How to Be Successful in a DMP

So, you’ve finally taken the big step and enrolled in a debt relief program.

Now what?

If you’re going to succeed, you’ll have to alter the lifestyle that got you into a financial mess. That may include changing your eating habits, cutting utility bills, finding cheaper ways to get around, finding a mentor, getting a part-time job, and even using apps to track your progress.

Ugh.

Look, nobody said getting out of debt was going to be easy, but the combination of nonprofit debt relief and budgeting and saving can greatly improve your odds of success.

Why the need for a monthly budget? You may be down to one payment a month with your debt management plan, but you’re going to be making those payments for three years, maybe longer. If you’re struggling to make your monthly payment with your current spending habits, what will happen if your car breaks down, your refrigerator conks out, or your air conditioner goes on the blink when the first heat wave hits?

That’s why you should be setting aside money each month for unexpected expenses. If you’re like 60% of American consumers who don’t use a budget,  that’s probably not the case currently. But don’t fret. InCharge Debt Solutions can help you create a budget that will help put you on the road to financial health and navigate any unexpected potholes along the way.

Downsize Your Car and Your Car Payment

What better way to start your search for savings than by looking under your hood? Cars cost an average of $8,469 a year, according to the American Automobile Association. A great way to save a bundle is to take public transportation or ride a bike or combine them both for a whole lot less than you spend on gas, insurance and new batteries.

Unfortunately, that’s not a realistic option for many people. What is realistic is trading down to a more affordable fuel-efficient car. That should mean reduced monthly payments – hopefully, $100 or more – and could cut the yearly $1,500 average fuel bill in half. And every 5 mph you drive over 50 mph is like adding another 18 cents a gallon to the price of gas, according to the Environmental Protection Agency.

Eat at Home

According to various studies, the average cost of a meal at home is $4. The average cost of a restaurant meal is $13.  Those nine bucks can add up to some major league savings over the span of a year.

If you take your lunch to work, you’ll save $2,250 per year. If you cut out two restaurant meals a week, you’ll save $936 a year.

If you need a cup of coffee in the morning, make it at home instead of buying it on the way to work. Brewing a cup of coffee at home costs about 17 cents. You could have five home-brewed cups and still spend less than one trip to the local convenience store ($1 or more) and the arm and leg you spend at Starbucks.

Of course, the best way to figure out how much you can save each month by eating in is to first calculate how much you’re spending by dining out. Calculate your own budget online and chew over the results. You’ll likely find some mouth-watering savings.

Go Green: Monitor Your Electricity Usage

There are various ways to save money on utilities such as electricity usage. Don’t know how to save money on electricity? It’s not by turning off lights. The average household spends $112 a month on energy bills. Frankly, forgetting to turn off all the lights is not going to break the bank.

The average modern bulb eats about 20 watts an hour. If you forget to turn it off before a two-day trip, it’ll cost you about 78 cents.

Far bigger savings come from keeping ventilation filters clean, keeping your blinds shut in the summer and open in the winter, and using a ceiling fan instead of an air conditioner.

Those three steps can save you between $62 and $118 a year. Computers, TVs and other electronic devices can cost an extra $100 a year.

Plug them into a power strip and turn it off when possible. Most electronics have memory chips that reset when the power comes back on, so you don’t have to worry about short-circuiting a system.

Other ways to save money on utilities include raising your thermostat (make sure it’s programmable) in the summer and lowering it in the winter; signing up for a cost-management plan with your energy provider; and insulating your home with simple steps like weather stripping for doors and windows and sealing leaks with caulking.

Cancel Cable

With the average base cable bill now topping $156 per month, according to a 2019 Consumer Reports survey, being a couch potato has never been more costly.

No wonder more households are deciding to “cut the cord” when it comes to the boob tube.

A digital antenna is a one-time purchase of between $15 and $50. Sling TV’s live streaming packages run from $30 to $45 per month,  while streaming services such as Amazon Prime, Hulu and Netflix will set you back anywhere from $6 to $16 (excluding live TV options), depending on your service and package.

After cutting your TV bill down to size, next turn your attention to  saving money on your internet service, such as through  low-cost plans for low-income households.  Consumers pay an average of $60 a month for broadband, but that price can come down to around $10 for those who qualify for low-income subsidies. If you don’t qualify for subsidies, you can still save by shopping around, cutting a deal with your current provider by threatening to take your business elsewhere, or buying your own equipment to cut down on rental fees.

A low-income household might easily exchange a $250 monthly bill for TV and internet service to one closer to $50 by taking advantage of subsidies and low-cost streaming or over-the-air TV options.

Better yet, unplug all your devices and read a good book.

Track Your Spending

It’s much easier these days with budget apps like Pennies, YNAB or Mint, which let you see what you’re spending in real time. They automatically update and categorize information from your bank, credit cards, IRAs and other accounts.

