Six Step Debt Elimination Plan

Step 1: Know wher you standIgnorance may be bliss, but it won't solve your problems. The only way to get out of a debt predicament is to know how beholden you are to creditors. Where are you starting from? Look honestly, as painful as it may be, at how much you currently owe.Once you've tallied your debt, add up your income and subtract fixed expenses. The amount leftover is money for discretionary spending and paying down debt.
Step 2: Create a Plan Take a short self-inventory to determine the best repayment plan. There are two main approaches to paying off debt:

• High to low. You pay off the card with the highest interest rate first. This gets the most out of every cent you send.-
• Big to small. You pay off the card with the biggest balance first, regardless of interest rate. This creates big results fast, but may not be the best bang for your buck.

Step 3: Set aside some savings - While it may seem counterintuitive, saving is a crucial aspect of a sound strategy to pay down debt. If you have three to six months of living expenses saved up, you're golden; otherwise, build an emergency savings buffer.A savings cushion can keep you from falling back into the deficit-spending cycle. After paying your minimums, put half of any extra money into savings and half into paying down debt.

Step 4: Pay more than the minimum - Do you understand how much you're paying if you only make minimum payments or how long it will take you to repay your debt?It is crucial to pay down more than the minimum each month. If you can't afford to pay down more than the minimum, sit down to figure out where you can save more. Leave no stone unturned.

Step 5: Imrpove your Terms - Creditors may waive fees, reduce interest rates or agree to more flexible repayment terms. All you have to do is ask. Knowing how to ask is important, though. Your chances of successfully negotiating with creditors increase greatly if you have a "deal breaker," such as another creditor willing to take on your debt at better terms.

Step 6: Seek Counsel- If you don't have the time or know-how to get results on your own, turn to a good credit counseling company rather than stalling or feeling frustrated by ineffectual attempts at vague behavioral changes.A consultation with a good credit counselor takes an hour or so -- you can even phone in. A credit counselor can get you on a budget or refer you to other options.

