschluse, head of Marketing and Content for Chime. If you want to set aside money for the holidays throughout the year, that can help you have a larger budget and a little more wiggle room. “Start by making a list of the food you think you'll serve and what items you'll need to buy. Add other holiday costs to the list, such as decorations and gifts.Once you have a rough budget, total it and divide it by eleven. Start saving money each month, starting in January, to be used for your holiday expenses. As the holidays approach, you'll be ready with enough money saved to pay for holiday expenses without going into debt,” suggests Deacon Hayes, owner and founder of WellKeptWallet.com. The amount and frequency is up to you and should be based on what’s feasible with your regular budget and how much you’d like to have for holiday spending. The most important part is to be consistent. If you’re planning ahead, you can also try to spread some of the costs throughout the year so that they don’t all hit at once. Shopping early can also help you save money on last-minute mark-ups. “When you finish your holiday shopping early, you won't have to pay extra for either the item or the shipping simply because you waited to shop until the last minute,” says Hayes. You should make travel-related purchases early because those prices increase around the holidays. “Airlines, car rental agencies, trains, and every other form of transportation dramatically increase prices around the holidays. Even gas stations raise prices as they know that people will pay whatever they need to in order to get home and see their families.As a result, the best way to save here is to end up booking your travel as early as you can. This way, you can save money and ensure that you’ll still make it home for the holidays,” says Allec. Depending on your shopping habits, it may actually be best to put off shopping as late as possible. Anne Keery, Unique Gifter owner and editor, says, “Lots of people, myself included, love to find the perfect gift... and then the next perfect gift, and the next. By the time Christmas rolls around, I'll have found six perfect gifts for one person and be wildly over budget. Start shopping later, so that you don't run out of budget before you run out of time. There will be new sales and deals, so don't worry, you aren't missing out." You know yourself, so take the approach that best suits your needs. Find savings As the holidays get nearer, create a shopping list. Once you have your gifts determined, stick to your list and keep an eye out for when those items go on sale so you can comparison shop. You can do your own research and compare prices manually, or you can use an extension that does it for you. “Using a browser add-on, like PriceBlink or InvisibleHand, will ensure you never overpay. The free browser extension automatically checks for lower prices, coupons, and free shipping anytime you are shopping online. It also tracks prices and price history, so you can decide the best time to buy,” says Karl Quist of PriceBlink. You may also be able to find discounted gift cards. “Discounted digital gift cards are also a great way to save. On GiftCardGranny.com, you can find discounted gift cards that you can purchase and then shop with (automatically creating your own discount) or give as gifts (the recipient will never know that you saved on their gift!),” says Trae Bodge, smart shopping expert for TrueTrae.com. You can also try other shopping methods, like Facebook or garage sales. “Use Facebook Marketplace as a place to find gifts for people. Allow someone else to make the impulse buy and resell the item back out to the Marketplace for a discounted price. You can find many items new and then use the chat feature to negotiate the price,” says Brittany Kline of The Savvy Couple. Alternatively, you can create homemade gifts or regift. Just be careful not to regift to the same person who gave you the gift. “Homemade gifts are a great way to save money and provide someone with a unique gift. Not all homemade gifts are created equal. If you are going the DIY gift route, give a gift that people can actually use! Homemade hand scrubs, cookie ingredients in a mason jar, hot cocoa and a mug, homemade candles...the list goes on. Nothing like a quick Pinterest search. Think about practicality. You don't want to waste your money on making homemade gifts that people really don't want,” says Kline. Gifts also do not have to be products—they can be charitable donations. This is especially great if you have friends or family who are passionate about causes. “Instead of buying gifts, make a contribution to a charity in the name of those who you normally buy gifts for. Your tax deductible contribution can be far less expensive than buying gifts. The charity will never reveal the size of the gift, and you can use one donation to cover many people,” advises Wolf. Determining the best way to approach gift-buying will help you find a solution that shows thought and care without wrecking your finances. While there may be some decorations that need to be purchased every year, you can approach decorations in many of the same ways that you would gifts. You can create your own and watch for sales. Plan to reuse decorations every year to reduce those costs. Bryan Stoddard, Director at Homewares Insider, counsels, “I've seen