Assume you are the proud owners of a new home and you need to finance a total of $250,000 over a 30 year fixed mortgage rate of five percent. Do you know what your monthly payment will be? Do you know how much money you are going to pay over the course of the full 30 years? Sadly, the numbers are probably a lot bigger than you think, but I’m going to show you just how to calculate this information on your own.

The formula for figuring out your own monthly payment on a principal loan is as follows:

M = P x J / 1 – (1 + J) ^ -N

To solve this formula, let’s first define all of the variables:

• M = Your monthly loan payment
• P = The principal amount of the loan. In this case, $250,000
• I = The annual interest rate. In this case, 5%
• L = Length in years of the loan. In this case, 30
• J = Interest rate in decimal form. (I / (12×100), in this case, 0.004166666667
• N = Number of months the loan is good for (L x 12). In this case, 360

Now that we have everything defined, a few simple computations and we will figure out just how much our monthly payment will be. Make sure you follow your math rules, always taking care of things in parenthesis first, then exponents, multiplication, division, addition and finally subtraction.

M = 250,000 x 0.00416666666667 / 1 – (1.00416666666667) ^ (-360)

Computing the number raised to the power of (-360) then subtracting it from 1, our formula is simplified and looks as follows:

M = 250,000 x 0.00416666666667 / 0.776173399

The final step is dividing the two numbers and multiplying the result by the principal balance of $250,000. Our results show a monthly payment of $1,342.05, which is exactly what any mortgage calculator will show if you use the above criteria. When you multiply this monthly payment over the course of 360 months, you find out that a total of $483,138 will be paid on a $250,000 loan. YIKES!

At anytime during your mortgage or loan, you usually have the option of paying more than you owe for the month, thereby reducing your principal. Paying off a little extra early on can save you thousands over the course of your entire loan and figuring out your new monthly payment is just as simple. Just change the principal amount and the number of months remaining on the loan to figure out what your new monthly payment will be.

And that’s all there is to calculating how much your monthly payment will be on a fixed interest rate loan. It’s never a pretty number in the end, but of course you can always make extra payments to reduce how long you take to repay the loan (and how much interest you pay).

About the Author: Michael is a contributing editor of the Dough Roller, a personal finance and investing blog, and Credit Card Offers IQ, a credit card review site.

Related posts:

1. Save Big on Your Home Loan with Bi-Weekly Mortgage Payments
2. Mortgage Rates Briefly Explained
3. How to Find the Best Mortgage

I came out of college with no personal finance experience and had no idea how to control my money. I quickly found myself in a pile of student loan, credit card, and car loan debt. It didn’t take me long to realize I hated that awful feeling in my stomach and wanted to get rid of it. I knew that I needed to do something about my debt, and I wanted quick results.

Here is how I got out of debt, using a little “tough love”. If you’re struggling with debt, perhaps it can help you, too.

If It’s Not Necessary, It’s Not Allowed

Contrary to what I used to believe, a night out on the town or designer boots do not qualify as necessary expenses. When you’re in debt, you must eliminate all frivolous and unnecessary expenses like these (even if the boots are on sale and just perfect) in order to meet your goal of debt-freedom.

Trim down all your bills to only your basic needs. Cancel your cable bill. Trim your cell phone bill to the lowest amount of minutes possible (say bye-bye to internet access or texting on your phone).

Call your car insurance company and raise your deductible and you’ll see a huge drop in your monthly premium (after all, how often do you make an insurance claim?). You can even check to see if you’re carrying extra car insurance you may not need.

For me, it was hard to cut out my dining out and entertainment expenses. These are expenses that 20-somethings thrive on and eliminating a social life is not an option for most people. The best solution is to still go out with your friends, just order a water or soda or eat beforehand. This may be hard at first, but over time you’ll most likely realize that getting out of debt is more important than one overpriced dinner or drink.

Free is More Fun

Cutting back on spending can be a huge lifestyle shock in the beginning, however, here are some ideas that will help you have fun for free when you’re knocking out that debt.

