Making and maintaining budgets is vital to prevent getting sucked into debt and needing debt management.

Many people hate the task of budget planning because they view it as overwhelming and frustrating. But it will make the task achievable if you look at it differently; an effective path to financially freedom.

Does it feel as though there is no chance to get out of debt and into credit, much less plan ahead for retiring from work or taking a break? Are you tired of getting your pay on Friday and being penniless by Saturday? Do you have lots of unnecessary products that you wish you had never bought? If this seems like you, we have got some good news.

There is a lot of guidance out there for you in different styles and you’ll be able to pick which one suits you the best.

One idea is to use applications like Excel or Microsoft Money. These are great options and resources for planning budgets. Money management software will take you through the process and let you put together or add new categories of where your money goes so you will be able to view the annual picture. It will then show you what you need to look at monthly so that you can be prepared. Budget software helps with your budget planning because it enables you see your money together, in addition to giving you prompts when it is time to settle your bills.

Actually, some computer programs will allow you to pay bills from your bank account. This is a great tool if you are trying to build your credit record. As you spend, you will be able to alter the categories; this will let you get a better understanding of where you require to reduce spending, or identify where you need to invest more.

Many financial applications often also have companion websites where you can set up an account and review your budget or savings. If you require something more hands on to get yourself back in credit, you have many possibilities. You can contact a credit counseling office in your neighborhood or online and identify what resources they have that you could use. Many offices have free courses about budget preparation.

Some people have such a hard time with planning a budget because they just do not know where their cash is going.

By getting it right, you’ll get to watch, a little at a time how your financial situation changes. Imagine that, by taking this action, you may some point in the future be stronger financially, or even own your own home.

The key is to take your time, do the process in small bites, and ensure that you take advantage of the assistance available. Remember that you are not alone but if you are already suffering financially, you should consider getting debt management help.

When you’re struggling with debt and looking for profession help, you have
four options: credit counseling, debt negotiation, debt management, or debt
consolidation. While credit counseling and debt consolidation are both pretty
straightforward services, many people have trouble understanding the difference
between debt negotiation and debt management. This article compares the two
services, and it will help you to determine which service is right for you.
First, ask yourself these questions:

Does My Problem Stem From An Inability To Afford My Debt Payments?

If you answered yes to this question, debt negotiation is probably the choice
for you. Debt negotiation services call your creditors on your behalf and
negotiate lower payments. You keep control of sending out your payments each
month, but your debt negotiation company will negotiate payments with your
creditors that you can afford. Additionally, if your reasons for being unable to
afford your debt payments stem from a circumstance that is not beyond your
control, credit counseling is usually available.

Does My Problem Stem From An Inability To Both Afford and Manage My Debt
Payments?

If you answered yes to this question, then you’re probably in need of the
services of a debt management company. In addition to negotiating lower payments
with your creditors, debt management companies will distribute your payments to
your creditors on your behalf. You simply send them one combined monthly
payment. If you have trouble remembering to pay your bills on time every month,
your credit will greatly benefit from the services of a company that ensures
timely payments.

Debt management differs from debt consolidation in that debt consolidation is a
loan that consolidates all of your debts, and debt management is just a service
that calculates the balance of all of your payments and combines them for you.
With debt management, you still hold all of your original credit accounts.

The most important part of seeking professional debt services is getting
counseling in order to prevent future debt problems. Any professional debt
service should also provide counseling in order to teach you how to stay out of
debt once their services have ceased. Debt services are not meant to be a way
for you to escape your financial responsibilities; rather, they are a way for
you to educate yourself on responsible handling of your credit and debt.

Debt management companies have become unavoidable agencies for debtors who find it difficult to repay their loan amount. The increase in the number of these companies is a result of the increase in the number of bad debt situations. Reading the reviews of debt management companies on various websites will be a great help to those who wish to know more about such companies. By analyzing reports and the reviews about these companies, one can make an intelligent choice.