this problem when people approach each year's holiday as a completely new event. They need to have the latest and newest decorations, and their old decorations are forgotten and left gathering dust. I don't mean to say that decorations are the main way people spend too much during the holidays, but in my opinion, they affect spending in a big way. Because of that, I'd recommend you bring out your old decorations and reuse them.” Another good way to find savings is to research cheaper options for your recurring expenses. “See if you’re paying too much for a monthly service like cell phone service, TV, or internet. Wirefly.com offers a comparison engine for cell phone plans, TV, internet, insurance, and more,” says Logan Abbott of Wirefly.com. You should also make sure that you’re not paying for subscriptions that you’re not using.“Take a look at your monthly subscriptions on your credit card. Many people sign up for some monthly delivery service like vitamins, or razors, or an online news website, and then they stop using the product but forget to cancel. You can do this yourself by spending 15 minutes scanning your credit card bill,” Abbott adds.These tips are great because they help you save on expenses throughout the year, not just over the holidays. Track your spending If you don’t know how much you spent on the holidays last year, keep good records this year. Track your spending as you go so that you know how much you’re spending on the holidays and compare it to your budget. You can track it yourself in a spreadsheet or use a budgeting app.“During the holiday season, incidental purchases can easily pile up. That's why it's important to keep track of every expense during the holidays. Whether you do it by spreadsheet or via an app, it's important to know how much money you really have. It doesn't matter if it's an ugly Christmas sweater or just an extra cup of cocoa — you need to know that money is gone,” says Michael Bonebright, DealNews.com consumer analyst. If you’re spending more than you planned, evaluate why and find ways to reduce costs. Once the holidays are over, review your spending. “Tracking will also help you gauge how healthy or unhealthy your holiday spending habits are and help prepare you for the following year,” cautions Nathan Wade, Managing Editor for WealthFit Money. Understand the reasons behind your purchase decisions. If you’re comfortable with the amount you spent, that’s great. If you feel that you overspent, figure out how you’ll approach the holidays differently next year. Avoid debt It can be tempting to put holiday expenses on a credit card or use layaway programs for gifts. While these are nice options and tools to have, be sure to use them carefully. Debt often comes with interest, which means that you’ll typically end up paying more for an item than its sale price. As you’re making purchases, it can be helpful to think about the cost in terms of work hours, not dollars. “Consider your purchases in work hours, not dollars — how long would you have to work to buy that huge LEGO set? Putting your purchases into a different perspective can help you stay on track,” suggests Bonebright. If you’re working extra hours or anticipate a holiday bonus, don’t spend it before you have it. “Leave the holiday overtime pay and bonuses out of your budget. These funds are not guaranteed until they show up in your bank account, so you should never count on them. Then, if you do get a sizeable holiday paycheck, you can put those funds toward something fun,” says Bonebright. If you’re taking on large amounts of debt for the holidays, it’s probably not worth it. Instead, it may be best to reset expectations for your family and friends or find other ways to lower your spending. As you thoughtfully consider your holiday traditions and budget wisely, you’ll be able to enjoy the holidays without worrying about your finances and financial future. For more holiday budgeting tips, check out Consolidated Credit’s “Debt-Free Holiday Budgeting Guide” or Kalicia Bateman's "How to Create Your 2020 Holiday Budget".

This is Chapter 2 of 5 in our Ultimate Guide to Debt Relief series. If you’re struggling to pay down consumer debt, particularly from credit cards, enrolling in a debt management plan is one option for getting out of debt. As you weigh your options and evaluate your situation, you should think about the pros and cons of each and what would be the best way to move forward. Here’s what you need to know about debt management before you enroll: What is a debt management plan? How does a debt management plan work? How is debt managment different from debt consolidation? What does debt management do to your credit? What happens if I stop paying my debt management plan? How do I choose a debt management program? What is a debt management plan? A debt management plan is an option for paying off debt. You can create one yourself with a budget that prioritizes paying debts. You can also enroll in a credit counseling agency’s debt management program that can make it easier to get out of debt. Sometimes having additional accountability is helpful. “The goal of a debt management plan is to get you out of debt in the shortest period of time, without going through bankruptcy or debt settlement, both of which are detrimental to your credit score,” says Katie Ross, American Consumer