While you may be accustomed to spending your Friday nights at popular bars or restaurants, now is the time to invite friends over for movies, game night, or cocktail hour at home. Afraid you’ll miss all the shows you used to watch on cable? Most of those shows are now easily accessible online at websites like Hulu or even network websites like MTV or the CW. Plus, your local library probably offers most popular television shows in box sets that are free to check out. Speaking of the library, don’t forget about all the books, movies, CDs, and magazines they have to offer—for free!

Want more ideas on how you can have fun for free? Check out Cities On The Cheap, which has websites for over 35 U.S. cities and two Canadian cities.

Get creative when thinking of your weekend activities! The free (and fun) possibilities are endless! After all, aren’t the twenties supposed to be the best years of your life? Right now is the time to get debt-free and have fun while doing it!

Find the Hidden “Unnecessary Necessary” Expenses

Grocery shopping can be a great example of those “unnecessary necessary” expenses. Do you ever notice that there is food left over in the pantry at the end of the week, but you still feel like you need to make a trip to the grocery store? If this sounds like you, it’s time to start making a weekly meal plan.

Write down every meal and every ingredient you’ll need for every meal. The point of this list is to cut out all the food that we thought was actually necessary, but really wasn’t. Instead of haphazardly buying ingredients for 10 different meals, consolidate the ingredients to make only the exact number of meals you’ll need for that week only. You’ll know you’ve succeeded when your cabinets are bone dry come Sunday morning!

Use this technique in other areas of your life (clothing, gas for your car, household items, etc.) to cut out those hidden excess expenses and trim your budget even further!

Keep Your Eyes on the Prize

As I mentioned earlier, when you implement these rules in your life, it can feel like a huge lifestyle change. It might even feel like a huge burden. Be sure to help yourself stay motivated and focused by keeping a calendar or timeline of your debt-payoff schedule close at hand!

Small rewards are definitely encouraged when you’re using such a strict debt reduction technique. The key to this technique is trimming down 99.99% of your unnecessary spending.

If, however, you’re really keeping your spending on a tight leash and want to enjoy a dinner out or new shirt every couple months while still keeping your eyes on the prize, by all means go for it. Tough love debt reduction is not meant to be a torture device, rather a tool that will give you fast results and teach you the fundamentals of living on less.

Put these tough but effective techniques to use in your life and your debt will soon be just a distant memory. Then you can go on and enjoy the rest of your twenties without worry; I have heard they’re supposed to be the best years of your life!

About the Author: Carrie is in her mid-twenties and currently studying for the CPA exam, so she’ll be soon be qualified to give us some desperately-needed tax advice. She blogs about her journey to financial independence at Carrie…On the Cheap from her home in Kansas City, Missouri.

Related posts:

1. Do Budgets Really Work? A Few Tips for Your Budget
2. Living Credit Card-to-Credit Card: Escape from Revolving Debt Hell
3. Debt Free Step Two: How Much Debt Do You Have?

One man was dealing with estranged spouses (yes, plural), a failed business, and hundreds of thousands in debt. It was no surprise he was considering bankruptcy. From there, however, callers’ reasons for wanting to file bankruptcy grew far less convincing. One caller even wanted to know if her 24-year old son should file bankruptcy over a $15,000 credit card debt.

Bankruptcy in this country has its place. Ideally, bankruptcy serves debtors who are in such a hole that there is truly no other way out. Unfortunately, however, many Americans see bankruptcy as the “easy way out” of debt—just like we snatch up diet pills and a lotto tickets.

If you’re struggling with a frightening amount of debt (or know somebody who is), here’s a quick reminder of why bankruptcy should still be avoided and only used as a true last resort.

What Bankruptcy Does

Here’s the 60-second primer: Bankruptcy is designed to protect the truly insolvent from unaffordable debt. There are two kinds of individual bankruptcy: Chapter 7 and Chapter 13.

• Under Chapter 7 bankruptcy, filers must liquidate personal assets to pay some debts, but many other debts may be discharged. Debtors must meet certain income requirements to file Chapter 7 bankruptcy.
• Chapter 13 bankruptcy odes not eliminate debt; it establishes a court-supervised repayment plan over three to five years.