The duty of debt management companies is to primarily help individuals in their finances, and then provide debt reduction services by reviewing the debt and determining the negotiations. By making very minute changes you can avoid filing and repay the debts on your own. Many debt management companies even offer a free consultation for credit counseling.

Reviews of debt management companies may be obtained from the vendor?s websites. Anyone can read these reviews to learn more about the company as well as their method in handling debt related cases. The reviews contain the experiences of clients, the pros and cons of the company, the way they treat people, the extent of their use and a summary of their programs. Some companies will have a page on their website dedicated to comments from clients.

Detailed reviews of debt management companies will help to select the best among them. The reviews conclude that the guidance of debt management companies has significantly reduced consumer complaints. There is strong evidence that professional supervision in the debt management sector successfully reduces consumer detriment. The reviews also provide a list of smaller debt management companies.

In general, one must go through reviews of debt management companies before dealing with any one company. Anyone who is well informed in this area will always be one step ahead of an ordinary person.

“Cut Your Payments in Half!” the headline screams. “Consolidate Your Bills into One Low Monthly Payment!”

When you see ads like this, they are often from Credit Counseling firms. In this article, I’ll explain the principles behind the Credit Counseling approach and discuss the main problem consumers face when they join one of these programs.

First, let’s get our definitions straight. The term “Credit Counseling” is actually quite misleading, since it has nothing to do with preserving or improving your credit score. In fact, Credit Counseling will often damage your credit, an unpleasant reality that is sometimes downplayed by industry representatives.

Credit Counseling is a debt management program where you make a single monthly payment to an agency. In turn, that agency distributes the money to your creditors on your behalf, ideally at lower interest rates so you can pay off the debt faster. Credit Counseling should not be confused with Debt Consolidation, Debt Settlement, or Debt Termination. Each of these debt programs takes a very different approach from Credit Counseling.

Of all the available debt options, Credit Counseling is by far the most popular, with millions of Americans participating. Does this mean it’s the best choice for most people struggling with debt? No! There are numerous problems with this approach.

In recent years, the Credit Counseling industry has been heavily criticized by impartial consumer groups like the Consumer Federation of America. But these criticisms often miss the mark entirely. They usually focus on the aggressive companies that use their non-profit status to trick consumers into thinking they are charitable organizations, or even that their services are free of charge. In reality, these outfits charge hefty “voluntary” contributions, often adding up to hundreds of dollars, plus steep monthly fees as well.

However, I’m not talking here about the bad companies who provide little or no actual “counseling,” or the ones that are only in business to make their owners rich. No, I’m talking about serious problems with the actual business model itself. So let’s take a closer look at how Credit Counseling works.

Let’s say you owe $25,000 on several different credit cards. Let’s also assume your average interest rate before you enrolled was 20% (which is actually low these days, especially if you’ve missed any payments). Your minimum monthly payments are $500, which you’ve been struggling to keep up with. At this rate, it will take a whopping 109 months (more than 9 years) to pay off your debts, assuming you don’t miss a single payment along the way.

You enroll in a Credit Counseling program that promises to get you out of debt faster. But does it? Assuming your creditors agree to participate in the program (not always the case), the real key is the concession they will grant on your interest rates. In prior years, creditors looked more favorably on Credit Counseling and they offered steep discounts off the normal interest rates. But lately they have squeezed the industry, and the concessions are not so good any more. Currently, most of the major players will reduce interest rates down to a range of 7% on the low side to 18% on the high side. We’ll use 12% as the average.

So if you keep your payments at $500 per month at the new 12% rate, how long will it take? First, we need to deduct the monthly fee charged by the agency. In this example, we’ll use a fee of $25 per month, so $475 of your $500 will go toward debt reduction. The good news is you’ll be out of debt faster. The bad news is that it will still take 75 months (more than 6 years) to become debt-free.

But what happens if you can’t keep up with that $500 per month? After all, you sought help from a credit counselor because you were struggling financially, right? Let’s say you drop down to $450 per month. After deducting the $25 monthly fee, that leaves $425 toward your debt plan. Now you’re looking at 90 months (7 years & 6 months), which is not much better than the 109 months you started out with.