Credit Counseling education and development manager. However, a debt management plan doesn’t work for all kinds of debt. “A debt management plan targets consumer, unsecured debt. Think credit cards and personal loans. If you have student loans or a mortgage, these won't be covered,” says Morgan Taylor, LetMeBank finance expert and CMO. If you’re not struggling with unsecured debt, you’ll need to consider other options. How does a debt management plan work? If you enroll in a debt management program, the credit counseling agency will work with your creditors to negotiate interest rates and fees. This will make it easier to pay off your debt. You’ll make a regular payment to the credit counseling agency which will then disburse it to each of your creditors. Simplifying your debt into one regular payment will make it easier to keep track of your payments. “Credit counseling agencies are also known as debt management companies. They work by maintaining pre-arranged agreements with credit card companies; the card issuer lowers interest rates on the consumer's debt to a "concession rate" the creditor provides. With this new rate, credit counseling agencies typically then enrolls a consumer in a debt management plan (DMP). In these plans, the credit counseling firms charge consumers a monthly fee. They also receive payments (called “fair-share” payments) from the credit card issuers. Terms of payment are typically five years. Payments are usually only slightly lower than regular minimum payments. In many cases, consumers attempt a DMP, but eventually wind up filing bankruptcy because they can’t afford the payments,” says Sean Fox Freedom Debt Relief co-president. If you enroll in a debt management program, you’ll pay a one-time enrollment fee and have a regular administrative fee added to your regular payment. These amounts vary depending on each person’s situation, but the fees should be clearly stated before you enroll in the program. How is debt management different from debt consolidation? Debt consolidation typically refers to taking out a single, large loan to pay off existing debts immediately. Then, all of your debt is consolidated into one loan with one monthly payment. Resolving your debt this way is not the best solution for everyone. “Debt consolidation can be helpful when a person has one or more accounts with high interest rates, and a lower interest rate will help them in paying off the debt. It is NOT the best solution for people who are unable to make minimum payments on current debt,” advises Fox. Debt management programs mimic debt consolidation’s single payment for all debts without the need to apply for another loan. Debt management programs have fees, so if your choosing between the two options, compare available interest rates and loan fees with debt management fees to see which is the cheapest option. Meeting with a certified credit counselor can help you evaluate your debt and your options for handling it. You can use this information to make an informed choice. What does debt management do to your credit? There are two ways credit can be affected: through the credit report and the credit score. Arguably, the largest initial impact is on your credit report. “Initially, when you enroll in a DMP, there is a notation on your credit report, but it is usually seen as neutral, so it doesn’t hurt your score,” says Ross. However, the notation prevents you from being approved for new lines of credit. Debt management ultimately helps your credit score if you’re consistent with your payments. Meeting your financial obligations shows lenders that you’ll pay back the money they lend you. “Using a debt management plan won’t impact your credit score. However, since you are freezing or closing accounts and altering your credit utilization ratio your score may change as a result. The good news is, the on-time payments for the plan will help your score and once the freezes are lifted your score can rise even more,” says Jared Weitz, United Capital Source Inc. CEO and founder. However, there are some negative effects to your credit: Closing credit card accounts will negatively impact your credit in the short-term because you’ll have high usage of credit with lower credit limits. If you reach a settlement and pay less than owed when closing the account, that will show up on your credit report. However, if you make payments on time and complete the program, you’ll ultimately be in a better position financially and with your credit. If you make late payments, that will affect your credit and be on your credit report. Take an active role to make sure that your payments are made before they are due by verifying with the credit counseling agency and credit card companies that they’ve met their obligations. Depending on how the credit card company reacts to your enrollment in the debt management program, you could have other issues. “Debt management would not directly affect your credit; however, if the creditors choose to continue legal escalation this will then have a negative affect. The same as if the contractual terms are breached as the debt management offer is not acceptable, the creditor can issue a default,” says Ash Farrer, iwoca collections manager. Talk with your credit counselor to learn more about the credit companies they work with and the likelihood that you’ll be approved. How