Destroy Debt http://www.destroydebt.com/ Destroy Debt is an online community which provides regular articles showing practical ways to eliminate debt. www.destroydebt.com Thu, 09 Jul 2009 01:07:55 GMT webmaster@destroydebt.com webmaster@destroydebt.com Debt Settlement Can Increase Your Income – And the Amount of Income Tax You Owe http://www.destroydebt.com/articles/debt-settlement-can-increase-your-income-and-the-amount-of-income-tax-you-owe.html http://www.destroydebt.com/articles/debt-settlement-can-increase-your-income-and-the-amount-of-income-tax-you-owe.html Sat, 25 Apr 2009 06:00:00 GMT With more people struggling to pay their debts, there is an increase in the number of people who are looking to “settle” their debts with their creditors. A debt settlement is a process in which an individual, or a company acting on behalf of the individual, contacts their creditors to request a settlement amount that is less than the total balance owed. It is not unheard of for a successful debt settlement negotiation to result in the individual paying less than half of the total amount owed to fully repay their obligation to the creditor.
For example, if you owe $5,000 on a credit card, negotiating with the creditor may result in you being able to pay a lesser amount – say $2,100 – in exchange for the creditor closing the account and marking it as “paid” or “settled” on your credit report. You no longer have any obligation to the creditor for that particular account.

Creditors are finding that settling debts may be a better option in these difficult financial times than waiting as more people are defaulting on their debts or filing bankruptcy. So, while the creditor receives less than they would if the individual continued to make payments on the account, a settlement is often a better arrangement for the creditor than when someone files bankruptcy because they can't keep up with their payments.

Potential Disadvantages of Saving Money with a Debt Settlement

How can saving money in difficult financial times be a disadvantage? Well, as they say – nothing in life is “free” and if it seems too good to be true, it often is. Debt settlements may reduce the amount you have to pay, but they're not always worth throwing a celebration party over! The creditors who agree to settle your debts are required to send you and the IRS a form 1099-C which indicates how much money you saved. So if you paid $2,100 on the $5,000 you owed to settle the account, you saved $2,900. Any money saved that is greater than $600 must be reported on your tax return as income, unless you meet the criteria for the “exception” to this rule.

The IRS has an exclusion for the reporting of the amount of money you save through settling accounts as income if the individual was insolvent at the time the account was settled. Insolvent means that a person is unable to pay their debts – which is most likely anyone who considers and gets approved for a settlement. It means you have a negative net worth and owe more than you have in assets. So the majority of individuals would fall under this insolvency rule, which is described fully in IRS Publication 908 (in the “Bankruptcy Tax Guide”). You don't need to declare bankruptcy to take advantage of the insolvency rule, either.

If you do end up having to pay taxes on canceled balances (over $600), you've still saved a lot of money on what you owe (and the interest they would have accumulated, not to mention potential late fees) that makes having to pay a little more at tax time a better deal than struggling with excessive credit card debt. Typically people who have a lot of equity in your home or other property that is worth more than what your debts are, your networth will be positive and you would end up having to pay tax on the amount you save during a debt settlement. With most people having upside down mortgages, though, chances are you will not have to pay tax on the forgiven debt – check with a tax professional before or after you settle on your debts to find out specifics and how to file your tax return.]]> Last Minute Tax Tips for Last Minute Tax Filers http://www.destroydebt.com/articles/last-minute-tax-tips-for-last-minute-tax-filers.html http://www.destroydebt.com/articles/last-minute-tax-tips-for-last-minute-tax-filers.html Thu, 09 Apr 2009 06:00:00 GMT April 15 is just a few days away – have you filed your tax return yet? If not, you need to get yourself in gear and take care of it as the deadline is April 15th. Even with a rapidly approaching deadline, there is no reason to panic. Here are a few last minute tax tips for all the last minute tax filers:


Get Organized First: you will need a fair amount of concentration to file your taxes, so it may be better to work in a quiet area than it is to work on the coffee table in the living room with the television on. Get all of your information together including your w-4 from all jobs held in 2008, 1099 forms that show miscellaneous income sources, and any records for deductions (medical bills, charitable donation receipts, mortgage interest statements, self employed records, etc). It's easier to try and gather everything you'll need before you start to help you move through the process quickly rather than spending time every other line on the return searching for the necessary paperwork to complete it.




