Once the shock wears off and it sinks in that you were successful with debt reduction, having whittled down your mountain of bills, you are likely to ask yourself, What now?

Before you wrack up new debt celebrating, take these steps to devise a post-debt plan of action so you can stay in the black.

Plan for the unexpected

If you haven’t done so already, now is the time to open an emergency savings account or set up regular automatic payments to an existing fund. If you find yourself putting this imperative task off, stop and remember how you got into debt in the first place. No doubt an adequate emergency fund would have prevented you from sliding into debt, or at least made the experience less treacherous and lengthy.

Consider the future

Though you no doubt lost precious time while in debt, keep in mind that it’s never too late to fund your retirement. Contributing to a retirement plan even for a few years allows you to create a more secure future for yourself. If your employer provides an opportunity to fund a 401(k), take it. If that benefit isn’t offered, open your own IRA. In most cases, retirement savings will also lower your taxes.

Resurrect your dreams

No doubt your dreams that require financial backing fell by the wayside during your debt crisis. It’s not practical to even think about a luxury cruise or remodeling your kitchen when your mortgage is overdue or your creditors are calling and you require debt help.

Now that you’ve experienced debt solutions, give yourself permission to dream a little. Make a list of your top desires and determine how much they will cost you. Then save a certain amount of money on a regular basis, and wait until you have sufficient cash saved to fund your dreams. Paying cash for fun items will not only keep you out of debt, using such restraint is bound to make you feel especially proud of yourself.

The brand new world of being debt free can be a bit disconcerting at first, but once you get used to living a life without a mountain of bills, you’ll find it easy to build wealth and live the life you always imagined.

About the Author:

Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in a wide variety of publications, including Family Circle, Ladies’ Home Journal, Parenting, Entrepreneur and The Los Angeles Times.

Dreaming is good for you. It allows you to tap into your passions and live your best life. Once you get help with debt and take advantage of debt solutions, you have the freedom to create a financial plan that allows you to follow your heart. Try these tips to budget a path to your dream life.

Make a wish list

What dreams did you put off while you were consumed by debt management issues? Think about the items you’ve gone without, such as a new laptop, a long-awaited kitchen remodel or taking a vacation.

If it’s been a while since you thought about fun purchases and you need some inspiration, think back to what impassioned you before debt dragged you down — or tap into the kid in yourself and recall what excited you as a child.

Calculate potential costs and set goals

Do some research and determine the price tag of each of your dreams. Discovering the cost of a cruise or a flat-screen television makes the goals seem more real and clearly shows you how much money you need to save.

Prioritize your list

While it would be nice, it’s probably not possible to tackle all of your dreams at once. Arrange the list in order of importance or feasibility and concentrate on the top two or three. For instance, you might find it fulfilling to tackle a more readily realized goal such as purchasing a new television set before booking a European vacation. If you have young children, an extra bathroom is probably more useful at this point than a sports car, for instance.

Determine a timeline based on your budget

Knowing the cost of your various goals allows you to set dates for when you’d like to achieve them. For instance, if you wish to buy a $750 laptop in six months and take a $2,500 overseas vacation in two years, you need to start setting aside $229 total each month now.

If you lack enough discretionary funds to meet your projected goals, you either need to delay the goals in order to draw out the required monthly savings and/or cut your budget. Waiting longer to reach your dreams and cutting back on discretionary income may seem like a drag now, but consider how satisfying it will be to fund your dreams with cash.

About the Author:

Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in a wide variety of publications, including Family Circle, Ladies’ Home Journal, Parenting, Entrepreneur and The Los Angeles Times.

Once the shock wears off and it sinks in that you were successful with debt reduction, having whittled down your mountain of bills, you are likely to ask yourself, What now?

Before you wrack up new debt celebrating, take these steps to devise a post-debt plan of action so you can stay in the black.

Plan for the unexpected

If you haven’t done so already, now is the time to open an emergency savings account or set up regular automatic payments to an existing fund. If you find yourself putting this imperative task off, stop and remember how you got into debt in the first place. No doubt an adequate emergency fund would have prevented you from sliding into debt, or at least made the experience less treacherous and lengthy.

Consider the future

Though you no doubt lost precious time while in debt, keep in mind that it’s never too late to fund your retirement. Contributing to a retirement plan even for a few years allows you to create a more secure future for yourself. If your employer provides an opportunity to fund a 401(k), take it. If that benefit isn’t offered, open your own IRA. In most cases, retirement savings will also lower your taxes.

Resurrect your dreams

No doubt your dreams that require financial backing fell by the wayside during your debt crisis. It’s not practical to even think about a luxury cruise or remodeling your kitchen when your mortgage is overdue or your creditors are calling and you require debt help.