long does debt management stay on your credit report? The freeze on your credit is not permanent. Once you exit or finish the debt management program, the note is removed from your credit. However, late payments and closed accounts will stay on your credit report. Ask your credit counseling agency about their timeliness with payments and for more details on how a debt management plan would affect your credit in the long-run. What happens if I stop paying my debt management plan? If you stop paying your debt management plan, you won’t make further progress on your path to being debt-free. A few other results of stopping payments include: Automatic disenrollment — “If you stop paying, after a certain amount of time, you will be automatically removed from the program,” says Ross. Collections — “If you stop paying the debt management plan, the creditors would be notified that it has failed and the creditors would then look to continue the normal practice and collections process,” says Farrer. If other unexpected financial challenges arise that make it difficult to maintain the debt management program, talk with your credit counselor to explore your options. You can also disenroll yourself, especially if you are going to pursue other options. “You can cancel or otherwise get out of a debt management plan, but that doesn’t get rid of your debt. The process for getting out of a debt management plan may vary depending on the agency you work with. Be sure to read your contract before entering into any agreement, so that you understand any possible downsides or fees,” says Greg Mahnken, Credit Card Insider credit industry analyst. How should I choose a debt management program? Before you enroll in a debt management program, be sure that the company and the counselor you work with are trustworthy and qualified. Experts say to look for the following factors before working with a company: Organization Greg Mahnken, Credit Card Insider credit industry analyst“Watch out for companies that feel pushy or take a long time to get back to you. You are trusting this agency to make payments on your behalf, so you should get a good feeling that they are organized and on top of your case.” Interest in your case Jared Weitz, United Capital Source Inc. CEO and founder“Make sure you find a counselor that is a good fit for you, as you will be working with this person to manage your finances. The last thing you want is someone that you don’t connect with and stares at their watch more than your finances during a meeting.” Mike Weaver, Money Ladder“What should people consider when choosing a debt management plan? A company they know, can identify with, and can understand. Most importantly, a debt management plan should be structured in such a way that customers don’t have to enroll into a debt program, again and again. Whatever plan they choose to tackle their debt with, they should re-enter the world of good credit having learned everything they need to never return to our services. In our playbook, the ultimate red flag would be a company that doesn’t aim to heal your faulty processes, but uses predatory practices to gain your repeat business by making sure your debt is never fully resolved. At Money Ladder, we are a member of the American Fair Credit Counsel (AFCC), and we are certified with IAPDA." Professional memberships Katie Ross, American Consumer Credit Counseling education and development manager“What should people consider when choosing a debt management program? Look for a credit counseling agency that is licensed in your state and has nonprofit status, ideally one that has been in business for a long time and is in good standing with the Better Business Bureau. It should also be a member of either the NFCC or the AICCCA, and all the counselors that assist you in the debt management program should be certified." Options presented Morgan Taylor, LetMeBank Finance Expert and CMO“If you're looking for debt management, look for a non-profit ideally. They'll review your situation, then offer several options for you. If someone is pressuring you to sign up for debt management same day without providing alternatives, they probably aren't trustworthy.” Jared Weitz, United Capital Source Inc. CEO and founder“Research the agency you are considering before signing any paperwork. If they ask for a monthly maintenance fee, application fee or a large upfront fee that may be called a “voluntary contribution”, proceed with caution. Although they may be a nonprofit, consider where your money is going.” Customer reviews It is convenient to find customer reviews from third-party sources. Customer reviews can give you recent, unbiased information about how the company treats its clients and the quality of its services. Look at multiple review sites to get a fuller picture of a company. Be aware that review sites have different processes for moderating and displaying reviews. You should also understand the safeguards the company has in place to catch fake reviews. Learn more about Best Company’s customer reviews or view debt relief customer reviews.