File Online (and for free): Did you know that regardless of your income, you can file your tax returns online for free this year, through the IRS website? Visit www.irs.gov for details. If you need software to walk you through filing step by step, you can get that for free if your adjusted gross income in 2008 was $56,000 or less. One of the benefits of filing your taxes electronically is that if you are eligible for a refund, you'll get the money faster than you would if you mailed your returns in – especially if you're mailing in at the last minute.

You can get an extension: Everyone is entitled for an extension of six months (until October 15th) for filing their tax returns if you can't get them done on time. You do have to request the extension by April 15th, and filing one doesn't mean that you have more time to pay any taxes that you owe. You will need to estimate how much you owe to the IRS and send a check in by April 15th, and make up the difference when you complete the return before the October extended deadline.

Many people believe filing for an extension increases your likeliness for being audited, but the audit risks are the same for people who file before April 15th and those who file for an extension.

Use Standard Deduction to make it faster to file: if you don't have a complicated financial situation, as in you don't have a home mortgage with interest and you don't make large charity donations that you need to claim, chances are you can file using the standard deduction instead of itemizing. In 2008, the standard deduction for a single person was $5,450 while married couples can take the standard deduction of $10,900. If you are over the age of 65 and/or have disabilities, you get a higher standard deduction. Not everyone needs to itemize their deductions and it's only useful if your itemized deductions will be higher than the standard deduction you could use.

Get a last minute tax deduction by contributing to your IRA: open or contribute to an IRA and the contribution will count for the 2008 tax year if you contribute before April 15th. Up to $5,000 can be deducted from your taxes (or $6,000 if you're 50 or older) – although eligibility depends on your income.

Random sources of income: Don't forget bank accounts that earn interest, even if you closed them during 2008 you have to report the interest those accounts earned. Did you work and get paid for jury duty? Freelance work? All sources of income should be reported when you file your tax return.]]> Frequently Asked Questions about Debt Collectors http://www.destroydebt.com/articles/frequently-asked-questions-about-debt-collectors.html http://www.destroydebt.com/articles/frequently-asked-questions-about-debt-collectors.html Thu, 02 Apr 2009 06:00:00 GMT According to the Federal Trade Commission, a debt collector is any company or person with the business purpose of collecting debts that are owed to others. Debt collectors may be collection agencies, companies that buy debts from other businesses and then attempt to collect the money, and lawyers who collect debts regularly. The FTC is a consumer protection agency that is responsible for enforcing the Fair Debt Collection Practices Act. Under this act, consumers are protected against collectors using abusive, deceptive or unfair practices in their efforts to collect money from you.
Here are some frequently asked questions about your rights under the Fair Debt Collection Practices Act, and about debt collectors in general:

What debt is covered under the Fair Debt Collection Practices Act? Basically all debts that are not incurred to run a business are protected under the Act. Personal, household, family debt on credit cards, automobile loans, personal loans, medical expenses and mortgages are all covered under the Act.

When and where can debt collectors contact you? Contrary to popular belief, debt collectors cannot contact you any time or any where! They can't contact you before 8am in the morning or 9pm at night, unless you've agreed to it. If you tell the collector in writing or verbally not to contact you at work, they are not allowed to call you there.

Can debt collectors contact someone else to collect the money from you? If you have an attorney, debt collectors are required to work through the attorney. If you don't have representation, the collector is allowed to contact your family or friends or work to find out your home phone number, address or where you work – but they are not permitted to discuss your debt with anyone other than you, your spouse, or your attorney.

Can you stop a debt collector from contacting you? If you've spoken to the debt collector at least once to find out what they're looking to collect on, regardless of the circumstances you can request that they only contact you by mail rather than by phone. Send a letter by certified mail (keep a copy) and pay for a return receipt. Once the collector has the letter, they may not contact you except to tell you they are filing a lawsuit in an effort to collect the debt.


