Beware of debt negotiation companies
I received a call the other day from a company saying it could negotiate the balance on my credit cards to a lesser amount. The caller also said they could get me a zero-per cent interest rate until the debts were paid off, and then the accounts would be closed. Iím kind of starting over again financially, because I sold a company I had run for almost 15 years, then got into real estate and lost almost everything. Iím making just enough to squeeze by, and my credit-card debt totals $40,000. Would this be a good idea?
No, this is not a good idea. Youíre looking at two major problems with a company such as this one. One, they will absolutely destroy whatever credit you may have. Their plan is to take your cash, and spend some time beating down the credit card companies until they agree to accept a lesser amount. Then, they use your cash to settle loans you will have ó by that time ó defaulted on. This will put you in a situation very similar to if you had filed for bankruptcy. Stay away from these people.
You have an income crisis, in addition to a debt crisis, at this point. For starters, I want you to start living on a tight, written, monthly budget. Iím talking rice and beans, no vacations, and no eating out until you pay off this debt. Where your income is concerned, maybe you should consider getting back into the kind of business you ran previously for a while. Look for a managerial or supervisory position in that area, at least until youíre able to get back on your feet and save some cash.
Finally, cut up the credit cards, close the accounts, and put as much money as you can spare towards paying off that debt using the debt snowball system. Never go back into debt again!
My husband and I are in our forties. We have no children, and we bring home $95,000 a year combined. Weíre also debt-free except for our home. We owe just $10,000 on the house, and can take care of that in a few months. Would it be okay to rearrange the Baby Steps a bit, and pay off our home before getting serious about saving for retirement?
I donít usually give folks any wiggle room when it comes to sticking with the proper order of the Baby Steps. But if youíre that close to being completely debt-free, I donít see anything wrong with paying off the house first.
Most people I talk to still have anywhere from $100,000 to $300,000 left on their mortgages. This is a little bit different story, however, and you two are obviously managing your money well.
Knock out that mortgage, and start pouring at least 15 per cent of your income into retirement. Youíre going to love the feeling ó and the freedom ó that comes with being completely debt-free!
ē Dave Ramsey is CEO of Ramsey Solutions. He has authored seven bestselling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 13 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey
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