This is Chapter 1 of 5 in our Ultimate Guide to Debt Relief series. One of the joys of adulting is managing your finances. Credit counseling can help you get a handle on your finances and manage them better. Credit counseling is one option when trying to get out of debt. If you feel like your finances are beyond your control or if you’re dealing with debt that seems impossible to pay off, reviewing your finances with your credit counselor can help you successfully gain control of your finances and understand your options. “Most people don’t know what to do when their debt gets out of control and should shop around to make sure they don’t fall into a scam,” says Daniel Rodriquez, director of operations at D.R. Hill Wealth Strategies, LLC. Here’s everything you need to know about credit counseling before you start: What is credit counseling? How does credit counseling work? How does credit counseling affect your credit? Who needs credit counseling? What are the benefits of credit counseling? What makes a good credit counseling company? What red flags should I watch out for? What’s the difference between credit counseling companies and credit repair companies? What’s the best way to prepare for a credit counseling appointment? What is credit counseling? Credit counseling is one way to get financial advice tailored to your situation. Credit counselors can help you create a budget, make a plan to pay off debt, and evaluate your credit report and credit score. Sometimes credit counseling agencies offer free workshops on personal finance. “A credit counselor is only the first step forward in resolving your debt or financial concerns. They will guide you and give you the resources to get out of the hole, but it's up to you to put things into action,” says Jared Weitz, United Capital Source Inc CEO and Founder. Most credit counseling companies offer these services for free. One paid service these companies offer is a debt management plan. If you enroll in a debt management plan through a credit counseling company, you can expect them to work with your creditors to lower interest rates and waive fees. Ultimately, this will make it easier to pay off your debt. The credit counseling company will also manage your monthly payments for you, so all you have to do is make one large monthly payment. The company will then disburse the funds to your creditors. Enrolling in a debt management plan typically involves a one-time enrollment fee and a monthly charge for managing your payments. How does credit counseling work? Whether or not you’re having trouble managing debt, meeting with a certified credit counselor can help you get a better handle on your money. The first step is scheduling a free consultation. At the consultation, the credit counselor will review your finances and help you make plans to manage your money better. “Credit counseling won’t provide you with a hands-off debt solution. Instead, you’ll typically talk with a financial professional who will help you find a way to tackle current debts and devise a budgetary approach that should help you keep out of debt in the future,” advises Sean Messier Credit Card Insider credit industry analyst. How does credit counseling affect your credit? Credit counseling generally has no effect on your credit. However, creating and implementing a plan to pay off debt and meet your financial obligations can help your credit score. Credit scores are calculated based on your current accounts, current credit card usage, and your history with both. When scoring companies consider the history of your accounts, they look at how consistent you are with making payments on loans and credit card bills. Becoming more consistent and paying off your current debt obligations has a positive impact on your credit score over time. Who needs credit counseling? Since credit counseling primarily focuses on financial education, anyone can benefit from it. “If you are opening your first credit card, need to manage student loans or a mortgage, and looking to make a long term financial play, credit counseling is a good option for you to pursue,” suggests Weitz. A credit counselor can help you understand your financial obligations and make plans to manage your finances well. Credit counseling can be especially helpful if you don’t feel like you have a handle on your debt. “Someone who is looking to pay off all their debt without ruining their credit score would seek out a non-profit credit counseling agency. These often have an education component to them as well, so clients can learn better money management skills during the credit counseling session,” says Katie Ross, Education and Development Manager for American Consumer Credit Counseling. Credit counselors help you assess your finances and understand your options for dealing with your debt. “Credit counseling could be a beneficial move if you’re struggling with debt management in any capacity, especially if there are free services available in your area. If you’re considering a more drastic approach to your debts, like bankruptcy, credit counseling is an essential first move,” adds Messier. What are the benefits of credit counseling? Credit counseling offers several benefits, including increased financial literacy, budgeting assistance, and reviewing your credit report. Credit counseling can also help you make a plan to pay off debt and become debt-free. Taking advantage of a credit counselor’s help in crafting a plan you implement on your own or using a credit counseling company’s debt management program can be beneficial if you are trying to get a handle on your debt. Even if