What information does the debt collector have to tell you about the debts? Debt collectors are required to send you a written validation notice with the amount of money you owe within 5 days of contacting you to collect the debt. It should include the name of the creditor to whom you owe the money and what to do if you don't think you owe it.


Can your bank account or wages be garnished by a debt collector? With a judgment against you in court, if the collector wins they can garnish your wages or set up a direct payment from your bank account to pay towards your debts. For federal student loans, no court judgment is required to begin wage garnishments, and they can even take any tax refund you have coming to you.

What practices are debt collectors not allowed to use in their efforts to collect a debt? The Fair Debt Collection Act prohibits certain activities for debt collection, including:

Harassment: a collector can not harass, abuse or oppress you with threats of violence or harm, through obscene or profane language, or repeatedly use the phone to annoy someone about a debt. They also cannot publish a list of names of people who are refusing to pay debts, except to report it to credit reporting agencies.

False Statements: a debt collector cannot use any false statements to pressure you into paying – they cannot claim to be attorneys or government representatives, cannot claim to work for a credit reporting agency, claim your debt is a crime if it isn't, or misrepresent the amount of money you currently owe. They cannot state forms they send you are legal if they're not, or vice versa. Prohibited Statements: collectors are prohibited from saying any of the following:

  • You'll be arrested if you don't pay the debt

  • Legal action will be taken against you (if they don't intend to take action or if doing so would be illegal)

  • Your wages will be garnished or seized unless they are permitted by law to take that action AND they intend to do it

  • Your property will be sold and proceeds used to pay the debt unless they are permitted by law to take that action AND they intend to do it



Unfair Practices: collectors may not engage in unfair practices such as trying to collect more than what you owe in interest or fees, unless your state law allows those charges, cannot deposit a post-dated check before the date indicated on the check, and cannot contact you by postcard.

Is there anything you can do if you think a debt collector has violated the laws under this Act? If you believe a debt collector violates the laws of this act, you can sue the collector in state or federal court within a year of the date the law was violated. If you can't prove that you've suffered actual financial damages, the judge can require the collector to pay you $1,000 and to reimburse you for attorney fees and court costs. If you have proof that the collectors actions were illegal and cost you financially, they can be ordered to pay you for those actual damages. Keep in mind that even if the debt collector violates the law when trying to get the money they are owed, the debt is still owed and doesn't go away.

Information: Debt collection and credit: www.ftc.gov/credit and MyMoney.gov

File a complaint: Ftc.gov or call 1-877-FTC-HELP]]> Credit Companies are Hurting Your Credit Score http://www.destroydebt.com/articles/credit-companies-are-hurting-your-credit-score.html http://www.destroydebt.com/articles/credit-companies-are-hurting-your-credit-score.html Thu, 26 Mar 2009 06:00:00 GMT Just when you think you've got the calculation of credit scores figured out... you discover that credit companies can actually hurt your credit score – and it's not what you are probably thinking. Of course, if you don't make your payments on time, a creditor can report you as 30, 60, 90 or 180 days late which will eventually decrease your FICO score, particularly if you make a habit of making payments late. But creditors can also decrease your credit score through no fault of your own.
  • 35% of your score is based on how you pay your debts, with your recent activity having the most importance. Paying bills on time of course is ideal, while declaring bankruptcy is the worst. If you pay your bills late consistently or have bills sent to collections, this will cause big problems in the credit score department.
  • 30% of your score is based on how much money you owe and how much money is available to you for borrowing. If you're using almost all of the money available to you, you're riskier than someone who has a lot of available credit.
  • 15% of your score is based on how long you've had credit. College students have lower credit scores than someone who has been utilizing credit responsibly for 10 years because it's hard to predict how a new credit-user will pay their bills when there is no history to compare it to.
  • 10% of your score is based on the type of credit you've had or currently have. A higher score is awarded to people who show they know how to manage a variety of credit types, including credit cards, mortgages, car loans, installment loans, etc.
  • 10% of your score is based on how often you apply for credit. If you are applying for credit left and right, you are seen as riskier and receive a lower score than someone who doesn't apply for credit as often.


    • How Credit Companies Can Lower Your Credit Score – Even if You're Paying on Time

    So how is that a credit company can actually decrease your FICO score, if you're making all of your payments on time?

