Allocate 50% of your income before taxes and deductions to go to necessities, things like; housing, food, transportation, utilities, insurance, minimum loan payments, and any other needs that must be covered for you to work and live.

30% is allocated to wants—these are any of the extras you enjoy but are not essential to living and working. This would include streaming services and other subscriptions, travel, entertainment, and meals out.

Finally, 20% of your income will go to savings and debt management, including any emergency funds, any extra paid toward credit cards or other debt, or any funds that go into a 401(K) or retirement plan.

Check out our Money Management service for powerful tools to take control of your personal finances. There you can set a budget, view your accounts, and manage your spending.

Kirtland FCU offers a great personal loan for debt consolidation. With a fixed rate as low as 8.99% APR*, the Debt Consolidation loan could be an excellent option. and if you finalize your loan before May 31, 2022, you could receive up to $1,000 toward the principal balance of the loan.

Getting started with a DMP usually begins with a free counseling session. The counselor will conduct a thorough review of your situation and help you develop an action plan to meet your financial goals and determine if a DMP is right for you. If you decide the DMP is right for you, you begin paying a monthly payment plus small fee. The counseling agency then takes that payment and pays the individual creditors.

While this method takes a little longer, usually 3-5 years, it is favorable to your overall credit score, according to NFCC.org.

Professional settlement is usually considered to be ill-advised and risky, involving sending payments to a firm that then attempts to settle your debts with the firms that hold your debt with the goal of reducing principal, which is where a creditor considers your debt satisfied for an amount lower than the full amount due.

The DIY approach tends to be less risky and less expensive since it is you who negotiates with your creditors to settle the amounts due. The premise of this option is built around the idea that if you aren’t paying your debts, your creditors would rather take a smaller amount than nothing. There are several factors that make this option problematic. By intentionally not paying debts, you open yourself to collections or lawsuits where the creditor could obtain a judgement that could result in garnished wages. If you have debts with multiple creditors, you or the firm you hire will have to negotiate with all of them, and they may not be able to reach settlements with all of them.

A recent study from the American Fair Credit Council found that only 43% of people settled their debt by month 36, that people were only able to receive a 22% reduction is debt. These factors in addition to the toll taken on your credit score make debt settlement a risky and complicated strategy.