you feel good about your financial situation, it’s always helpful to work with an expert to see if there are habits you can change to do better. Experts on the benefits of credit counseling Jared Weitz United Capital Source Inc CEO and Founder“In most instances you are getting free advice. For many people working through credit debt or floundering in financial hardship, having someone lay out a plan forward will help you reduce your stress and be able to better manage your finances moving forward. They can give you key tools and educate you on how to get out of debt and stay there.” Simon Nowak, 3 Credit Scores CEO“The biggest benefit of credit counseling is learning how to budget properly. When you budget, you're aware of precisely where you're spending is excessive. Once you see where you can reduce spending you're able to allocate the savings towards eliminating debt which is the ultimate goal.” Daniel Rodriquez, director of operations at D.R. Hill Wealth Strategies, LLC“People will have a plan and budget in place to reduce or eliminate their debt, resulting in higher credit scores, lower interest rates, less stress and more disposable income.” What makes a good credit counseling company? As you’re choosing companies to work with, you need to recognize good companies to work with. One easy way to start identifying a good company is through its communication and education practices. “The program should include (at no extra charge) educational information and material, and help and advice on creating and using a budget, and managing debt,” says Sean Fox, Freedom Debt Relief co-president. The credit counseling company you choose should also be clear about the cost of services. Most debt relief companies offer free consultations, to make it easy to ask questions and understand fees before committing to a program. “The agency should provide clear information, written and verbally, that explain the program, the timeframe, and the fees,” adds Fox. Industry accreditations, memberships, and certifications Accreditations and participation in organizations show a company’s dedication to providing high quality credit counseling. Fox identifies two to look for: “It can be a good sign if an agency is a member of the National Foundation for Credit Counseling (NFCC) or Financial Counseling Association of America (FCAA, formerly the AICCCA); this indicates the company follows industry standards,” he says. Memberships in these organizations is typically easy to determine because they are often displayed on a company’s website. Both organizations account for accreditations from the Council on Accreditation (COA), though the AFCC also allows certification through Bureau Veritas and BSI Group. These organizations conduct in-depth reviews of companies against industry standards to determine how well they serve clients. If you’re also considering bankruptcy or if bankruptcy comes up when you meet with a credit counselor, double-check that the agency you work with is approved to offer bankruptcy counseling. “The Trustee Program of the U.S. Department of Justice offers a list of credit counseling agencies approved to provide counseling before a bankruptcy filing,” says Fox. If your agency isn’t on the list and you need bankruptcy counseling, choose one that is. In addition to looking for accreditations at the company level, you should also consider the training and certifications of a company’s credit counselors. The NFCC and FCAA also account for these when they grant membership to companies. “When you sign up with a counselor, make sure that they are certified and educated in financial management. This might seem straight forward, however there are many instances where counselors know just as little as the customer,” recommends Weitz. Ask questions about your counselor’s background and experience. Their response will help you determine if they are someone you want to work with. It should also be apparent from how they talk through creating your budget, setting financial goals, and getting out of debt how knowledgeable they are. If your credit counselor’s responses and solutions seem in-line with common practices and make sense to you, they’re probably trustworthy. If you do not know much about finance, do some research beforehand about the financial goals you want to reach so that you’ll know. If your credit counselor makes a suggestion that seems odd, ask more questions to learn more about why that approach would make sense. If it still doesn’t make sense to you, you’re not obligated to follow the advice. Formal and informal complaints You’ll also want to know the history of the credit counseling agency you work with. This means checking for formal complaints and reading customer reviews. “Check each one out with the State Attorney General and local consumer protection agency for complaints possibly filed against them,” cautions Rodriquez. Understanding the nature of the complaints and how frequently and recently the complaints are filed will help you quickly eliminate credit counseling agencies to work with. If your options are limited, knowing what to watch out for will help you protect yourself if you do decide to work with a specific company. Good credit counseling companies will also have good customer reviews. It’s not unusual for every company to have a few bad reviews. However, if you see