Although bankruptcy can help debtors eliminate or repay many unsecured debts like credit card and medical bills, bankruptcy does not eliminate many debts including alimony, student loans, criminal judgments, and tax debts.

Why Avoid Bankruptcy

Ruined Credit. Unsurprisingly, bankruptcy ruins your credit (if you had any left before filing). Bankruptcy stays on your credit report for at least seven and up to 10 years. That does not, however, mean that once that time has passed, you have a clean slate. Many financial applications and background checks ask if you have ever filed bankruptcy. Not in the last 10 years. Ever. Bankruptcy will follow you for life.

Expensive Borrowing. Most unsecured credit cards will flat out reject applicants with a recent bankruptcy. You may be able to arrange for a mortgage or an auto loan in time, but you may need to put up to 50 percent down and pay ridiculously high interest rates.

Filing is Tricky and Costly. Legislation enacted in 2005 makes it harder to file bankruptcy. Filers must go through credit counseling at their expense six months before filing for bankruptcy and must take a financial education class afterward. Finally, even though bankruptcy is designed for broke people, it is far from free. You can expect to pay, at the very least, $1,000 in filing fees and attorney fees.

Alternatives to Bankruptcy

The best way out of debt will always be to man up and face your debt head-on. That means making a debt repayment plan and paying up—whatever it takes.

If you need help, there are legitimate organizations that can help, like the National Foundation for Credit Counseling (800-388-2227, www.nfcc.org).

• Need Help? Learn How to Get a Free Debt Consultation

Ads for commercial debt management programs and debt settlement companies abound, but be careful: Some debt management programs can help; debt settlement offers usually don’t.

If you’ve made significant efforts on your own to repay your debts and have already tried getting help from one of the above sources—especially if you owe more than you earn in a year—bankruptcy may be an option. Just do your homework and ensure you have exhausted other options before you proceed.

Finally, if you do go forward, find and hire an attorney you trust.

Related posts:

1. When You Need to File Bankruptcy
2. Q&A: I Have Tons of Debt and Virtually No Income. What Are My Options?
3. Retirement Saver's Tax Credit is a Great Benefit for Low Income Taxpayers

That’s because the CARD Act takes effect this winter and will restrict credit card companies’ ability to raise interest rates on existing customers. If you thought credit card companies were committing usury in the past with APRs of eighteen, or twenty percent; you ain’t seen nothing yet. Cardholders are seeing their rates go as high as 29.9 percent; there’s even a story of man who received a credit card offer at 79.9 percent APR!

How do you know if your card is raising your interest rate? What can you do about it?

How Credit Cards Raise APRs

In general, your credit card company must notify you of any changes to your account, including interest rate increases, by mail (or electronically if you have consented to receive legal disclosures online). Unless you pay late. Most cards’ terms and conditions include a clause that allows them to raise your interest rate if you pay late or go over your credit limit; no notification required.

Manage your cards well? You’re not immune to rate hikes.

My wife just received a notification from Citi that her interest rate will jump to 23.9 percent in December. That’s on a card with a $15,000 credit limit that does not have a balance and has always been paid in full. (We use the card for joint expenses each month and pay it in full).

She received a letter yesterday detailing the change. Unlike other rate increases I have seen, however, this notice had an interesting clause. If my wife were to transfer a balance of $3,000 or more to the card (plus a fee), Citi would actually lower her rate to 9.9 percent on the balance transfer and all future purchases until 2011. Obviously, Citi is just trying to make some money off this account. Since we always pay the balance in full and the card has no annual fee, they never get a dime from us in interest.

Just be sure to watch the mail.

A lot of these credit card rate increase notices look like junk mail. But if you miss them, you may miss your opportunity to opt-out of the rate increases.

How to Opt-Out of Rate Increases

When your credit card company raises your interest rate arbitrarily (i.e., not because you paid late), they must give you the opportunity to opt-out. Usually, you must contact the card’s customer service to opt-out. If you opt-out:

• You can pay off the existing card balance at your current (lower) interest rate.
• When the debt is paid off, or when the card expires, the credit card will be closed.