5 Steps to Making a Budget you can Live with

1. Keep Track of your Regular Expenses:If you're the one paying the bills each month, this is probably the easiest part of your budget to put together. Take note of all your regular monthly expenses, including fixed payments for, say, your car and mortgage (or rent), and your fixed (but sometimes variable) costs, such as gas, cable and phone bills. Then jot down your seasonal, biannual and annual expenses. For example, if your car needs a tune-up at least once a year, factor that cost into your annual budget. Once you're done, you should have a good sense of what you're day-to-day living costs you. While there's no set formula that proves whether or not you're spending too much of your monthly income on these expenses, you can typically expect home payments, including your mortgage, utilities, taxes and maintenance costs to consume up to 35% of one month's salary, says Lawrence. And transportation costs including car payments, insurance and maintenance don't normally surpass 24% of one month's pay. Obviously, these percentages will vary based on your location and marital status, among other things, she says. Click here for more on how to track your spending.
2. Prepare for Rising Energy Costs:For the 2007-2008 winter season, the average household is projected to spend $1,955 on heating oil, a 33% increase from the previous winter, according to the Department of Energy (DOE). Homes with natural gas are expected to pay $865, a 6% increase. Rather than getting hit by a monstrous bill, re-adjust your budget with a few simple steps. If you live in a state with cold winters, ask your oil or gas suppliers if you can sign up for a set pay rate for the entire year. That way, rather than receiving exorbitant bills in the wintertime, you'll pay a set amount each month, says Antoine Smith, information specialist at the DOE. Keep in mind that once you sign up, the rate won't change even if there's a mild winter. You can also keep costs down by winterizing your home. "Little things like insulating your doors and windows can save you a couple hundred dollars a month," says Jason Rich, author of "Make Your Paycheck Last." Click here for more on how to cut your winter energy bills. Gasoline retail prices are also projected to rise to an average $3.15 per gallon from $2.62 in 2006, according to the latest DOE annual data. Before you fill up, check web sites like GasBuddy.com and Mapquest, for gas stations with the lowest prices. You can also increase you car's fuel efficiency with some basic maintenance, like a tune-up and checking your tire pressure, says Rich. For more tips, click here.
3. Eliminate Credit Card Debt:The average household with at least one credit card carries $9,616 in credit-card debt, according to Cardweb.com. If you have credit-card debt, it's time to start paring down the lifestyle and focusing on paying it off. First, remove as many entertainment and other unnecessary expenses from your budget as you can, and then put all of that money toward paying off your debt. Otherwise, no matter how well you plan your budget, you'll always end up overspending on the high interest rates and fees that accompany your credit cards, says Rich. Click here for more ways to tackle debt.
4. Build an Emergency Fund:Unexpected emergencies, like temporary unemployment and medical expenses, can blindside you financially. Rather than depending on an interest-charging credit card or loan to help weather such storms, try to save as much as you can when your finances are stable so that you'll have a cash reserve when you need it. In order for this fund to serve its purpose, it should have three to six months' worth of your take-home pay, says Lawrence. That may sound like a lot, but even if you're on a tight budget, you should try to contribute to your emergency fund as often as possible, ideally each month. Set up an automatic contribution to your bank account from your paycheck, for, say, $50, during each pay period. That way, you pay yourself first without even realizing that you're left with less money for day-to-day expenses, says Elaine Morgillo, a certified financial planner with offices in North Andover, Mass., and York, Maine. To help your fund grow, put it in a high-yield savings account where it accrues interest and where you can access your cash within 24 hours of requesting it, says Morgillo. If you use an online account, make sure it's FDIC-insured. Online banks such as HSBC Direct and Emigrant Direct have an annual percentage yield of 4.25% and 4.65%, respectively -- some of the highest rates out there. If you still have extra cash after contributing to your emergency fund, deposit it in your 401(k) -- and make sure you're taking full advantage of your company match -- or your IRA. Click here for more on 401(k)s and click here for more on IRAs.
5. Estimating your Tax Bill: Before you finalize your budget for the year, schedule an appointment with your accountant to get a rough estimate of your tax bill. Because of last year's volatile markets, you're likely to get hit with capital-gains taxes if your holdings include mutual funds in brokerage accounts that had high returns in 2007, says Theodore Lanzaro, certified public accountant and managing partner at Shelton, Conn.-based Lanzaro CPA. This is especially the case if you invested in the energy sector and foreign markets, such as China, India, Russia or Brazil, he says. Click here for more on capital-gains taxes. Your accountant can also keep you abreast of the developments surrounding the alternative minimum tax (AMT). As of press time, President Bush is expected to sign a bill into law that will spare more than 20 million middle-class taxpayers from the AMT. Who will get hit with this tax? That depends mainly on whether you itemize deductions for state and local taxes, your number of personal exemptions, and if you exercise any incentive stock options. Although it's difficult to pin down a starting salary that's affected by this tax, it's unlikely the AMT will hit single taxpayers with income under $75,000 and married people filing jointly that make less than $150,000. Click here for more on the AMT.

Micro Loans for Macro Change

I've always been fascinated with Micro Loans and finance; the idea that giving women in developing countries small loans to start their own business has such a huge economic impact is incredible to me. I was reading the pink magazine website and saw this e-newsletter interview and thought how I would like to share it.

SUCCESS SECRET:"Being aggressively optimistic, bold and persistent, and having zero fear of failure."Jessica Flannery, Co-founder and director, Kiva

Micro Loans for Macro Change
The founder of Kiva tells how small donations add up to a whole new life for women entrepreneurs in developing countries

By. Cynthia Good

Thirty-year-old Jessica Flannery came up with the idea for Kiva (kiva.org) four years ago, inspired by a Nobel Prize winner speaking at Stanford, where she was a student. To date, the nonprofit run by Flannery, her husband, Matt, and their team has raised more than $23 million in no-interest loans from 250,000 lenders to fund microbusinesses in 40 countries. About two-thirds of Kiva's borrowers are women. I caught up with Flannery, co-founder and director of Kiva, at its headquarters in the Mission District of San Francisco this week to talk about connecting people through lending to alleviate poverty.

PINK: What's your biggest success story?

Jessica Flannery: Any woman who takes a loan – despite the cultural poverty, despite not being seen as valuable outside the home – is brave in her own right. I met this one woman, Elizabeth, in Tanzania. She was humble but confident; she looks you in the eye and has a firm handshake. She tells me she started her charcoal business with $100 a few years ago. It turns out she also started five other businesses and employs her husband. She's like a mogul in this Tanzanian village. I thought, "If you'd had half the opportunities I've had in my life, I'd be working for you."