an overwhelming number of bad reviews, consider working with other companies. You can check well-known review sites, but be sure to understand how they moderate reviews. Some companies may repress reviews or may not have a good process for weeding out fake reviews. Best Company moderates all the reviews that come in to ensure that they meet verification standards and does not repress reviews. What red flags should I watch out for with credit counseling companies? Look out for the following red flags when investigating a credit counseling company: High, upfront fees Upfront requests for sensitive financial information, like your Social Security Number Charges for financial education and advice Unrealistic claims Limited debt resolution options presented Dropout and success rates "The agency should provide dropout and success rates to you upon request," says Fox. Researching companies in advance will also help you avoid scams and bad companies, but don't ignore unsettling feelings if they come up during your first meeting. "As unscientific as it may be, you'll know if something does not feel right when checking out a company," says Fox. Experts on red flags Jared Weitz United Capital Source Inc CEO and Founder“Scams and poor service exist when it comes to credit counseling. A key way to tell if you are part of a scam or working with an agency that isn’t up to par is if they ask for any large upfront set-up fees and if they make promises that sound too good to be true. There is no easy way to get out of debt and if they make it sound like you will be debt free tomorrow, tread carefully.” Katie Ross, Education and Development Manager for American Consumer Credit Counseling“Some red flags to watch out for to prevent credit counseling scams include high fees from the get-go, and the scammer asking you for sensitive personal financial information. If you’re unsure whether or not the agency you’re dealing with is legitimate or not, check with the Better Business Bureau,” says Ross. Daniel Rodriquez, director of operations at D.R. Hill Wealth Strategies, LLC“The company requests a payment before any services are provided. Consumers are told not to directly contact a credit bureau. The company tells the consumer to create a new credit report by applying for a FEIN instead of using their SSN. Consumers are not informed about actions they can do themselves for free.” What’s the difference between credit counseling companies and credit repair companies? Credit repair companies are very different from credit counseling companies. Credit counseling companies focus on helping people move forward and improve their finances through budgeting and making plans to get out of debt. Credit repair companies focus on helping clients deal with bad credit by reviewing their credit report and credit history and correcting errors. Credit repair companies also offer credit monitoring and fraud notifications. They do not typically offer financial education. “If there is a valid item being disputed, it will be removed (permanently) from the credit report. However, if it is not valid, or is resolved in favor of the creditor or lender, it will go back on the file after about 60 days. As such, some people may use a credit repair service to try and achieve only a temporary increase in a credit score in order (for instance, to improve short-run chances of getting a loan). The danger in that outlook is that it may be taking a short-term view, not a longer-term commitment to improving credit profiles and scores. Consumers should note that credit repair services do not solve the root problem of why a consumer’s credit is poor in the first place,” says Fox. While credit repair can help fix errors from the past, it does not help boost your credit score over time. “Credit repair companies won’t always be able to help you, particularly if there’s nothing inaccurate on your credit reports. Credit counseling, on the other hand, can provide you with a solid educational base you can use to manage your finances more wisely in the future,” adds Messier. What’s the best way to prepare for a credit counseling appointment? Preparation will help you get the most out of your credit counseling. Have clear goals in mind. For example, maybe you want help creating a budget, starting a savings account, building up an emergency fund, or getting out of debt quickly. Let the credit counselor know your financial goals and intentions. They will be able to target their advice to your goals. You should also have hard numbers regarding your spending and your income ready. This will enable the credit counselor to work through your specific situation, and you’ll walk away with good advice and an actionable plan. “Know your numbers. Bring paystubs. Prepare a detailed list of the money coming in and the money going out. Identify who you owe and how much you owe. Identify your financial goals and what you’re looking to accomplish by the end of everything,” advises Rodriquez.