If you don’t opt-out by the specified deadline, your rate will go up and you won’t be able to do anything about it after the fact. So if you’re carrying a balance and your credit card company notifies you of an extreme rate increase, you should probably opt-out (unless you can pay off the balance in-full immediately). This is the time to forget about whatever effect closing your credit card has on your credit and just get far, far away from this nasty interest rate.

What to Do Next

If you’re not carrying a balance on the card that raised your interest rate, there’s little point to opting-out. As long as you don’t take on debt on that card, who cares about the APR? You might, however, be so outraged with the card company that you want to stop doing business with them. Or, you might want to preserve a lower APR “just in case” you need to revolve a balance on the card in the future.

Try negotiating.

In the past, customers with excellent payment histories could often be successful just calling up their credit card company and saying “Hey, I can get a 13 percent APR with Card ABC or Card XYZ, why should I stay with your card at 20 percent? What can you do for me?”

This strategy is certainly still worth a shot, although you can expect to have a harder time getting concessions from card companies. For one, they know that it’s harder for customers to switch to a new card (due to tightened credit requirements). Second, the card companies need the money. (Not that I expect you to have a lot of sympathy). But with sky-high default rates and the new laws limiting sneaky fees and interest rates that used to make credit card companies lots of cash, they’re trying to figure out how to make money on a totally new playing field. For now, that means charging even their best customers ridiculous interest rates.

Or, get a new card.

If you have really good credit and little or no credit card debt, you’re in luck, because you can probably apply and get approved for a new credit card at a much lower APR than on existing cards you have. (Most cards are offering new customers APRs ranging from 12 to 18 percent; not great, but better than 24 or 29 percent). Your best bet is to apply with companies that are actively seeking new creditworthy applicants, like Chase and Discover. Chase’s Freedom card has been a perennial favorite of card-critics for its simple rewards program, and the new Chase Slate card provides a lower rate, albeit no rewards, for customers who want the flexibility of paying some purchases over time.

• Compare and apply: See my list of recommended credit cards.

What about you? Have your credit card interest rates gone up? How high? What have you done about it? Please share your story in a comment.

Related posts:

1. Beware Credit Card Rate Jackings (Increases)
2. Summary of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009
3. Credit Card Changes: Five Ways to Protect Yourself

But like most people I know, that’s about the extent of the time and energy I’ve invested in understanding my student loans and student loan debt.

The fact is, we’re borrowing more and more to go to school. The Wall Street Journal reports that the amount of money students borrow has long been on the rise:

New numbers from the U.S. Education Department show that federal student-loan disbursements—the total amount borrowed by students and received by schools—in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion…Today, two-thirds of college students borrow to pay for college, and their average debt load is $23,186 by the time they graduate…

With the cost of higher education soaring and the pressures our society places to become as educated as possible, this number will surely continue to grow. That’s a problem, but I’ll leave the debate about how much is too much student loan debt for another time.

The fact is many of us have student loan debt. And how we tackle that debt is one of the first big financial decisions we make once we’re on our own.

1. Understand the Difference Between Private, Subsidized, and Unsubsidized Loans

Student loans come in a variety of “flavors”. Federally-guaranteed student loans are backed by the U.S. Government and, as a result, have low interest rates and are available to most students regardless of credit history. The most common federal loan programs are Stafford loans, Perkins loans, and PLUS loans (for parents).

• Subsidized federal student loans are available to students meeting income requirements and do not charge income while you are still in school or during grace periods.
• Unsubsidized federal loans are available to more borrowers but charge interest as soon as they are disbursed.
• Private student loans are not federally-guaranteed, require good credit, have higher interest rates, and charge interest as soon as they are disbursed.

2. Grace Periods and Deferment

Federal Stafford loans have a six month grace period; Perkins loans have a nine month grace period. That means you aren’t required to start paying them back until six or nine months after you graduate or cease being a full-time student. If your loans are subsidized, you won’t pay any interest on the balance during that time. If the loans are unsubsidized, however, interest will accrue, so it’s a good idea to make payments anyway.