    Recently, a number of credit card issuers have been lowering available credit to their cardholders. Many of the cardholders who've been targeted for the reduced credit limits haven't been making their payments late, and some aren't even using their credit cards. Creditors are lowering the available credits of many cardholders simply to “reduce their risks”, as more people default on their credit cards or declare bankruptcy.

    When your credit limits are decreased, your available credit decreases. Since your ratio of debt to available credit makes up 30% of your credit score, you can bet that the lowering of your available credit is going to impact your credit score in a negative way. Suddenly, you are using a higher percentage of your available credit, even though you didn't spend more money, and your credit score decreases as a result of this available credit change.

    How Can You Improve Credit Score if This Happens to You?


    Unfortunately, there isn't much you can do to stop a creditor from lowering your available credit limit. Often, they do it without warning and simply send you a notice in the mail to let you know the limit has been reduced.

    The best way to help your credit score is to reduce your debt as much as possible, so you are using less of your available credit.]]> Get Out of Debt Tips http://www.destroydebt.com/articles/get-out-of-debt-tips.html http://www.destroydebt.com/articles/get-out-of-debt-tips.html Thu, 19 Mar 2009 06:00:00 GMT Everywhere you look there are guides for getting out of debt and step by step processes you can follow to help you get your finances in order. On DestroyDebt.com, we've given a number of methods for getting out of debt, along with the step by step details – in this article, we're going to give you a number of TIPS to eliminate debt. They aren't in any order, and it's not a step by step guide, but you should find ideas for getting out of debt here Destroy Debt. we've given a number of methods for getting out of debt, along with the step by step details – in this article, we're going to give you a number of TIPS to eliminate debt. They aren't in any order, and it's not a step by step guide, but you should find ideas for getting out of debt here. If you have tips that haven't been covered here, please leave them in the comments!



  • Spend less than you earn.

  • Use cash for better budgeting, and stop using debit cards and credit cards.

  • Create a plan to get out of debt for better results than just sending money to your accounts randomly.

  • Know exactly how much you owe, keep track of it in a spreadsheet or notebook and update it each time you make a payment.

  • Establish an emergency fund as soon as possible to avoid relying on debt when an unexpected expense occurs.

  • Shred your credit cards but keep accounts open (closing accounts lowers your credit score).

  • Consider a non-profit debt counseling service to help you develop a plan for getting out of debt faster.

  • Contact creditors to request lower interest rates or easier repayment plans.

  • Get a free copy of your credit report to see if there are any errors that need to be corrected.

  • Don't go into more debt trying to pay off your debts! You can't send so much to your debt repayments that you can't keep up with your living expenses.

  • Look for ways to reduce expenses – the more you reduce, the more money you can pay toward debt and the faster you can become debt free. You don't have to live like a monk, but there are many living expenses and unnecessary expenses you can reduce or eliminate (even if only temporarily) to get out of debt faster.

  • Learn how to entertain yourself for free.

  • Plan for upcoming expenses and non-monthly expenses so you don't have to scramble to get the money all at once (car insurance premiums, property or school taxes, car maintenance, etc).

  • Create and stick to a budget.

  • Consider the debt snowball.

  • Consider the highest-interest-first method of paying off debt.

  • Consider the debt avalanche.

  • Avoid relationship problems by keeping open communication regarding finances.

  • If you fall off the debt repayment wagon, get back on. It takes discipline and hard work to get out of debt.

  • Learn how to reward yourself for sticking to the budget, or paying off debt, without spending a lot of money for the reward.

  • You didn't get into debt overnight, understand it will take longer than a day to get out of debt, too. You have to break the cycle of debt.

  • Stop borrowing or applying for credit. If you can't save for the purchase or the expense, then you can't afford to buy it.

  • Don't forget the importance in saving for the future (retirement, college, etc) while repaying your debts.

  • Increase your income with a part time job, a home business, programming, design, or with freelance writing jobs.