Guest Post by Becky Beach Debt and sky high interest rates were piling up on me and I couldn't break free. Every month, I could only afford the minimum monthly payments from my obscenely high credit card debt. Like clockwork, the creditors would stack on a hefty 20 percent interest rate, and it was like I wasn't paying anything off at all. I'd lie awake at night and toss and turn. This wasn't my life, was it? Join the debt club At least I wasn't alone. Should I feel better? The crisis is at an all time high with U.S. consumer debt at $13.51 trillion. No, I didn't feel good about this at all. Now, I've always been hardworking and try not to spend so much each month. School loans and medical bills from my son being in the NICU was the majority of the debt. My husband I worked full time jobs, yet could not pay down this debt, no matter how hard we tried. Budgeting helped a little, but the interest rates grew and grew each month. Something had to give. It all started with an ad After working 10 hours one day, I was lounging around on the couch and watching makeup videos on my phone. I had tried to start my own YouTube channel doing makeup tutorials awhile back but didn't attract any followers. I gave up too quickly, I think. While watching a video of my favorite beauty guru, Nikkie, an annoying ad came up with this guy perched pompously on a white Lamborghini. I was about to skip the ad, but this guy was intriguing. There was something about him that intrigued me, so I wanted to hear what he had to say. It turns out that this guy, Kevin David, makes millions a year doing drop shipping. Drop shipping? What was that? I had never heard of it before. Adventures in drop shipping Kevin David's channel had all these free videos on drop shipping and even a paid course. I devoured everything I could on drop shipping. It seemed so easy. I wouldn't have to buy any inventory up front or have to ship anything to customers. There wouldn't be a need to find space to stash inventory in my tiny home either. Drop shipping sounded fabulous. Using a free tutorial on YouTube, I set up my first shop on Shopify, an eCommerce platform, in order to begin drop shipping that weekend. The only expense I incurred was paying $29 a month for my Shopify store and spending a little money on Facebook ads to attract traffic. The ad spend started at $1 a day for different ad sets in an A/B test. If one ad set performed better than another, I would scale that ad set by increasing the budget to $5 a day. This process was repeated, so I didn't waste money on ads that didn't target the right people. When I ran ads, I focused on customer pain points and highlighted how my product would solve their problems. Problem solving products do the best and are easiest to advertise. 3, 2, 1. . . profit The weekend of my drop shipping adventure, I was able to earn $5,000 in profit. This was amazing, and I couldn't believe what was happening. It had to be beginner's luck. I joined several drop shipping Facebook groups and saw that several other people had even more success than I did. Drop shipping was legit. I continued doing drop shipping throughout the year, making sure to invest my time watching free YouTube videos to learn the current trends. My first store was a general store, meaning that I sold various products that didn't go together. For example, I sold a purse and a flashlight all in one store. What I wanted to do next was narrow it down and start a niche store, which I did. I decided to go with the woman's niche because I know it well. ;) I used Google Trends to see what items were popular in my niche and looked at competitor's stores using Nichescraper. After finding tons of winning products, I built up my new store. Niche down for success This store was so much more lucrative than the first one now that I had narrowed down my customer base into a niche. Just like with blogging, you pick an avatar for your target customer. Then, import winning products for that customer using the free app, Oberlo. You can also fulfill orders with Oberlo for free. On month seven, I hit $50,000 in profit with my niche store and made sure to put all of that money towards paying off our debt. It was hard because I wanted to go on a Disney cruise with my family, but being financially free was more important. Getting rid of all of our debt is a number one priority for my family. Becoming financially free Now, I have been drop shipping for nearly two years and have paid off over $80,000 in debt. Our credit card debt is now paid off, and we only owe a few thousand on our mortgage. This year, I plan to pay off the mortgage in full and then start planning for retirement and a college fund for my son. I don't want him to have to take out huge loans like I had to and be in financial trouble when he graduates. Drop shipping is always changing so you need to keep on watching the latest YouTube videos and be involved in Facebook groups so you know what is going on. Drop shipping goldmine The newest trend in drop shipping is starting one product stores, which I am currently implementing. What that entails is selecting one winning product and building your whole store around that one product, even the domain name. I hope it will help me be able to skyrocket my success this year. No longer do I toss and turn or stay up all night worrying about my future. With the help of my drop shipping side hustle, I feel like the shackles of debt have crumbled away. Becky Beach is first and foremost, a mom to a wonderful 3 year old boy named Bryan. She is also married to her best friend in the whole world and has a playful Pomeranian. Becky teaches other moms how to drop ship and learn other ways to make money online with her blog, MomBeach.com.