Get Out Of Debt In Eleven Steps

Getting into debt is much easier (and fun) than getting out of debt. It requires a complete change in money behavior to avoid falling back into the debt abyss.

Janet Paskin at Money Magazine lists an eleven step plan to get out of debt:

"1. Go green. For everyday spending, carry around a set amount of cash to use each week. You will find that you make better purchasing decisions when you actually have to fork over the green stuff and there's a preset limit on what you can spend -- when you run out of money, you stop.

2. Make debit your backup. When only plastic will do (if you're buying online, for instance), use your debit card. The debit card can also serve as an emergency substitute for cash if you run out.

3. Leave your cards at home. Enforce the cooling off period on new credit purchases by taking the cards out of your wallet. Store them in a place that's not easily accessible (in a safe-deposit box, maybe, or frozen in a block of ice)." Hey don't laugh! I have done this myself. It literally puts your impulsive purchase decisions on ice until you can come to your senses.

"4. Don't close the accounts. Having unused credit available from lenders with whom you've had long relationships will help boost your credit score.Lower your rates
With a moratorium on charging in place, shift your attention to paring down your existing debt. Start by reducing what you pay in interest.

5. Do some comparison shopping. Check cardweb.com and CNNMoney.com's card search tool for lower-rate issuers.

6. Consider a balance transfer. Look for offers with a 0% introductory rate for a full year, relatively low rates thereafter (13% or less) and no annual fees. A couple of good choices: Discover Platinum (800-347-2683) and HSBC Platinum (877-277-0948).

7. Play let's make a deal. Call your current card companies and explain that you intend to transfer your balance to another issuer unless your rate is lowered, suggests Scott Bilker, author of "Talk Your Way out of Credit Card Debt." If your credit score is above about 750, you should be able to get your rate under 10%, he says. And, he adds, you should still be able to knock a few points off your rate even if your credit score is as low as 650.Tackle those balances
Finally, develop a strategy for paying off your existing balances." For more on credit scores search my archives on this blog.

"8. Figure out what you really owe. Gather your statements and make a simple table listing the amount you owe, and the minimum payment and interest rate for each card. This will help you determine the order in which you should pay off your cards. Then use CNNMoney.com's debt-reduction calculator to see how long it will take to wipe out those balances.

9. Focus on the highest-rate card first. Pay as much as you can each month while making only minimum payments on your other cards.

10. Automate your current minimums. Late payments are the cardinal sin of debt management. You get slapped with hefty late fees and penalty rates that run as high as 30%, plus your credit score will take a hit.

11. Go in order. When the first card is paid off, use the same strategy on the next-highest rate card and so on until you're debt-free."

-Bill Burniece

Denver vs. The Bubble

Among the questions I am most frequently asked is my opinion of the Housing Bubble and it's impact and implications on Denver and the rest of our state.

I don't think Colorado is going to experience the kind of problems the housing bubble presents to other parts of the country. Among the many reasons I feel this way is the fact that we already experienced a housing value decline in the late 1980's when our job market went through a rough period and jobs disappeared. Although it was painful at the time it allowed the housing market to let off some steam and keep it from attaining levels of double-digit growth over the past decade.

In fact, in the last five years Colorado home values have risen around 28% which is about half of the roughly 58% appreciation rate nationally. Prices more than doubled during this period in parts of Nevada, California, Arizona, and Florida. These are the areas that appear to be heading for some unpleasant 'corrections' in the next few years.

The bottom line is that, like most of the US, the Colorado real estate market will level out and home appreciation will slow down. But I don't see home appreciation declining any time soon in our market.

-Bill Burniece

When Refinancing Is A Bad Idea

Many of the people that approach me for a refinance loan really don't need one. They ignore the big picture and look only at the short-term benefits refinancing provides. There is a break-even point that you must consider. Specifically, you must plan to remain in the home long enough to re-coup the costs of the refinance loan for it to make good sense.

Consolidating credit card debt can be a good idea but only if you change your spending habits to avoid running the balances back up again. Time and time again I see people fall back into their old habits and soon have both credit card debt and a higher balance mortgage. Worse, there is now less equity in their homes to try to bail themselves out again. This leaves the homeowner vulnerable to bankruptcy or foreclosure.

Another consideration is the time spent in your current mortgage loan. If you have paid your mortgage down to 15 - 20 years left does it really make sense to trade that in for a fresh 30 year term even at a lower interest rate? The longer you are in the loan the higher the total costs. You need to crunch the numbers or have a professional do it for you.