    • Hopefully you'll find a tip or two on this list that can help you on your mission to pay off debt. If you think of something we left out, please be sure to add it!]]>         File Your Taxes Online for Free With Adjusted Gross Income of $56,000 or Less http://www.destroydebt.com/articles/file-your-taxes-online-for-free-with-adjusted-gross-income-of-56000-or-less.html http://www.destroydebt.com/articles/file-your-taxes-online-for-free-with-adjusted-gross-income-of-56000-or-less.html Thu, 12 Mar 2009 06:00:00 GMT There are a number of online tax software advertisements that tell you that you can file your federal tax return for free.  You sign up for an account, fill in all the information to file your taxes and find out at the end that you have to pay to file, or pay to use the software, and there is nothing more frustrating than spending a couple hours preparing your taxes (thinking you can file for free) only to find out you've got to pay to complete it!
    What many of these sites fail to mention is that the federal filing is free only if your adjusted gross income is less than $56,000.  This is the standard amount, although if the amount is different from this number, the site should indicate that before you begin the process of preparing your paperwork to be filed.

    The IRS has put together a list of links to websites offering free tax preparation and e-filing services through The Free File program.  This program “provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the Internal Revenue Service (IRS) and the Free File Alliance LLC, a group of private sector tax software companies”.

    Keep in mind though, that the online preparation software does not have to offer all available forms in order to give you free preparation and e-filing, so check with the company to make sure you'll have all of the forms you require to file your taxes available to you.  You also shouldn't expect to file both federal and state for free, as most companies offering free federal e-file charge for state filing.

    In an effort to help you select the best online tool for preparing and filing your income tax return, the IRS has also set up a quick form.  The answers you provide on the form will help the IRS determine which free tax filing software might work best for your situation, considering the forms you will require, your adjusted gross income, age and where you live. 

    If the idea of preparing your tax forms through tax software is a bit outside what you are comfortable with, the other option for e-filing is to use free fillable forms that look like blank IRS forms.  You select the type of return you need to file (1040, 1040A or 1040EZ) and fill in the numbers on the online form just as you would if you were handwriting them on a paper form. The form will do basic calculations for you, eliminating mathematical errors and there are no limitations for your income in order to use these forms.  Once you fill in the forms, you can file your federal tax return online.  The free fillable forms do not include state forms or state e-filing services, so you would need to do those separately.

    If you owe money for your return, you can use a variety of methods to make that payment when e-filing.  You can have the money automatically debited from your bank account for no additional fee, or mail a check or money order at no cost.  Some payment methods will charge you an additional fee, such as paying your taxes with a credit card – but the system you use to prepare and file your taxes will let you know what the fees are and which payment methods result in an additional fee.]]>         Can You Claim the $8,000 Credit for First Time Home Buyers? http://www.destroydebt.com/articles/can-you-claim-the-8000-credit-for-first-time-home-buyers.html http://www.destroydebt.com/articles/can-you-claim-the-8000-credit-for-first-time-home-buyers.html Fri, 06 Mar 2009 06:00:00 GMT The $787 billion stimulus package passed in February included a new $8,000 tax credit for first time home buyers. Can you claim it? The First-Time Homebuyer Credit Form 5405 from the IRS helps answer some of the questions regarding eligibility for the credit (or not), and is also the form you would fill out and file with your taxes in order to submit the claim at tax-time. $400 tax credit per worker.  Can you claim it?  The First-Time Homebuyer Credit Form 5405 from the IRS helps answer some of the questions regarding eligibility for the credit (or not), and is also the form you would fill out and file with your taxes in order to submit the claim at tax-time.

    Who is Eligible?

    While it seems that you should be eligible for a first time home buyer credit as long as you buy your first home, like anything else there are conditions to the eligibility for the $8,000 credit. 

    If you are buying your first home (to be your primary residence) after April 8, 2008 and before December 1, 2009, and you meet the other conditions for eligibility – your home purchase qualifies.  However, the credit for homes purchased in 2008 is $7,500 – and homes purchased in 2009 receive the $8,000 tax credit. If you're married, neither you or your spouse can own any other main home during the 3 year period prior to the date of your purchase.  If you're building a home, the day of “purchase” is the day you start living in the home.

    Your main home must be your primary residence, but it can be a motor home, house boat, trailer, condominium, etc.  It just has to be residential, and what you live in most of the time to qualify.