Now that you’ve experienced debt solutions, give yourself permission to dream a little. Make a list of your top desires and determine how much they will cost you. Then save a certain amount of money on a regular basis, and wait until you have sufficient cash saved to fund your dreams. Paying cash for fun items will not only keep you out of debt, using such restraint is bound to make you feel especially proud of yourself.

The brand new world of being debt free can be a bit disconcerting at first, but once you get used to living a life without a mountain of bills, you’ll find it easy to build wealth and live the life you always imagined.

About the Author:

Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in a wide variety of publications, including Family Circle, Ladies’ Home Journal, Parenting, Entrepreneur and The Los Angeles Times.

With the ever-rising cost of medical expenses, an inability to pay health bills is now the top reason for personal bankruptcy. According to estimates by consumer advocacy group NerdWallet Health, in 2013 1.7 million Americans will declare bankruptcy because of an inability to pay medical bills.

Don’t expect the new medical plans offered through the Affordable Care Act (ACA) to bail you out if you experience a healthcare crisis, either. While Obamacare premiums are likely to be lower, your out-of-pocket expenses, such as co-pays and deductibles, are expected to be higher. One catastrophic or ongoing medical condition can potentially put you on the edge financially.

Knowing your rights and having a plan in place in case a costly medical issue does arise goes a long way toward helping you avoid bankruptcy.

Medical bills don’t affect your credit rating

Thanks to the Health Insurance Portability and Accountability Act (HIPPAA), the privacy law protecting your medical data, your medical bills can’t be reported on your credit report. Bill collectors can call you, but no calls will be made to the credit reporting agencies. This means that it’s important to avoid charging medical expenses on credit cards. If you put a hospital stay on your credit card and have difficulty paying it, this can end up on your credit report, because it is a credit card bill.

Negotiate payment terms

As with any debt, your best option is to talk to the medical organization where you received treatment and negotiate payment terms that work for your budget. By communicating with the hospital or doctor’s office, you prevent them from sending your bill to collections, which makes negotiating repayment more difficult. Call as soon as you get the bill to work out a payment plan that involves no interest.

Check your bills and dispute any errors

Medical practitioners are only human, and your health charges aren’t set in stone. Inspect your bills line by line to ensure that you weren’t overcharged for anything. On a hospital invoice, for instance, several items or services listed that you never received can add up to a substantial amount of money.

Direct what you save in premiums to a health savings plan

Put the savings you get from lower premiums that will come with the ACA in a medical savings account. If you’re employed, you can open a Health Savings Account (HSA) or a Flexible Spending Account (FSA), which both allow you to save money before taxes to use toward healthcare. Even if you don’t have access to such plans, open a savings account for healthcare expenses.

If you’re faced with high medical debt, bankruptcy doesn’t have to be your only option. Keep these tips in mind, and you’re likely to find debt help that is less financially damaging.

About the Author:

Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in a wide variety of publications, including Family Circle, Ladies’ Home Journal, Parenting, Entrepreneur and The Los Angeles Times.[/vc_column_text][/vc_column][/vc_row]

After more than three years of discussion over the most sweeping healthcare reform in decades, the Obamacare federal health care law and the resulting health insurance will soon be a reality.

Known as the Affordable Care Act, the healthcare plan requires most Americans to get health insurance and is supposed to provide cheaper insurance options for millions by offering the low- and middle-income subsidies to buy private insurance.

While the dramatic changes in the healthcare system are far-reaching, one thing is certain: The mandated healthcare is likely to affect your pocketbook, in some cases offering you debt solutions.

Penalties for not participating

One of the most publicized aspects of Obamacare is the penalty levied on those who choose not to have insurance. The fine excludes those who would have to spend more than 8 percent of their annual income on insurance, but otherwise requires that each adult pay $95 per year and $47.50 per child or 1 percent of the family income in 2014. This jumps to $325 per adult or 2 percent of the family income by 2015, and in 2016 it’s a $695 penalty per adult or 2.5 percent of the family income.

Premiums depend on your health status and age

If you’ve had serious health problems, like cancer or heart attacks, the plan is likely to save you money. You’ll find it easier to get affordable coverage through Obamacare, as the program doesn’t allow excluding less healthy patients or charging them more. Because of this decrease, healthier individuals are likely to see insurance costs rise.

Older insured individuals will also experience a decrease in rates. While it’s currently common for insurance companies to charge this group five times more than younger people, this will be limited to just three times more, once again causing younger individuals to see premium increases.

Gender will affect your insurance costs

Men currently often pay less than women for insurance, because they don’t go to the doctor as often. That will stop with Obamacare, which may mean a significant increase in your insurance premiums if you are a male between the ages of 25-36.