The biggest mistake I see is when a homeowner with damaged credit refinances to consolidate delinquent debt but fails to work on cleaning up their credit report after the loan closes. To get back into a good fixed rate loan this is a critical step in the process.

Refinancing can be a fantastic tool to save money in your overall financial picture when used properly. When refinancing goes wrong it can often be a shortcut to financial disaster.

-Bill Burniece

10 Tips To Get The Most Out Of Each Gallon Of Gas

With gasoline in Colorado nearing $3 per gallon this is a good time to revisit the topic of improving your car's gas mileage.

Lucy Lazarony at Bankrate.com explores simple tips that can start saving you money TODAY.

"1-Fill up with a lower-octane gasoline. Buy the lowest grade or octane of gasoline that is appropriate for your car. Unless your car requires premium gasoline, filling up your car with high-octane fuel is a waste of money. That pricey premium fuel won't boost your car's fuel economy or performance in the least, so skip it. If you're not sure what grade of fuel works best for your car, open up your owner's manual and take a look. As long as your engine doesn't knock or ping when you fuel up with regular unleaded, you're good to drive on this much cheaper gas. Passing on pricey premium gasoline could save you hundreds of dollars a year.

2-Don't top off. Don't bother topping off when filling your car's gas tank. Any additional gas is just going to slop around or seep out. Why waste your money paying for gas your car won't use? Stop pumping at the first indication that your tank is full when the automatic nozzle clicks off.

3-Tighten up that gas cap. Gas will evaporate from your car's gas tank if it has an escape. Loose, missing or damaged gas caps cause 147 million gallons of gas to evaporate each year, according to the Car Care Council. So be sure to tighten up that gas cap each time you fuel up your car.

4-Go for the shade. The hot summer sun that makes the inside of your car feel like a sauna also zaps fuel from your gas tank. 'If you let your car bake in the sun there's going to be a greater amount of evaporative emissions that take place than if you park in the shade,' says Jim Kliesch, research associate at the American Council for an Energy-Efficient Economy and vehicle analyst for GreenerCars.com. So park your car in the shade of a building or tree whenever possible. And buy a good windshield shade. A windshield shade blocks sunlight and helps to keep heat out of the inside of your car.

5-Use your garage for your car. Got a garage? Clear it out and make room for your car. Parking in your garage will help your car stay warm in winter and cool in summer, and you won't have to depend as much on your gas-guzzling air-conditioning or defroster when you drive."

"6-Pump up your tires. Don't get caught driving on underinflated tires. Underinflated tires wear down more quickly and they also lower your car's gas mileage.
'Tires that have low pressure offer more resistance so the engine is going to work harder to keep the car at 60,' says Brian Moody, road test editor at Edmunds.com.
Your car's gas mileage may plummet by as much as 15 percent. Driving on underinflated tires may also reduce the life of your tires by 15 percent or more. Check your tire pressure once a month. Buy a digital gauge and keep it in your glove box. Compare the pressure in your tires with the recommended pressure listed in your owner's manual and on the placard in your car door. Then inflate your tires as needed. Be sure to check tire pressure when your tires are cold. A good time is early in the morning after your car's been idle overnight.

7-Keep your engine in tune. Fixing a car that is out of tune or has failed an emissions test can boost gas mileage by about 4 percent. So be sure to give your car regular tune-ups. You'll also want to watch out for worn spark plugs. A misfiring spark plug can reduce a car's fuel efficiency by as much as 30 percent.

8-Replace air filters. Keep a close eye on your engine's air filter. When the engine air filter clogs with dirt, dust and bugs, it causes your engine to work harder and your car becomes less fuel-efficient. Replacing a clogged air filter could improve your gas mileage by as much as 10 percent and save you 15 cents a gallon. It's a good idea to have your engine air filter checked at each oil change. The Car Care Council recommends changing your car's air and oil filters every three months or 3,000 miles or as specified in your owner's manual.

9-Use the right oil. You can improve your car's gas mileage by 1 percent to 2 percent by using the manufacturer's recommended grade of motor oil. Opt for motor oil with the words "energy conserving" on the API performance label. This oil contains friction-reducing additives.

10-Don't skimp on maintenance. Be serious about auto care. Your car's performance depends on it. 'Always follow the manufacturer-recommended maintenance,' Moody says. 'The car's designed to run a certain way. If you neglect it, it won't be as efficient.' Obey the car-care guidelines outlined in your owner's manual. For more auto-care guidelines check out this free maintenance schedule from the Car Care Council."

At this point we should expect gas prices to remain high as we enter the peak-use summer months.

-Bill Burniece