3 Rules to Live by If You Want to Get Out of Debt

When you’re so good at saving money that you can retire at age 31, people understandably want to hear your money tips. That’s how Clark Howard ended up with his own radio show, where he takes consumers’ questions about all things personal finance.
As it often is, debt has been a popular topic recently, and Howard has a few tried-and-true tips he likes to share with consumers. Whether you’re committed to paying down huge credit card balances or simply want to avoid ending up in debt, here are three things Howard recommends you do.

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1. Always Save Some Money
Saving money is Howard’s primary approach to getting out of debt. Shoot for a savings rate of a dime per dollar earned (or 10%), but if you’re not saving anything right now, start by setting aside a penny per dollar (1%) and increase your savings rate every six months, he said.
“Now you may wonder, what does this have to do with eliminating debt in your life?” he said. “You have to start off by learning to live on less than what you make.”
Unless you can find a way to make more money, that means you need to cut things from your budget and put that extra money toward your debt (or a savings account, so you don’t have to turn to a credit card in an emergency).
2. Pay More Than the Minimum
“A lot of people pay the minimum payment because that’s what the bill says,” said Alex Sadler, managing editor of Clark.com. Doing that could leave you in debt for a very long time, so make it a priority to budget for more than the monthly payment. Credit card bills also include a section that says how much you need to pay each month in order to get out of debt in 36 months (three years), which can help you figure out how much room you need to make in your budget to get out of debt.
When you have multiple debts to pay off, Howard recommends using the “laddering method” to save the most money. That means focusing on the debt with the highest interest rate first.
“Keep throwing money at it, and [on] all the others pay the minimum,” Howard said. “Methodically, step by step, work your way to zero debt.”
It helps to make a list of all your debts and their interest rates. In fact, most people who call Howard don’t know how much debt they have, so sitting down and getting a sense of the numbers is a great place to start.
“If you ever want to get out of debt … the first thing you have to do is figure out how much debt you owe, and then you can make a plan,” Sadler said.
3. Find a Cheaper Alternative
One of the most common kind of questions Howard gets these days is about student loan debt, particularly from older consumers who borrowed or cosigned on behalf of children or grandchildren. As with all kinds of debt, the best thing to do is avoid it in the first place, because once you’re in debt, there’s usually not much you can do to get rid of it other than pay it off. (This is especially true of education-related debt, because it’s rarely discharged in bankruptcy.)
“The reality with anybody approaching college is the cost of college needs to be the highest priority,” Howard said. “You may have your favorite, but if your favorite would put you into very heavy debt or your family into very heavy debt, you need to go with a different school.”
Though he’s talking about education, that approach applies to anything that could put you in debt. You can’t always avoid going into debt, but if you save up as much as you can and opt for more affordable things (like a vehicle with fewer options or a home with most but not all of the things on your wish list), you’ll end up borrowing less and spending less money on interest.
As you work to pay down and stay out of debt, keep an eye on your credit scores. Not only will good credit help you qualify for better terms on things like an auto loan or mortgage, it can also make it easier to get everyday necessities like a cell phone or utility accounts. You can see two of your credit scores for free, with updates available every 14 days, on Credit.com
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The post 3 Rules to Live by If You Want to Get Out of Debt appeared first on Credit.com.
Source: Ramsey Debt Relief Feed 1

5 Ways to Avoid a Ridiculously High Medical Bill

Of all the things that are stressful about personal finance, medical bills might be the worst.
The events leading up to medical bills are difficult if not impossible to predict. On top of that, healthcare pricing is inconsistent, medical bills are often inaccurate and a lot of people have trouble understanding their health insurance coverage. And if you think it’s something you don’t need to worry about, consider this: About a quarter (26%) of people ages 18 to 64 said they or someone in their home had trouble paying medical bills in the last 12 months, according to a nationally representative survey conducted by the Kaiser Family Foundation and the New York Times from Aug. 28 through Sept. 28, 2015.
Medical expenses are undeniably burdensome and difficult to plan for, but that’s exactly why it’s important to try. We asked some medical billing experts to share their top tips for consumers who want to be prepared for whatever their healthcare providers send them in the mail.

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1. Know Your Coverage — & Prioritize Health Savings
Managing medical expenses starts before you get sick or injured. The first place to direct your attention is your health insurance.
“Know your insurance policy inside and out,” said Sarah O’Leary, founder and CEO of ExHale Healthcare Advocates. “The best way to avoid getting overcharged is to know your coverage! Demand 100% of the coverage you’ve paid for – nothing less.”
Even with insurance, you’re likely to have some responsibility for the bills. You can work healthcare costs into your monthly budget, allocate some of your savings for unexpected medical bills or use a tax-advantaged tool like a flexible spending account (FSA) or health savings account (HSA) to cover such bills. (You can find a everything you need to know about HSAs right here.) 
Remember to re-evaluate your coverage and review your health insurance contributions (noted in your paycheck) during open enrollment to make sure your policy suits your needs and your budget. A thorough understanding of your insurance coverage and what you need to save to cover the gaps can make it much easier to absorb the costs of any future medical bills.
2. Get Everything in Writing
When it comes time to actually go to the doctor, ask a lot of questions and get as many details as possible before receiving any treatment. Just like anything else you spend your money on, getting quality, affordable healthcare requires some legwork on the part of the consumer.
“Shop around the cost of your care,” O’Leary said. “An MRI on one side of Main Street might be $3,000, and on the other $300. You can save thousands by shopping around all aspects of your care – doctor visits, lab work, tests, and the costs of non-emergency procedures. Even shopping prescription drug costs can save you money. Negotiate the price with your healthcare provider(s) and get the agreed upon amount in writing.”
Adria Goldman Gross, who runs MedWise Insurance Advocacy in Monroe, New York, also emphasized the importance of written estimates: “Whatever agreed fee amount you have with your medical provider, make sure you have it in writing.”
And as important as it is to get as much information as possible from potential providers, don’t forget to run things by your insurance company. “Make certain you have all necessary pre-approvals from your insurer prior to the test/procedure,” O’Leary said. “If you don’t get proper approvals, the insurer may refuse to pay the claim.”
3. Double Check the Bill
Once you’ve gotten treatment, pay close attention to the paperwork.
“About 80% of all medical bills have errors,” Gross said. (O’Leary said about 60% to 80% of bills have errors.) “I recommend people examine them thoroughly and make sure that they’re not overcharged. On the internet, with some research, people can find usual, reasonable and customary charges for the procedure codes of which they are being billed.”
4. Ask for a Payment Plan
The minute you get an accurate medical bill and realize you can’t afford it, reach out to the healthcare provider.
“In most cases, the healthcare provider will be open to setting up a monthly payment plan with the patient,” O’Leary said. “It doesn’t do them any good to have a patient file for bankruptcy, nor is it to their advantage to hand it over to a debt collections agency.”
5. Make a Backup Plan
If for some reason you can’t work out a payment plan or your budget or emergency savings aren’t enough to help you cover a medical expense, you could consider using a balance-transfer credit card to cover the bill. These cards tout 0% introductory annual percentage rates (APRs) that let you skip the interest for a set period of time. Another emergency funding option? A low-interest personal loan. You can learn more about their pros and cons in our loan learning center. 
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The post 5 Ways to Avoid a Ridiculously High Medical Bill appeared first on Credit.com.
Source: Ramsey Debt Relief Feed 1