PINK: Which lender has most impacted Kiva?

J.F.: Every lender on the site is doing something heroic. For instance, a woman named Ann Brown, who has her own business in Seattle making leather purses, started her company with a small loan. So she wanted to give back to another woman

PINK: What's your ultimate goal for Kiva?
J.F.: It's possible to hit $1 billion in five years. But more importantly: What if everyone in the world could be connected, and could either empower someone or be empowered? Or, better yet, both? I'd love to see everybody on the planet have the chance to either provide or access dollars.

PINK: You have 26 full-time employees and hope to have more than 40 by the end of the year. Is Kiva more than a job to your employees?

J.F.: Yes. Each person has a story about why he or she connected with Kiva. This year we had a staff retreat where everyone explained why they're at Kiva. It was one of the coolest moments of my life. One day this married couple just showed up and said, "We want to help." They've been here for two years. Everyone's had an experience that opened their eyes to people who need so much. They are so passionate. One of those who manages our microfinance partnerships is 24 and a total rock star. He just got back from East and West Africa visiting borrowers, and he came straight to work from the airport. It's not "just a job" for any one of us. We're all able to use our gifts.

PINK: Unlike at other charities, 100 percent of donations to Kiva go to recipients. How are you able to keep the organization running?

J.F.: We're able to pay our salaries and keep the lights on thanks to lenders who add an optional donation to Kiva when they lend to an individual on the site. Based on that, we've even been cash flow positive in the past, but we're growing so quickly now that we're fundraising quite aggressively again. It's a nice thing, culturally, to know that the majority of our operational costs have been paid for by lenders who tack a few extra dollars onto their loans. We know they support us holistically.
We've set up Kiva like a business. We have other revenue streams, such as interest on the money in our accounts before it gets to borrowers and after it comes back. We also get additional donations from large foundations and wealthy individuals, and revenue for services. For example, instead of frequent flier miles or points for other stuff, we designed a system for one credit card company to turn their clients' points into Kiva credits.

PINK: You've been on Today and Oprah, and Fortune called Kiva "the hottest nonprofit on the planet." What's your secret to great publicity?

J.F.: The Kiva story is just compelling, and our community of lenders and borrowers is so vibrant. Every person has a story, and there are thousands of these stories posted on our site. It's endlessly interesting. And the connections that form are blurring the traditional donor/recipient lines that exist elsewhere. On Kiva, it's not about the strong, in-control American giving a handout to a weak, needy poor person. It's individuals in 72 countries lending to individuals all over the world, and it's a relationship of equals – of business partners. Lenders kick things off by sharing resources and lending someone $100; but the borrower is the one who then has the power, and when she repays you, this virtuous circle can continue.
Also, the Kiva model is sustainable, which is somewhat rare in the nonprofit sector. Instead of a donation or a financially profitable investment, we created this new product, a charitable loan that you get back and can use again after the borrower has repaid, usually in six months to a year

PINK: How do those who want to start businesses find you?

J.F.: We have microfinance institution partners who serve as our experts on the ground. There are 100 million potential borrowers, and only 20 percent of the need is currently met, so we believe in empowering these expert partners of ours to serve more people. Our partners need more cash. So Kiva offers them a platform to fundraise through a peer-to-peer lending connection on kiva.org.

PINK: How do you make sure they don't take advantage of the goodwill and the cash?

J.F.: We do a ton of due diligence, find great partners who manage the entrepreneurs and administer the loans well, and keep information flowing by requiring partners to blog on our website about the business owners' progress. It's a lot of work to do all of the necessary audits and manage the relationships, but we have a program that deploys a large number of amazing volunteers in the field to check up on how things are going.

PINK: What surprises you the most in your work?

J.F.: We deal with human growth and human potential, and nurturing this can be a slow process, and then you hook that up to the rocket ship of the Internet. It's interesting to be stretched between these two worlds. I feel like it made me realize everything is so possible. You don't need to have 40 years of experience to have an idea that can make a difference.

PINK: What is your greatest hope?
J.F.: If we can blur the lines between rich lenders and the poor, and treat and think about each other as equal human beings – that would be the end game. The rich and the poor thinking about each other as people. That would be pretty cool.