If you are having trouble finding a job or are not working, you may be able to contact your student lender and defer your loan. Just remember that if you have an unsubsidized loan, interest will be accumulating.

3. Student Loans Must Be Paid!

The consequences for defaulting on a federal student loans are more severe than failing to repay other debts (e.g., a credit card). If you fail to repay a student loan, not only will you ruin your credit, the government can seize your federal tax refund, garnish your wages, sue you, and cut off federal benefits like social security. Finally, federal student loans cannot be discharged in bankruptcy; so even if you hit rock bottom, you will still have to pay up for your education!

4. Student Loan Interest is Tax Deductible

On a more positive not, if you earn less than $70,000 a year, you can deduct up to $2,500 of student loan interest on your federal tax return, even if you don’t itemize your deductions. Each year, you should receive form 1098-E from your student loan lenders, detailing how much interest you paid (and can deduct).

5. Student Loans May be Forgiven

If you enter a career that serves the public in high-need areas (such as teaching or delivering healthcare in rural, low-income regions), you may qualify for programs that will forgive a portion of your federal student loan debt. Consider, however, that you may have to work in the qualifying field for several years before qualifying and that the amount of the loan forgiven may be taxable as income. Check with your school or professional organization for information about loan forgiveness programs. Additionally, federal student loans are canceled if you die, meaning your spouse and children won’t be burdened by them.

6. Some Consider Student Loans “Good Debt”, If There Is Such a Thing

You may read about “good debt” and “bad debt”. Basically, some credit experts classify mortgages and student loans as “good debt” because they’re investments in your future, while consumer debt like credit cards is considered “bad debt” because there is little value attached to the debt. This distinction may come into play when you apply for new credit, for example. A lender will look more favorably on somebody with $200,000 in student loan debt from medical school than on somebody with $20,000 in credit card debt. The doctor has ten times the debt, but still looks better to future creditors than the guy with credit card debt.

• What about consolidation? Read more about student loan consolidation.

The other reasons student loans are sometimes called “good debt” is because they tend to have very reasonable interest rates and that interest may be tax deductible. At the end of the day, however, student debt is debt. When people ask whether you should pay down student loan debt early, I say: Only after you’ve paid down all your other non-mortgage debt, have an emergency fund, and are saving at least 15 percent of your income for retirement.

Related posts:

1. What is the Difference Between a Subsidized and Unsubsidized Stafford Loan?
2. Understanding Student Loan Grace Periods, Deferment, and Forbearance
3. Student Loan Consolidation Made Easy

And then you get a mailing or a phone call. Consolidate all those student loans into one low payment! Student loan consolidation sure is tempting. But is it wise?

What is Student Loan Consolidation?

Student loan consolidation is taking one or more student loans and repackaging them into one loan with one fixed interest rate and one payment. There are consolidation options available for both federal student loans (Stafford, Perkins, and PLUS loans), as well as private student loans.

Most student loan consolidation programs are completely legitimate and may, in fact, make it easier to manage your student loan debt. That said, many consolidation programs market benefits that are misleading. Before consolidating student loans, make sure you have all the facts.

The Benefits of Consolidation

Consolidation can allow you to make one payment for all of your student loans. That’s far easier than making several payments and remembering different due dates. Not only will you save time and frustration, you’ll be less likely to accidentally miss a payment and incur fees and/or a negative mark on your credit report. Note: If you have both federal and private loans, don’t consolidate them together; you’ll likely end up paying a higher interest rate on your federal loans than necessary.

Student loan consolidation can lower your monthly payment. If you’re struggling to make your student loan payments, consolidating can lower you monthly payment. But watch out! Lowering your payment means extending your repayment period from 10 years to 15, 20, or even 30 years. The longer you take to repay the loans, the more interest you’ll pay, although you can always start to pay down your loan balance faster when you’re earning more.

Consolidation gets you a fixed interest rate. Most student loan consolidation programs move loans with a variable interest rate into a loan with a fixed interest rate. If you still have variable-rate student loans, this may save you money over time if interest rates get higher. Note, however, that all federal loans disbursed after July 2006 and all Perkins loans already have fixed interest rates, somewhat negating this benefit.