So how can credit counselors claim to cut your payments in half? Good question. If you dropped down to $250 per month, you’ll never pay off your debt! At 12% interest, the debt will climb faster than your $250 per month can reduce it. The lowest you could go would be $300 per month. However, it would now take 20 years to pay off the debt, hardly an improvement!

In order to truly cut your payments in half, down to $250 in this example, the agency would need to completely eliminate all interest! And even then, it would still take more than 9 years to pay off the balance! So the ads claiming you can cut your payments in half are simply false.

Bear in mind here that in our example, we’re assuming you’re working with a good company that charges low fees and actually obtains good interest rate concessions from all of your creditors. Even with the best of credit counselors, you’re still looking at a 5-9 year program to pay off your debts.

That’s why Credit Counseling is usually only effective for people with short-term financial problems. Consumers with long-term financial instability have trouble keeping up with the regular payment stream required to make these programs work. The result? Even the most favorable statistics show that about 3 out of 4 people drop out of Credit Counseling programs before completing them.

If you do decide to join one of these programs in order to obtain some short-term relief, be sure to do your homework first. Here are a few tips to help in your selection:

1. Look for a company that actually provides old-fashioned budget advice and counseling. If they want to sign you up right away without first understanding your budget situation, move on!

2. Obtain copies of the contract and read it carefully before signing up. Make sure you understand all of the fees involved. Are there enrollment fees? “Voluntary” contributions? Monthly fees? Extra fees per account? These hidden fees can add up to big bucks.

3. Make sure they work with all the creditors on your list and not just some of them.

4. Don’t be fooled by “non-profit” status. That doesn’t guarantee you’re dealing with a good company. And it certainly doesn’t mean the service is free!

5. Aim to find a local company that you can visit in person. Check out your target company with the local Better Business Bureau.

6. Make sure they provide support after the sale. Try calling their customer service number to see if you can get through promptly.

Remember, you can eliminate your debts if you take a disciplined approach to your finances, make a budget and stick to it, and don’t use your credit cards unless you can pay off new balances in full each month.

Good luck in your financial future!

Many credit counseling groups claim they are in it just to help you and not make a profit as indicated by their charitable organization status. The IRS is not happy.

IRS Crushes Credit Counseling Groups Claiming Non-Profit Status

For the last five years, the IRS has been taking a much closer look at businesses claiming to be non-profit organizations. Given the reduction of tax loopholes over the years, the agency has taken note of the fact that many high-end tax strategies now involve some kind of charitable organization. In performing the analysis, the IRS has found no worse a collection of abusive businesses than the credit counseling industry.

Beginning in 2004, the IRS audited 63 credit counseling groups claiming non-profit status. These “charitable organizations” receive over fifty percent of all the revenues in the credit counseling industry, to wit, we are talking a major audit initiative. Well, guess what the IRS found?

To date, the IRS has completed 41 of the audits. Of these 41 audits, every single credit counseling business has had their non-profit status revoked, proposed for revocation or outright termination. Yes, every single entity has bitten the dust! Can anyone think of a bigger scam?

In crushing these bad apples, the IRS found a couple of amazing things. The primary reason for revocation was the groups provided insufficient public benefit. They offered little or no counseling or education to individuals. Instead, they were primarily motivated by profit according to the IRS. To top things off, the IRS found most of the businesses had “unique” dealings with for profit companies that just happened to be owned by the same interested parties. Imagine that! Shocking, I tell you.

It must be admitted that these rotten apples only represent roughly forty to fifty percent of the credit counseling industry. The rest of the industry that has not been audited might be entirely legitimate. The IRS does not seem to think so. In fact, it has sent out audit notices to every single company that has not yet been audited. I suspect the blood bath is just going to get worse.

In truth, not all credit counseling agencies are dubiously claiming non-profit status. The IRS, in fact, has noted it approved a whopping three applications for non-profit status out of 100 since 2003! Unfortunately, the IRS hasn’t indicated the identity of the three.