    If you earn more than $95,000 per year as an individual or $170,000  (modified adjusted gross income) for a married couple, you are not eligible for the First Time Home Buyer credit.  Homes located outside the United States do not qualify, nor does your home purchase if you are a non-resident alien.  You can't buy a home from your parents or great-uncle if you want to receive the first time home buyer credit.

    First Time Homebuyer Credit Details

    For people who bought their homes after April 8, 2008 and before the year 2009 began, the credit is actually more like an interest-free loan than it is a “credit”.  The money is paid back in 15 equal installments beginning in the year 2010.  If you buy a new home as your primary residence, or otherwise stop living in the home you purchased before the 15 years are up, you'll have to pay back the remaining balance of your “credit” during the year you move out.

    If you buy a home in 2009, you don't have to repay the credit as long as the home remains your primary residence for 36 months beginning on the date you purchase the home.  However, just like home buyers at the end of 2008, if you leave before the 3 years are up, you'll have to pay back the credit the year you move out.  There are a handful of exceptions to this, but in general – if you move out, you lose out!

    The amount of the first time home buyer credit may actually be less than $7,500 for 2008 buyers and $8,000 for 2009 buyers.  If your modified adjusted gross income (MAGI) is less than $75,000 as an individual or $150,000 as a married couple, you'll get the full credit.  Otherwise, for MAGI's between $75,000 and $95,000 (or $150,000 and $170,000 for married couples), the credit begins to phase out and is the lesser of the $7,500 or $8,000 credit OR 10% of the purchase price of the home.

    How to Get the First Time Homebuyer Credit

    It may be worth it to use a tax professional when you file your taxes, if you are looking to claim the first time homebuyer tax credit.  Tax preparation software should be updated to reflect these changes, but be sure to double check that the credit is applied.  You should be able to tell, as it would add about $7,500 or $8,000 to your refund (or reduce the amount you're expected to pay if you owe at tax time).  If you still do your taxes with printed forms and a pencil, make sure you get the IRS form 5405 to claim the first time home buyer credit.]]>         How To Weed Out Bad Consolidation Companies http://www.destroydebt.com/articles/how-to-weed-out-bad-consolidation-companies.html http://www.destroydebt.com/articles/how-to-weed-out-bad-consolidation-companies.html Wed, 25 Feb 2009 06:00:00 GMT Being in debt involves a lot of decision-making and financial choices. Each individual is entitled to get enough information so they may continue to make informed decisions when it comes to their finances. Whether it be services or solutions or step-by-step methods for eliminating debt, each debtor has a responsibility to themselves to choose the best debt-reduction method that makes sense for their individual situations.
    When it comes to choosing debt consolidation as the method to get rid of debt, many will find the consolidation plan works easily into an established budget and enables them to meet debt-free goals they might not otherwise be capable of reaching. Debt consolidation companies help to eliminate penalties and fees that accrue on unpaid bills and typically the results of the consolidation process are quickly realized.

    While the process of going through a debt consolidation may not be overly difficult, the process of find a legitimate company to do your consolidation through may be an entirely different story. When you are already struggling to get back on the right financial path, it would be almost criminal to get taken for a ride by a company who may not be totally on the up-and-up when it comes to legitimacy. It can seem overwhelming having to investigate a multitude of companies on your own to find one that is a match for your situation. But it is certainly a necessary step you must take if you are considering a professional consolidation company. There are plenty of fly-by-night companies out there who are hardly afraid to prey on the financially weak so take your time and consider the following information:

    Red Flag Warning Signals

    If a representative of any company tries to coerce you into committing to a payment plan on the spot:

    - Consolidation companies should instead review all of your options with you prior to getting any signatures or commitments of any kind.

    - One of the available options is always to do it on your own by adjusting your current budget. It never has to be their way or nothing.

    If a consolidation company requires upfront fees that seem excess:

    -Typically, many companies will charge a basic administrative fee (average:$25-$50) which is considered a normal type of fee. Anything outside that range should be cause for alarm.

    -If you mention to a representative that you can not afford the administrative fees and they immediately reject your application, look for a new company.