No credit check for federal consolidation. There are no credit requirements for federal student loan consolidation.

Consolidation Pitfalls

Don’t consolidate until after you graduate. It’s wise to wait until after graduating to consolidate your student loans. Of course, you want to make sure you include all your loans in the program. But you also want to make sure you don’t give up one of the biggest perks of subsidized federal loans—interest does not accumulate while you are in school or during your grace period.

Be careful with Perkins loans. Perkins loans have unique benefits like a fixed five percent interest rate, nine-month grace period, and a forgiveness program for qualifying teachers and Peace Corps volunteers. If you consolidate, you may lose some of these benefits.

Don’t trust every offer. Your best bet is to pursue consolidation through one of your existing loan service providers or a company recommended by your financial aid office. If you have Direct loans, visit http://www.loanconsolidation.ed.gov/.

Be wary of consolidating loans jointly. Two benefits of federal student loans are:

• You can defer them if you become unemployed and
• they are canceled if you die.

If you and your spouse consolidate both of your student loans and one of you becomes unemployed, you won’t qualify for deferment (you’d both need to be out of work). Similarly, if one of you were to die, the other spouse is still required to repay the loan.

• Read More: Six Things To Know About Your Student Loans

What about you? If you have consolidated student loans or considered consolidation and chose not to, please share your experience in a comment. What would you recommend?

Related posts:

1. Student Loan Consolidation Made Easy
2. Understanding Student Loan Grace Periods, Deferment, and Forbearance
3. Six Things to Know About Your Student Loans

Fortunately, however, there’s another way: A peer-to-peer loan through either Lending Club or Prosper.

Lending Club and Prosper are social lending networks that bring together investors and creditworthy borrowers to provide personal loans at rates that are generally better than those offered by traditional banks. Here’s how they work:

• Borrowers apply for a loan with an online profile
• Lenders (people like you and me, not bankers) choose whether or not to lend you money.
• If enough lenders invest $25 or $50 each, your loan is funded
• You make monthly payments to the network, who distributes your payment to lenders

Who Can Get a Peer-to-Peer Personal Loan?

To receive a Lending Club or Prosper personal loan, you must be a US citizen or permanent resent, at least 18, and have a valid bank account and social security number. For the time being, residents of a few states are excluded (check on their site to see the status of your state).

Lending Club also specifies some minimum credit requirements. In order to qualify for listing a loan request with Lending Club, you will need:

• A FICO score of at least 660
• A debt-to-income ratio (excluding mortgage) below 25%
• At least three years of credit history
• No current delinquencies or recent bankruptcies (seven years)
• No open tax liens, charge-offs, or non-medical collections account in the past 12 months
• No more than 10 inquiries on your credit report in the last six months
• A revolving credit utilization of less than 100%
• At least three accounts on your credit report, of which more than two are currently open

Prosper does not specify minimum credit requirements to list a borrower application, although you can expect them to be similar to have a good chance of getting your loan funded.

How To Apply for A Peer-to-Peer Personal Loan

Think you’ve got what it takes to score a lower rate and consolidate your debts with a Lending Club or Prosper personal loan?

You’ll create an account (email address and password), select an amount and purpose of your loan, and enter your contact information and credit and employment specifics. The network will check your credit, ask for any additional information, and list your loan. If your loan is funded, you’ll have the cash deposited in your bank account within a few days of your listing ending.

• Lending Club: Learn more about Lending Club or apply for a loan
• Prosper: Learn more about Prosper or apply for a loan

Related posts:

1. Peer-to-Peer Lending Hits a Roadblock
2. I Paid Off My Prosper Loan!
3. An Introduction to Prosper and Peer-to-Peer Lending

Even scarier? Living credit card-to-credit card.

In other words, using credit cards that already have balances to make most of your monthly purchases. Then, when you get paid, you use most of your paycheck to “clear room” on your credit card balance so you can do the same thing next month. I was guilty of this tactic long, long ago, and have known others. I got out. One friend declared bankruptcy. Some are still trapped.

How Do We Let This Happen?