They create a budget you can take with you wherever you go, and alert you how today’s spending will affect tomorrow’s funding availability. It’s like having your credit counselor from the debt management company constantly there, reminding you to stay on track.

Best of all, the apps are free and relatively easy to use, even for the technologically challenged who use a smartphone just to make calls.

Whether you like it or not, creditors are also tracking your spending, and checking out what they have to say about your money management can also be a valuable way to get your financial house in order (and perhaps qualify for a mortgage). It’s recommended that you review your credit report at least once a year from each of the major reporting bureaus (Equifax, TransUnion and Experian), both to see how you’re doing financially and identify any mistakes in your credit history or personal information.  You can request a free annual credit report from www.annualcreditreport.com or by calling 1-877-322-8228.

Whether you decide to use an app or third-party source, it’s important for anyone on a debt management program to carefully track their spending and credit habits and look for savings opportunities to end their cycle of debt. In managing your monthly budget, keep track of changes in prices for food, household bills and other living expenses, and adjust your spending according. If prices rise faster than your income, or if your income falls for any reason, you may need to cut back further on spending.

And if you see your income growing faster than your expenses, resist the urge to celebrate by heading to the mall or planning an expensive getaway. Instead, put more money aside each month in savings and build up a rainy day fund for when the next financial storm arrives.

Get a Part-Time Job

If you’re still struggling to stick with your budget and pay off your debt even after cutting expenses, it’s time to look at ways to increase your cash flow.  That means real work,  literally.

What kind of job depends, frankly, on how badly you need to shore up the “revenue” portion of your budget, and what’s available based on where you live and the current state of the economy. In good economic times, there is typically no shortage of part-time work available at grocery stores, fast food joints and retail outlets. They may not be glamorous or fun or self-fulfilling, but you don’t need to get a second college degree to meet the hiring qualifications.

Here are some possibilities worth considering:

• Try turning a hobby or skill into a side hustle. Have a knack for home repair projects? Market yourself as an affordable handyman. Have a green thumb? Hit your neighbors up for gardening, lawn care or landscaping work.
• Turn your car into a taxi. Drivers for companies like Uber or Lyft typically earn between $15 and $25 an hour in larger cities. Expect about half that if you live in a smaller city. That can be supplemented by delivering food or grocery orders for services like UberEATS, Grubhub or Instacart.
• If you have a skill teaching, writing, typing, accounting, babysitting etc., the digital revolution has made it easier to market yourself. Websites like Upwork, Fiverr and TaskRabbit create profiles, post jobs and connect people looking for help with those who can offer it.
• Academic by nature? Tutoring is a growing business, and there are plenty of opportunities to earn $15 to $50 an hour, sometimes more. Wyzant, University Tutor and Tutor Matching Service connect students and tutors.
• Americans love to eat and drink, and in normal times there’s no shortage of openings for waiters, restaurant hosts or bartenders. While the base pay is not great, there’s the opportunity to greatly enhance what you take home through tips.

If the thought of working another 10 or 20 hours a week or giving up Starbucks depresses you, remember it’s for a good cause – You.

You enrolled in a debt relief program because you were tired of bill collectors, sleepless nights and feeling as though there was no way out. There is a way, however, and you’ve taken that big first step.

Congratulations, but that’s all it is. If you’re going to get anywhere, you’ll have to keep moving.

Save an Emergency Fund

As stated previously, setting aside money for unexpected expenses, including emergencies, can be a crucial factor in whether you succeed in climbing out of the debt hole. One of the most common reasons for failing to complete a debt management plan is participants’ inability to make their monthly payments. Often, this results from having to divert money intended to pay off debt on more pressing expenses.

Aim to set aside 10% to 15% of your net monthly income for emergency expenses, and don’t touch it unless you absolutely need to. There are simple steps you can follow to save for an emergency fund, including calculating how much money you need to feel comfortable, how much you can afford to save each month, and challenging yourself to cut your expenses and accelerate your savings.

Be Persistent

Albert Einstein once said, “Persistence is the most powerful force on earth, it can move mountains.” It’s also the most powerful force in managing and eliminating debt. Setting and sticking to a budget is not easy, especially when it entails cutting expenses that you’ve become accustomed to and weathering financial emergencies large and small that are an unavoidable aspect of life. InCharge Debt Solutions can help you to learn more about the qualifications for a debt management plan and whether it’s the right answer for you as you look to scale the mountain to financial freedom.

If it all feels overwhelming, rest assured that help is available. A reputable credit counselor can play a critical role in helping you to understand the root causes of your debt and find solutions to escape it. Some good advice, along with a healthy dose of persistence, can go a long way toward making your journey out of debt a success and the foundation for a bright financial future.