Potentially increased taxes

The tax credits offered through the Affordable Care Act in 2014 are available on a sliding scale to individuals with an income of $45,960 or less and $94,200 or under for a family of four. The eligibility is likely to change each year, so if your income goes up, you may have to pay back your overpayment on your next tax return.

The next several months as Obamacare takes effect promise to shed even more light on how the insurance plan may offer you debt help.

About the Author:

Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in a wide variety of publications, including Family Circle, Ladies’ Home Journal, Parenting, Entrepreneur and The Los Angeles Times.

A well-paying job goes a long way toward helping you gain financial fitness, and achieving at many professions requires a college degree. Ironically, the student loans many take out to finance an education are burying them in debt. Currently, there is $1 trillion in student debt outstanding in the United States and with the increasing cost of college this figure is likely to rise.

Stafford Loan interest rates

Recently, the cost of new student loans got even steeper when Stafford Loan interest rates doubled from 3.4 percent interest, which it’s been for the last two years, to 6.8 percent interest, meaning thousands of dollars in additional money owed by graduates for the same amount of money borrowed.

The student loan interest rates rose on July 1^st because, despite debating the issue for months, lawmakers failed to reach an agreement on the subject before the rates were set to rise. This means that if you recently got a Stafford loan, you currently owe the higher interest rate.

New legislation will be considered

Fortunately, a new bipartisan bill is under negotiation that would retroactively lower the interest rates. The proposal, which is set to be voted on soon, would tie rates for undergraduate Stafford loans to the 10-year Treasury note plus 1.8 percent. This would feature an annual interest rate cap of 8.25 percent and mean that current undergraduate loans would drop to 3.61 percent. Graduate loans would pay the 10-year Treasury rate plus 3.6 percent, capping at 9.5 percent. And parent loans would feature 4.6 percent plus the 10-year Treasury rate and cap at 10.5 percent.

While the news is potentially positive regarding the retroactive lowering of interest rates, they may rise as soon as two years. It’s also important to remember that, for the most part, you can’t escape repaying student loans, not even by filing bankruptcy.

In order to avoid a student loan debt load that may cloud your financial future and require that you seek debt help, understand exactly how much you’re going to owe before you take out a student loan, and only borrow the bare minimum of what you need.

About the Author:

Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in a wide variety of publications, including Family Circle, Ladies’ Home Journal, Parenting, Entrepreneur and The Los Angeles Times.

If you are buried in debt and see no way out but prefer not to file bankruptcy, debt settlement may be your best option. Such programs involve a settlement company negotiating on your behalf with creditors to allow you to pay a lump sum that constitutes less than the full amount you owe.

To determine if debt settlement is right for your financial situation, keep the following factors in mind:

Debt settlement benefits

• An effective settlement can significantly lower your monthly payments and reduce your overall debt, allowing you to dig out of debt more quickly.
• When you finish with the program, you can funnel the money you’ve been using to pay off debt to savings.
• Settlement also helps you avoid bankruptcy.

Debt settlement drawbacks

• Settlement programs usually require that you deposit money into a special savings account for at least 36 months prior to settling your debts, so that the settlement company has payoff money to offer creditors. Such mandatory payments can prove difficult, so make sure you can handle this ongoing expense prior to attempting such a program.
• You have no guarantee that your creditors will agree to a settlement, and chances are some of them may not.
• Settlement companies generally encourage you to stop sending payments to your creditors, which negatively impacts your credit rating until you pay off your debts. During settlement negotiations, late fees and penalties continue to mount.
• Savings you eventually get after a settlement is reached are considered income and taxable.

Choosing a debt settlement company

Reputable companies set you up with a 24- to 36-month program and are clear about the fees involved. They will also have you send your debt repayment money to an account with an independent third party that will make payments to your creditors once settlement is reached. Avoid companies that offer unreasonable claims about paying off your debt.

When you determine this option is right for you, debt settlement is a viable method for paying off debt and moving toward financial freedom.

About the Author:

Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in a wide variety of publications, including Family Circle, Ladies’ Home Journal, Parenting, Entrepreneur and The Los Angeles Times.

Even if you don’t complete your education, in most cases you must repay your student loan. In certain circumstances, however, it is possible to get a student loan discharge, which means you no longer have to pay the loan. If you do qualify for a loan discharge, it’s worth considering, as it gives you the opportunity for debt reduction.

Valid reasons for a discharge

Simply being in over your head financially regarding your student loan does not qualify you for a discharge. One of the following criteria must be met in order to be considered:

• Bankruptcy. If you file Chapter 7 or Chapter 13 bankruptcy, it is sometimes possible to get your student loan discharged. This can only occur in bankruptcy court in an adversary proceeding, at which time your creditors may come to challenge the request.