People start living credit card-to-credit card when they’re already in way too much debt. The credit cards are probably almost maxed out. They have other debts that have to be paid.

What happens is this: The money comes in. First you pay your biggest expenses that you have to pay with cash, such as your rent or mortgage, auto payment, and any other debts like student loans.

Then, you probably only have about half of your income left over (maybe less if your home and car payments are way over your head). Now you have to pay the credit card men. After you make your minimum credit card payments, you would only have a few hundred dollars left over. Even if you were living really frugally (which, if you’re in this situation, you probably aren’t), those few hundred dollars are not enough to feed your lifestyle.

So what do you do? You put almost all of your left-over cash towards your credit cards (paying a bit more than the minimum). Then, you use what’s left of available credit on those cards to get by the rest of the month.

Here’s an Example

Let’s say you earn $30,000 a year. After taxes and deductions, you take home about $1,750 a month. Assuming you pay $700 cash towards your housing and $350 towards a car payment, student loans, or other fixed loans, you have $700 left.

Let’s look at your credit cards. Perhaps you have three cards with balances of $5,000, $2,000, and $8,000 for a grand total of $15,000 in credit card debt. (Yeah, that’s a lot of debt, but I can assure you, I’ve seen worse). Let’s assume, for simplicity’s sake, that all the cards have a 15% APR and require a 2% minimum payment.

That means you’ll owe the credit cards, at a minimum, $300 a month. Of that $300, you’re paying $188 in interest, meaning you’re only paying $112 towards your $15,000 debt!

Now, you have $400 left over. If you were really frugal, you could stick to that $400 budget every month. But, since you’re only paying $112 towards your credit card principal, you’re going to be poor for a very, very long time. Not wanting to feel poor, you put that $400 towards your credit card balances and keep up your carefree spending ways with the plastic (after all, you still need to eat). So you use those same credit cards to charge your monthly expenses.

Even if you only charge, say $500 back onto your cards, you’ve gone a month and you’ve only reduced your credit card debt by $12. That’s right. $12!!! What happens if you charge more than $500? What happens if you lose your income? You are one step away from total financial disaster.

How to Get Out from Living Credit Card-to-Credit Card

This is the time to cut up those credit cards! Some people can get out of debt and hang onto your credit cards; but not you. You have to stop using them 100%. Forget about your precious credit score. It’s probably not that great anyway, and you’re one step away from missing your payments and having your credit really bottom out. You can rebuild your credit later. Right now, it’s time to wage war on debt.

Next, you need to figure out a way to either up the amount of your credit card payments (and get by on the cash you have left) or increase your income. Preferably both.

Yes, it’s time to get a second job.

Since you already don’t have much to spend on little things every month, you need to find away to trim the big fat: Your car and your housing payments. Find a roommate, move to a smaller place, or better yet, swallow your pride and move in with mom and dad.

Driving too much car? Sell it. In a lease? Get out of it.

Forget about all the other get out of debt tips you might read until you have done these big things. Because if you’re living credit card-to-credit card like the example above, you are in crisis mode!

Have you ever lived credit card-to-credit card? What was it like? And how did you get out?

Related posts:

1. Credit Card Companies Extend Relief to Debtors in Debt Management Plans
2. The Worst “Creditaholic” I Have Ever Seen
3. Debt Free Step Seven: Living Debt Free

Blueprint is comprised of four new features: Full Pay, Split, Track It, and Finish It.

Blueprint’s Full Pay feature lets “customers select the types of purchases they want to pay in full each month, such as groceries, prescriptions and other everyday items. Chase separates out these charges on their statement, so customers know the payment they need to make to ensure that these purchases are not increasing their balance or accumulating interest. As long as customers make their Blueprint payment by their due date, they will not pay interest on those purchases.”

The Split feature allows customers to pay off larger purchases, like a computer or emergency auto repair, over time without falling into the credit card minimum payment trap. With Split, consumers decide how much they want to pay each month or how long they want to take to pay the purchase off. After the consumer chooses the repayment term, Chase sets up a plan and includes that payment amount with each statement. The consumer’s payment progress is displayed separately on each statement until the balance is paid-in-full.

