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First off, with today's cheap credit, the only reason you should have a high interest rate on a credit card is if you have made late payments. If you've been paying off bills on time and your credit is good, call your credit card company and ask for a lower rate. If you are refused, ask to speak to a supervisor and press your case and tell the supervisor you are ready to switch cards. If you still can't get the company to budge, be prepared to apply for a lower rate card and transfer your balance.
If your credit is blemished due to late payments, you need to set up a push payment plan to get rid of your highest interest debt first. You can set this plan up yourself using Debt Analyzer software, which you can download for free at DebtAnalyzer.com. If you don't think you're up to the task, you can enlist the help of a qualified credit counselor by visiting the National Consumer Credit Foundation's Web site and using its search tool to find a counselor near you.
You can also use Bankrate.com's Pay-down Debt Adviser calculator in the site's calculator section. The good thing about Debt Analyzer is that you can play with the numbers yourself, plus push a button to run a slew of very easy to read reports literally in the blink of an eye. These reports allow you to see when each debt will be paid off, which can be a powerful incentive.
If you are trying to pay off high interest bills and can't seem to get ahead of them, one way to do so is to transfer your balance to a lower interest rate credit card. You can find a list of the lowest rate credit cards by visiting financial guru Suze Orman's Web site. There you'll find a list of reputable credit cards offering low fixed rates or low introductory rates and the terms of offered by each. You may have to pay a balance transfer fee to move your balance over, but the difference in rates will probably more than offset the fee.
One thing you do need to watch out for is teaser rates. Some companies offer low- or no-interest rates for a few months then jack the rate up, sometimes as high as 29 percent. Make sure you read the fine print. Also, keep in mind that every time you apply for credit, a credit report is pulled. If you credit report gets pulled too often, your credit score will go down.
There are tons of resources to help people figure out a household budget, manage paying off bills, and other such things. If you have never set up a budget before, something low-tech may be in order. Pick up a copy of The Pocket Idiot's Guide to Living on a Budget by Peter J. Sander and Jennifer Basye Sander. It's short, sweet, to the point, and loaded with step-by-step instructions on how to set up a basic household budget.
Another good resource is The Family Budget Workbook: Gaining Control of Your Personal Finances by Larry Burkett. The book includes instructions and worksheets for setting up a realistic household budget that you and your family can actually live with.
A push payment plan is one designed to pay off high interest bills first. While a push payment plan doesn't necessarily reap the emotional reward of a debt payment plan that pays off the smallest bills first, it is far and away the smartest way to pay off debts from a financial perspective.
Let's say you have a couple of department store credit cards, a Visa bill, and a student loan you are paying off. Your total debt is $12,375 and you're paying an extra $50 on each above the required minimum payment. Instead of paying $50 extra on each bill, take the $150 from three of the debts and apply it to the debt with the highest rate. Pay that off, and move on to the debt with the next highest interest rate, and so on until all the debts are paid off. In the end, you'll save nearly $750 in interest and you'll pay off your debts faster because less interest is adding up.
To figure out your own push payment plan, download Debt Analyzer for free at DebtAnalyzer.com. The program has been used successfully by certified credit counselors for years.
When you say "pay off my bills," you are referring to your debt. Debt is anything other than your basic living expenses. Credit cards, mortgages, student loans, that type of thing. Some people think any debt other than home mortgage debt is bad. In most cases, that's true, although depending on what stage of life you're at, a little credit card debt might not be a horrible thing.
Assuming you've already racked up a "little" credit card debt, a student loan or two, and you'd like to get out from under it, there are strategies that will pay off bills more quickly than others. To find out the best way to pay off your bills, visit Bankrate.com and use the site's Pay-down Debt Adviser calculator. You'll find it in the site's Calculator section.
If you own a home, it seems like lenders today are just begging to throw money your way. Home equity loans and lines of credit are easy to come by, even for those with blemished credit. If you have several high interest credit cards or personal loans, you may wish to consider consolidating them with a home equity loan or line of credit. Assuming your home has enough equity, a lender will place a second mortgage on the property and give you the money to pay off your higher rate debt. With a home equity loan, you get a fixed amount up front in a lump sum and pay it back in fixed installments usually over ten, fifteen, or thirty years.