  (The court will decide in your favor if you’ve been making an effort to repay the loan for at least five years, and it is proven that making the payments would cause you to be unable to maintain a minimum standard of living during the loan repayment period.)

• Disability. If you become totally and permanently disabled, it is possible to get your loan discharged.
• Employment. Certain occupations entitle you to a discharge of your student loans with some stipulations. Such jobs include teacher, Head Start worker, public service jobs like law enforcement, corrections officer, volunteer in the Peace Corps and a member of the U.S. armed forces serving in hostile areas. Nurses, medical technicians, child or family services workers and professional providers of early intervention services may also qualify.
• School closure. If the school you’re attending closes before you complete your degree, you are eligible for a discharge.

How to apply for a discharge

If you think you qualify for a loan discharge, you must contact your loan servicer. For Federal Perkins Loans, call your school’s financial aid office or their designated loan service provider. When you’re eligible, obtaining a student loan discharge helps you dig out of debt more quickly.

About the Author:

Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in a wide variety of publications, including Family Circle, Ladies’ Home Journal, Parenting, Entrepreneur and The Los Angeles Times.

Refinancing? Watch These Closing Costs

Refinancing to take advantage of low interest rates? Refinancing can be a smart way to reduce debt, but it is important to keep an eagle eye on closing costs during the process. Closing costs can average between 2 to 6 percent of the cost of the property—a hefty burden when your overall goal is to get out of debt. By comparing fees thoroughly, you can see how your loan options stack up.

5 Fees to Watch When Refinancing

You are likely to encounter these fees as you refinance. Be aware that some are non-refundable if you do not complete the loan process.

1. Application charge: The fee to process your loan request, including a credit check. This can range from $75 to $300, and you may still need to pay even if refinancing is denied.
2. Appraisal fee: Covers the cost of appraising your home to ensure it meets loan value requirements. Appraisals typically range from $300 to $700.
3. Inspection fee: Some lenders require a home inspection for termites and structural soundness. Costs can range from $175 to $400.
4. Loan origination fee: This fee includes evaluating and processing your loan. It may be negotiable and can be up to 1.5% of the loan principal.
5. Points: One point equals 1% of your mortgage amount. Paying points—known as loan-discount points—can reduce your interest rate. These are negotiable with your lender.

Use the Good Faith Estimate to Compare Loan Offers

After submitting your mortgage application, you should receive a Good Faith Estimate (GFE). This document outlines the key loan details to help you compare offers. Understanding the total loan cost allows for a well-informed decision—don’t hesitate to ask your lender questions.

If refinancing to lower debt is the right decision for you, contain costs by shopping around for services and negotiating lower fees. This strategy supports your financial goal of reducing debt.

About the Author

Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in publications including Family Circle, Ladies’ Home Journal, Parenting, Entrepreneur, and The Los Angeles Times.

Paying Off Your Credit Cards: Quick Tips for Debt Relief

Paying off your credit cards is likely at the top of your list for digging out of debt. While achieving a zero balance generally takes time, it’s possible to reduce your debt more quickly by making strategic choices regarding the type of credit card accounts you have.

Consider these tune-up tactics for credit debt relief:

Zero-Percent Balance Transfers

Balance transfer credit cards that don’t charge interest for an extended period of time, such as 6 or 12 months, give you a chance to save on interest. You can reduce debt by using the interest savings to make larger payments on your credit card. For instance, if you’ve been paying $200 a month on credit card interest and you transfer the balance to a 12-month no-interest card, you can put an additional $2,400 towards the balance in a year.

Always read the fine print of balance-transfer offers. Some credit card issuers charge fees for balance transfers that could potentially negate any benefits of transferring the balance.

Low-Interest Card Options

When it comes to interest rates, the best credit cards are those that only add a few percentage points to today’s prime lending rate. Locking in such a low rate is especially useful when the prime rate rises. Transferring your balance to such an inexpensive credit card offers you a chance to enjoy lower finance charges, which gives you more money to put toward paying off your balance.

Better Card Benefits

Considering the wide variety of rewards cards available today, when shopping for a new card for your old balance, it makes sense to get as many benefits as possible from your credit card account. Depending on your preferences and lifestyle, look for cards featuring rewards such as:

• Gift cards
• Cash back
• Gas credit
• Airline miles
• Hotel points

The cash-back option provides you an easy way to pay down debt on your card, and other types of rewards free up money spent. All of these savings give you the opportunity to earmark additional funds for paying off debt.

Credit card balances can sometimes seem insurmountable, but these tune-up tactics can help with debt reduction.

About the Author

Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in a wide variety of publications, including Family Circle, Ladies’ Home Journal, Parenting, Entrepreneur, and The Los Angeles Times.