Alan Klayman, creator of MyIncomeStrategy.com, is CEO of Klayman Financial LLC. He served as a vice president at Fidelity Investments, worked as a financial planner for American Express, and built fixed income strategies on Wall Street at The First Boston Corporation.
Dear Maturing Loans,
My mother is $20,000 in debt, relies on Social Security income and is 68 years old. Who or what would you recommend to help consolidate her debt to one monthly payment? -- Susan
Dear Susan,
It all begins with preparation. This is something you can do to help your mother. First, make a record of all her recurring bills. This can be on your computer, on a worksheet or just on a pad of paper. Next, take out her checkbook and her bank statements (with her permission, of course!) and make a list of every expense you see. This should include cash withdrawals. Between her bills and checkbook expenses, you should have a good idea of what your mother is spending every month.
Now make a line on your pad or make two columns on your spreadsheet. Label one column "needs" and the next "wants." The "needs" column will include all of the necessities she needs to live, like rent, food, clothing, utilities, gas, etc. The "wants" column will include all extra expenses (such as extraneous purchases, eating out, entertainment, magazine subscriptions, etc.).
See how much she has in excess expenses in the "wants" column. If she has any amount in excess in her "wants," then you have some extra buying power to bring down her debt load.
Now, make a list of all of her credit card bills. If you can't find these bills easily, check bank statements and her checkbook ledger. How many credit cards does she have? Is it just one? Is it two? Or does she have 10 or more? Are there cards with a balance that she hasn't touched for some years on which she is paying recurring charges?
With credit card bills in hand, add up the interest expense each month from all of her credit cards. This is what we want to bring down, and use the extra money from the "wants" (if any) to eliminate and consolidate her debt.
Take a look to see if she has any 0 percent balance transfer offers. If she does, initiate those transfers. The less she pays in interest, the quicker she can pay down that debt. If you can't find any 0 percent offers, you can check out the ones on this site or have her talk to her credit card companies to see if they will lower her interest rate.
If you need further help, look into a credit counseling agency. Your mother may feel more comfortable discussing her finances with an anonymous third party rather than a family member.
Your state may require that a credit counselor carries a license. If so, make sure that the agency you work with is licensed. Also do some checking on the Web and with the Better Business Bureau to see if there are any complaints against the agency you've chosen.
Word of mouth never hurts. I would also ask your friends and your mom's friends if they have worked with anyone with any success.
In a nutshell, you will want to:
Work out a budget first. Here is a quick budget worksheet to get you started.
Assess how much is owed as well as at what interest rate.
Limit the number of lines of credit by consolidating the debt into a lower rate card.
If you go to a counseling agency, then I would recommend being there with her. If you can't be there or she doesn't want you there, then try to get a trusted friend who can help her make decisions. Good luck. I'll see you back here next week with more questions.
Alan Klayman is creator of MyIncomeStrategy.com and CEO of Klayman Financial LLC. Klayman specializes in retirement income planning, business management and planning, estate planning, tax-advantaged investing, trust investment management, professional money management, insurance and annuities, mutual funds, fixed income securities, and institutional and personal retirement plan administration.
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