    - If a company requires that you pay a large sum of money before they can move forward with their assistance, move on to another company.

    If a consolidation company can not/will not divulge information about their standards and licenses:

    - All companies should be non-profit organizations

    -All company representatives should be trained and fit to comply with governmental guidelines

    - All companies should be bonded or have the appropriate insurance to protect you from their errors in judgment concerning your consolidation or in the event of fraudulent activities on their part.

    For a list of companies approved by the federal government, you should read over the list of companies which can be found online at the US Department of Justice.]]>         Grocery Shopping: Before and After http://www.destroydebt.com/articles/grocery-shopping-before-and-after.html http://www.destroydebt.com/articles/grocery-shopping-before-and-after.html Tue, 17 Feb 2009 06:00:00 GMT How many times have you stood behind someone in line at the grocery store and groaned to yourself as they flipped through their file of coupons? Is it really worth the extra effort to clip some coupons, and wait for the cashier to figure out how to enter them into the cash register, only to save a few cents?! We decided to share a “Before and After” grocery shopping experience to give you some tips for saving money on your groceries. Is it worth clipping a couple coupons? We'll let you decide:
    DestroyDebt.com is committed to helping you save money on your everyday expenses so you can pay off your existing debt and avoid adding to it: we decided to share a “Before and After” grocery shopping experience to give you some tips for saving money on your groceries. Is it worth clipping a couple coupons? We'll let you decide:

    Grocery Shopping: BEFORE

    The first part of this experiment involved hitting the local grocery store and picking up a week's worth of groceries for a family of 3, without using coupons and without spending time checking for sale prices. If something we were buying happened to be on sale – that was a bonus, but we didn't make any effort to find sale prices or choose the lowest priced option.

    Before heading out to the store, we figured out what meals we'd eat for the week (to make sure what we bought would be enough to last a full week) and then made a shopping list so we could at least stick to the $100 budget.

    If you aren't doing at least this step before grocery shopping, chances are you're spending a LOT more because we all tend to buy more if we aren't buying items from a specific list. If you shop without a list, you'll probably end up having to pick up another few bags of groceries before the week is up because you failed to plan enough meals and snacks to last throughout the week.

    Our general “menu” plan for the week included the following meals.

    Our shopping list included the following items so we could prepare those meals:
    • Bread
    • Eggs
    • Syrup
    • Milk
    • Turkey
    • Cheese
    • Boneless chicken
    • Spaghetti sauce
    • Ground beef
    • Macaroni and Cheese
    • Corn
    • Ketchup
    • BBQ sauce
    • Bananas
    • Apples
    • Carrots
    • Onion
    • Potatoes
    • Frozen pizza
    • Canned soup
    • Mayonaisse
    • Gravy
    • Paper towels
    • Toilet paper
    • Cookies
    • Goldfish crackers
    • Grapes
    • Cereal


    The total of the shopping trip came to $98.31.

    For many families, this is already quite a bit lower than what is spent on a weekly basis at the grocery store. Chances are the step of planning out the meals and shopping only for items you put on the list would save quite a bit of money even without looking for sales or coupons – so if you aren't doing this already, take a few minutes to do this before you go shopping and see for yourself!

    Grocery Shopping: AFTER

    The next part of the experiment was to see whether things like looking for sale and lower priced versions of our purchases, and using coupons would save enough money to make the extra few minutes this planning requires worth the effort.

    In order to buy sale priced items, and items you have coupons for, you will actually be creating most of your “menu” starting with what is on sale the week you're going shopping. So the first think you need to do is get the sale flier for your preferred grocery store, and the Sunday Paper (because it has all of the coupons). When you're browsing online or reading a magazine, keep your eyes peeled for coupons and if you see any you might use, just rip out the page or print it on your printer, but you don't have to put a lot of thought into it.

    While looking through the grocery store sales and the coupons from the Sunday paper, this is the menu we came up with.

