The last year brought financial challenges to many people and families. Some have been laid off or are working less. Certain sectors of business income have dwindled, such as in the restaurant and hospitality industries. From March to September of 2020, the monthly poverty rate grew from 11.9% to 16.7%, according to a Columbia University report, leaving many more Americans struggling with unpaid bills.
Fortunately, many financial institutions and service providers, as well as federal, state and local governments, have put new policies in place to help consumers, including suspending student loan repayment, auto loan deferments and lowered credit card payments and interest rates. Many utilities and phone/internet service providers have pledged to keep services turned on even if the client is unable to pay.
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To help consumers take control of their debt situations, GOBankingRates consulted A’Shira Nelson, CPA and founder of Savvy Girl Money, and Barry Gross, founder and president of BillCutterz.com, a bill negotiation service. Read on for their expert advice.
Last updated: Sept. 28, 2021
Write It Down
Nelson first founded Savvy Girl Money to teach her own family and community about making better financial decisions, using her own life as an example. She set out on a successful mission in 2017 to pay off her $24,000 student loan debt within two years. The very first thing she did, she said, was to write her situation and goals down. “Something about writing it down on paper and putting a date on it made it real for me,” Nelson said.
Before you even get into your specific income and expenditures, create a simple chart of what your financial goals are and your timeline for achieving them.
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Make a Budget
Next, take a close look at your income and expenses, Nelson said, and make sure you know where all your money is going. She uses the "zero-based budgeting" method, a simple method that assigns a specific task to every dollar. The goal is that your income minus your expenditures equal zero. The idea behind this move is that you are being intentional with your finances and are in control of every dollar you spend.
Once you have a clear picture of your budget, you can start hacking away at your unnecessary expenses. Nelson immediately found obvious things she could eliminate, like subscription boxes for clothes and a barely used gym membership. “It took looking at where my money was going to realize I’m not even using this stuff,” Nelson said.
Take every dollar that you’re able to eliminate from your expenses and reassign it to an area of debt.
If you’re avoiding calls and late notices from debt collectors, this will only make the problem worse. It’s time to reach out to collectors and let them know you’re having difficulties.
The pandemic fallout has created a more understanding and flexible atmosphere, so you might be surprised by how accommodating collectors will be. What’s more, the federal CARES Act included provisions to protect the credit scores of those who have been impacted by COVID-19 and have made special arrangements with their creditors.
Most financial institutions and service providers have COVID-19 relief alerts posted prominently on their websites, making it easy to connect with available programs to help people who are struggling.
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Ask For More
Once you start tackling other large expenses, such as your phone and cable bill or auto insurance, there are often multiple layers of incentives and deals you can uncover -- but you have to keep digging. As a rule of thumb, Barry Gross of BillCutterz.com said to “never accept the first offer. Instead ask, ‘What else can you do to lower my bill?’”
When Nelson phoned her auto insurance provider to run her a new quote, it initially came up with a $50 reduction. That sounded good, but she pressed on. She got quotes from two competing insurance companies and was ultimately able to switch providers to a plan that offered better coverage for $100 less per month. That meant $1,200 more for the year that she was able to put toward paying off her debt.
Silence Is Money
One way to get the upper hand in negotiating a lower rate is to use a simple tactic: silence. “When you ask for a lower rate, be quiet,” Gross said. “Seriously, not a sound. Wait for the representative to speak next. You will likely get a better offer.”
It also helps to show that you’ve done your research. Mention that you have looked at offers from competitors who offer a better deal, Gross said. Ask if they can match that offer, and again, leave the silence out there for the representative to fill. Often they would rather match the competitors’ quote than lose you as a customer.
Tools Can Help
There are a number of both free and paid tools and services that can help you maintain your budget and find pockets of savings. Wally and Mint are both free apps that sync your various accounts into one place, providing overviews and insights into your spending by category and tracking your daily progress along the way.
Services like BillCutterz and Truebill will take on the negotiations for you, lowering your rates or applying special discounts. These services charge a percentage of the savings that they negotiate on your behalf.
Other tools can help you target a specific area of debt you’d like to reduce. CoPatient reviews your medical bills to identify mistakes and overcharges. Trim works with cable, internet, phone and medical care providers to negotiate your accounts, lower interest rates and cancel unwanted “free” subscriptions you signed up for and then forgot to cancel. The Trim app is free, while its bill negotiator service charges a percentage fee of the savings it finds.
Start Saying 'No'
One of the main keys to sticking to your budget is getting comfortable with saying no to things that don’t fit within it, Nelson said. For her, that meant wardrobe updates, meals out with friends and other social activities.
It was hard at first. “I had to get over people’s opinions of saying no,” she said. But as her friends and family became more familiar with her goals and the reasons behind her declined invitations, the more understanding and supportive they became.
Share Your Journey
Nelson decided to share her financial goals and progress with her community and online followers, each month detailing her budget and expenditures so people could see her as a real example. For her, doing this had multiple benefits: It not only helped her stay committed and accountable, but it also grew her community of support as people cheered her on. “I was very vulnerable at that time, but I was authentic and was happy to be able to share my experience,” she said.
Of course, not everyone needs to put their financial journey out there on social media or in the public eye. But even by just keeping your friends and family up to date on your goals and progress, you can find extra support and encouragement to reach your mission of financial stability.
This article originally appeared on GOBankingRates.com: 9 Ways To Negotiate Your Bills and Get Out of Debt Fast