With a home equity line of credit, also called a HELOC, you get a checkbook with a credit line up to the amount authorized by the bank. You pay a monthly amount based on the total amount you've "drawn" or spent up to the available limit. Just like with a credit card, as you pay off your balance, that amount becomes available to be re-drawn or spent. A HELOC has a fixed draw period, usually ten years, in which you can borrow against the credit limit. After that, you must pay the outstanding balance back over a period of up to fifteen years. A HELOC can be a good safety net for emergencies if used wisely. However, both home equity loans and HELOCs put your house on the line. Down the road, if you can't figure out how to pay bills, you could end up on the street. It's not something to be done lightly.
Trying to figure out how to pay bills? A smallest first debt payment plan is one in which you pay bills off according to their size. Let's say you have a JC Penney bill for $300 with a minimum payment of $26, a $575 Old Navy bill with a minimum payment of $40, a $1,500 Visa bill with a minimum payment of $54, and a $10,000 student loan with a monthly payment of $200. In a smallest first debt payment plan, once you pay off the JC Penney bill, you then take that money and add it to the amount you pay toward the Old Navy bill each month. Clear Old Navy, and add the total you were paying on Old Navy and JC Penney to your Visa bill, and so on.
Paying off the smallest bills first is emotionally gratifying for many people, and the snowball effect of rolling the payments into the next bill's payment pays the debt off more quickly. However, if a smallest first debt payment plan, while emotionally gratifying, is not the most cost effective way to pay off debt. If you want to save money on interest, you should use a push payment plan.
If you are paying off bills but it seems to be taking you longer than you'd like, could you be unconsciously sabotaging yourself? If you're trying to figure out how to pay bills more quickly, STOP ADDING TO THEM. If you are trying to pay off high interest bills such as credit cards but you continue to use them, you will never get ahead of the curve. Start paying cash for purchases, and, if you don't have the cash, don't buy it. You can use either the "smallest first" payment method or the push payment method to pay your bills off. The "smallest first" payment costs more in the long run but gives you a more immediate sense of gratification by clearing small bills quickly. It may be better for those who might be discouraged from sticking with a debt pay down plan by the seemingly endless wait to finally pay off a bill. The push payment method delays that gratification a little longer, but it ultimately pays off all the debt more quickly and saves thousands of dollars in interest by paying off the highest rate debt first. The finance section of FamilyResource.com's site has some good articles on the pros and cons of each of these methods.
The best way to pay off your bills depends on your goals. First and foremost, you should pay your bills often enough to avoid incurring any late fees, particularly credit card late fees. For most people, paying bills twice a month is often enough if you are writing out the checks and mailing the bills. If you don't think you can stick to a twice-a-month schedule, you may want to set up your bills to be paid automatically using your bank's bill pay service or your creditor's autopay service.
While most bills are due only once a month, if you are trying to pay off bills to get out of debt or build equity, it may be worth your while to pay more often than once a month. Let's say you have a thirty-year mortgage that you would normally pay once a month. If you split the total monthly payment in half and pay that amount every two weeks, by the end of the year, you will have paid an extra month's payment. By doing this, you can shave as much as seven years off the life of your loan and build equity much more quickly.
Most people consider a budget a torture device, but it doesn't have to be that way. Done right, a budget is an awesome tool for setting and meeting goals that can help you figure out how to pay bills effectively. Those goals will be different for everyone. Whether your goal is to get out of debt once and for all or take a trip to a tropical island, a budget will get you there.
A budget helps you keep track of how much money you have coming into your household and how much your expenses are. It helps you spot trouble areas and plan ahead for them so you don't end up having to run up big credit card bills. You pay most of your bills, such as your credit cards, utility, housing, and grocery bills, each month. Some bills, like your car insurance, may only be due twice a year. In order to avoid getting caught short in the months your car insurance is due, a budget helps you figure out how much you need to put aside each month so you have the full amount when you need it. Also, a good budget actually includes amounts for fun! In fact, budgets that ignore things like movie rentals, eating out, and vacations, are not realistic. No one can stick to a budget that doesn't allow for rewards—within reason.