    Our shopping list included the following items so we could prepare those meals:
    • Cereal
    • Milk
    • Ground turkey
    • Chuck roast
    • Chicken thighs
    • 4 Cans of Tuna
    • Potatoes
    • Carrots
    • Onion
    • BBQ sauce
  • Spaghetti sauce
    • Bread
    • Chex mix
    • Juice
    • Frozen Pizza
    • Canned Soup
    • Bagged salad
    • Strawberries
    • Oranges
    • Goldfish Crackers
    • Eggs
    • Paper Towels
    • Toilet Paper


    The total of the second shopping trip came to $83.83 before coupons and sales were factored in.

    We used $4.49 worth of coupons, and selected items based on sale prices to increase savings to $26.

    The total of the shopping trip with coupons and sale prices came to just $58.23.

    Between weeks one and two, you can see a savings of $40.08. If you saved $40 a week on groceries for a month, you'd have an extra $160 in your pocket!

    The total time spent looking through the sales,checking for coupons from the Sunday paper and creating a menu for the week was less than 35 minutes from start to finish. If you wanted to spend more time in an effort to save more money, you could also extend your search for coupons to the internet:

    CoolSavings.com
    CouponMom.com
    TheCouponClippers.com
    Coupons.SmartSource.com]]>         What You Don't Know Can Hurt You: 3 Financial Mistakes that Lower Your Credit Score http://www.destroydebt.com/articles/what-you-dont-know-can-hurt-you-3-financial-mistakes-that-lower-your-credit-score.html http://www.destroydebt.com/articles/what-you-dont-know-can-hurt-you-3-financial-mistakes-that-lower-your-credit-score.html Fri, 13 Feb 2009 06:00:00 GMT Just about everyone understands if you pay your bills late or skip a payment all together, your credit score is going to be lower than someone who always pays everything before it's due. There are some other financial mistakes that may not be as well known, but that will also cause a lower credit score. When talking about your financial situation, what you don't know really can hurt you – here are 3 financial mistakes you need to avoid:
    1. Shopping Around for Better Rates: What?! How can making sure you get the best interest rate possible on your financing be wrong? The problem with shopping around for financing is the number of times creditors access your credit report. Whenever you fill out an application for a credit cad or loan, you give the lender permission to pull your credit score. This is considered an inquiry, and it will show on your credit report for 24 months that the lender viewed your report in order to determine your eligibility for credit.

    Credit scoring models use the number of inquiries when calculating your credit score. Statistically, people who have a lot of inquiries are more of a credit risk than someone with less inquiries. The more inquiries on your credit report, the more your credit score will drop.

    2. Closing Credit Card Accounts: People who pay off their credit cards after having had credit card debt for awhile look forward to the moment that they can close their credit card accounts. It signifies a new phase in their financial futures – closing a credit card account proves you're committed to paying with cash and avoiding the burden of credit card debt, right? As counter-intuitive as it may seem, closing credit card accounts will often lower your credit score! Credit score calculation takes into consideration how much of your revolving credit limit you are using. If you have a credit card with a $5,000 limit and you are using $2,500 you are using 50% of your available credit. The amount of your available credit that you use is almost as important in the calculation of your credit score as making your payments on time – this is why you could have a mediocre credit score even if you are making all of your payments on time.

    If you close a credit card account that is paid off or not being used, you remove some of your available credit. As soon as you reduce the amount of credit you have available to you, you increase the amount of credit you are using, even without spending more. As your utilization of available credit percentage increases, your credit score will decrease.

    3. Leaving Inactive Cards Open Until They Fall Off Your Credit Report: So if you're not supposed to close credit card accounts, you should just leave the credit cards alone until they disappear off your credit report seven years after your last date of activity, right? Wrong! If after you pay off your credit card you leave the account open to avoid increasing your debt utilization percentage, the clock starts ticking. Most unused credit information will be removed from your credit report after 7 years. If your credit card shows a history of on-time payments, you don't want it to be removed from your credit report! Having a record of on-time payments is used in the calculation of your credit score, and is also used by lenders when determining your credit worthiness – so allowing an unused credit card with a good payment history to fall off your report is not a good idea.


    Use your credit card once every couple of months to pay for dinner or an item that you will pay off in full as soon as the bill arrives. By making a purchase periodically (and not carrying a balance), the account will not be closed, your credit report will reflect the payment history and help you keep your credit score strong.]]>