For example, if a consumer charges an $800 computer at 12.9% interest, it would take 124 months of making $16 minimum payments to pay off—at an interest cost of $580.88. If, however, the consumer opts to pay $100 a month using Chase Blueprint’s Split feature, the consumer would pay off the computer in nine months and pay only $41.96 in interest.

Finish It applies to existing card balances and works similarly to Split: Consumers can choose a payment amount or repayment term and make regular monthly payments until the debt is paid off. A final feature, Track It, allows customers to set budgets on their card and track month-to-date and year-to-date spending in different categories in real time.

Chase Blueprint: My Take

With Blueprint, Chase brings some long-overdue transparency to its relationships with credit card customers. In an industry known for dubious practices that confuse credit card users and keep them in debt, Blueprint will educate card users about the realities of using credit (like how much it costs) and help users make more educated credit decisions. Does Blueprint make it “smart” or “okay” to borrow on a credit card? Hardly. The best policy is to pay your card in full every month. And for those determined to get into credit card debt, a Chase Blueprint card might be the credit equivalent of a “light” cigarette; they’ll both still kill you in the end.

But I believe Chase Blueprint will help consumers who choose to finance purchases with a credit card pay their balances off faster and save money in the process. I also like the sound of the Track It budgeting tool. For simplicity, I use one credit card for nearly all of my routine monthly expenses, and the ability to check my card balance and spending against my budget in one place would be great.

Want a card with Chase Blueprint? Apply for a Chase Freedom Card (best for cash rewards) or a Chase Slate Card (lower interest rate for paying over time).

What do you think? Is this a feature you would use? Will it make a difference in how consumers use their credit cards?

Related posts:

1. Reasons to Apply for a Business Credit Card as an Individual Consumer
2. Are Joint Credit Card Accounts a Good Idea?
3. How to Use a Credit Card Responsibly

Most agree that your housing budget should encompass not only your mortgage payment (or rent, for that matter), but also property-taxes and all housing-related insurance (including PMI). As for just how big a percentage of your income that housing budget should be? It all depends on whom you ask.

In an article on new rules for first-time home buyers , the New York Times reported:

If you’re determined to be truly conservative, don’t spend more than about 35 percent of your pretax income on mortgage, property tax and home insurance payments. Bank of America, which adheres to the guidelines that Fannie Mae and Freddie Mac set, will let your total debt (including student and other loans) hit 45 percent of your pretax income, but no more.

Let’s remember, that even in today’s post-mortgage crisis world, mortgage lenders want to approve creditworthy borrowers for the largest mortgage possible. I wouldn’t call 35 percent of your pretax income on mortgage, property tax, and home insurance payments “conservative”. I’d call it average.

On the flip side, debt-hating Dave Ramsey wants your housing payment (including property taxes and insurance) to be no more than 25 percent of your take-home income.

Your mortgage payment should not be more than 25% of your take-home pay and you should get a 15-year or less fixed-rate mortgage…Now, you can probably qualify for a much larger loan than what 25% of your take-home pay would give you. But it’s really not wise to spend more on a house because then you will be what I call “house poor.” Too much of your income would be going out in payments, and it will put a strain on the rest of your budget so you wouldn’t be saving and paying cash for furniture, cars and education.

Notice that Ramsey says 25 percent of your take-home income while lenders are saying 35 percent of your pretax income. That’s a huge difference! Ramsey also recommends 15-year mortgages in a world most buyers take 30-year mortgages.

Not everybody is as debt-adverse as Ramsey, but I think you have to acknowledge he has a point: The more you spend on your home, the less you have available to save for everything else. You may be able to afford a housing payment that is 35 percent of your pretax income today, but what about when you have kids, buy a new car, or lose your job?

When you obtain mortgage pre-approval, lenders will likely approve you for a loan that would require housing payments closer to 30 or 35 percent of your pretax income. Don’t just assume “if the bank approved it; I can afford it”. That’s rarely the case.

Related posts:

1. How Much House Can You Afford?
2. Are You Ready to Buy a Home? An Easy Way to Check
3. Your First Mortgage: How to Apply and Get Approved