Often, when you’re faced with IRS debt, there are other nasty little financial problems that can crop up.

I have to tell you though, as I sat down to write this, it made me think about some San Antonio clients that I’ve walked with over the years who fought their way — successfully — out of debt that would have crushed other families.

How did they do that? Today I’ll tell you.

But here’s something those San Antonio clients did NOT do: Borrow money to pay off more borrowed money (and call it savings). 

That only works for Uncle Sam, apparently.

The average credit card balance for an American household right now is around $7,951. And that counts the households that carry no debt, so the figure for those who *do* is even worse.

You may be in a better situation … it may also be worse. So, to answer the questions I often get from Texas Hill Country clients facing tough times, I’ve put together a simple step-by-step process to help clients work through minimizing debt.

Minimizing Debt Tip #1: Pay more than the minimums
If you only pay the minimum payment each month, your bill could continue to INCREASE, even if you completely stop using your card. This is called “negative amortization” — where you think you are paying on your debt but the additional fees and finance charges are more than the minimum payment. The bottom line is: Pay more than your minimum or you’ll eventually be in debt over your head. 

Minimizing Debt Tip #2: Create an automated system
With online banking and automatic payment options, there are GREAT tools for ensuring you don’t mess up because of administrative chaos. If you feel you can’t manage all your bills by pen and paper, there are several good software programs available for keeping track of your financial records.

In fact, I recommend that you automate a payment ABOVE the minimum monthly payment, just to be certain that you start getting ahead of the game. Those minimum payments are rigged against you, and the only way to get ahead is to … get ahead. I have some more thoughts on automation in a moment.

Minimizing Debt Tip #3: Yes, you can negotiate
No, you do not need to be an attorney or other professional to negotiate with your credit card company (negotiating with the IRS, on the other hand, is a very different story!). The rising amount of consumer debt in this country has made creditors realize they need to be more understanding of their customers — if they hope to get any money back. If you file bankruptcy they are only going to get pennies on the dollar, so they are often willing to make deals.

Minimizing Debt Tip #4: Proactively contact your creditors
Open communication always helps. Usually, credit card companies get ignored and end up sending delinquent files to a collections agency. So they’ll actually appreciate your openness in contacting them and may be more understanding of your situation. Proactively dealing with your debt, rather than hiding, will not only help your financial problem but will also make you feel better about yourself.

Minimizing Debt Tip #5: Develop a simple tracking system
If you’re not able to pay the full amount of your credit each month, you should still pay something to stay on top of it. Work off a written budget so you know exactly where you stand. Some experts suggest you divide your monthly debt budget by the percentage each bill makes of the total and pay that amount.

Here’s an example: If you owe a total of $1,000, and one credit card is $800 and the other is $200, and you only have $100 available to pay for that month… You should pay $80 on the $800 balance, and $20 on the $200 balance. This way you are reducing each debt by the same percentage. 

Minimizing Debt Tip #6: Do NOT be intimidated
No matter how forthcoming and honest you are, some creditors have been taught to be mean and downright nasty. Hang in there, and don’t let this tactic intimidate you.

Minimizing debt can be difficult, but it’s not impossible. Deciding to start tackling it now, especially during the holiday season when debt often increases, is going to put you on the right foot for when the new year turns.

Also, I’m here to help you minimize IRS debt, too.
(830) 331-9218

On your team,

Michael Essick