Ask The Expert: How Can I Avoid Overdraft Fees?

Question: I just started to budget a few months ago, after reading articles and blogs. I’m in debt, and I’m working on that. I have no credit cards due to poor credit management, and I have a small savings account that I can only put $10 a month into.

My main concern is using my overdraft protection funds to cover my bills. I get paid twice a month on the last day of the month, and the 15th of the month. (If that date falls on the weekends, I get paid the day before.)

After figuring out all my expenses for the month, I’m in the negative. I split up my bills between the two paychecks. I have two automatic payments that come out on the 30th of the month. This causes my account to go into overdrafts ($28 fee per item).

So when my direct deposit comes in, it deducts what I owe and leaves me short on funds for paying rent or car insurance — unless my overdraft kicks in again. This is a constant struggle on my part.

Sometimes my overdraft will be a little over $100. The next payday it will be over $300. I have my budget to the bare bone and I’m still coming up short. Any suggestions?

— Josephine in Alabama

How To Never Pay An Overdraft Fee Again

How can I avoid overdraft fees? A reader is hit with these fees every month because she can’t make ends meet. When I council smart people who are constantly being hit with overdraft fees, I know it’s a symptom of a much bigger problem.

These people aren’t lazy, they aren’t forgettnig to check their bounces. No, they’re just like Josephine, good people buried under bad debt. It might seem weird that when I hear about constant overdraft fees I may start thinking about bankruptcy.

Bankruptcy is a last-ditch maneuver towards financial freedom. But based on what Josephine has told me so far bankruptcy may be an option. It sounds scary and it’s a last resort, but it’s not a death sentence.

I urge you to read’s report the pros and cons of bankruptcy. I also mentioned bankruptcy because Josephine is just the kind of person it’s designed for, she provided me with a detailed list of her finances which she meticulously maintains.

She’s obviously the kind of person who will spend and save responsibly. If she can just get back to zero. If you have an issue like Josephine’s please call

Howard Dvorkin answers…

Using overdraft protection to juggle debt is like drinking poison because you’re thirsty – but then you drink the antidote right after. Eventually, this process takes its toll.

Better to solve the original problem.

I can understand why you feel you have no other choice, Josephine. When you’re struggling week to week, it’s hard to step back and look at the big picture. That’s what credit counseling is for.

A certified credit counselor will give a free debt analysis, reviewing your entire financial picture to see what programs exist to help you out. Based on the details you’ve provided, this might sound like an odd thing to say, but: I believe you’re going to be just fine.

How can I say that when your numbers don’t add up? I’m simply impressed that you’ve crunched all those numbers. You’d be surprised, Josephine, how many Americans have no clue what their income is, much less their debts.

The first step to solving a financial problem is quantifying it, and you’ve done that. When you speak with a credit counselor, that phone call will be so much more productive because the data is right at your fingertips.

Based on what you’ve told me so far, bankruptcy may be an option. That sounds scary, and it’s a last resort, but it’s not a death sentence. I’d urge you to read’s report, The Pros and Cons of Bankruptcy.

I’ve been asked about bankruptcy many times, from questions like Is It Possible To Get Credit Cards After Bankruptcy? (yes) to Will Bankruptcy Keep Me From Buying A Car? (no, but it will cost more to get an auto loan). I’ve even been asked Can I Declare Bankruptcy Twice?

While a credit counselor often spends a lot of time just trying to understand the contours of someone’s debt, in your case, the conversation can focus on the best solutions. If that’s bankruptcy, then I expect you’re just the kind of person that last-ditch option was designed for: Someone who will appreciate the clean slate, and will prosper in the future.

If you don’t call, Josephine, call someone who can get you the help you need. You’re a success story waiting to happen.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How Do I Stop Living Paycheck to Paycheck?

Question: I don’t have a lot of debt, but I also don’t have a lot of money. I think I got $5,000 I’m carrying on a couple of credit cards. I also got $12,000 in student loans to go. My car is paid for, and I live at home with my parents until I can figure out how to live on my own. My job is steady, and it has decent benefits, but it pays only $22,000 a year. How do I save money and stop living paycheck to paycheck?

— Anthony in Georgia

How Do I Stop Living Paycheck to Paycheck

How do I stop living paycheck to paycheck? A reader has some debt but no savings. Thankfully he has several excellent options. If you feel like your financial life is a hamster wheel it’s time to stop running in circles.

The best way to stop living paycheck to paycheck is start living dollar to dollar. The best thing you can do is also the easiest. can show you how to create a budget that will show you exactly where your money goes. The results will probably surprise you.

Yes, I know making a budget isn’t high on anyone’s list of having fun, but it’s also very important. It also doesn’t take too long, so do it now, can show you how. Once you create a budget you can consult a professional. It’s called credit counseling and believe it or not it’s absolutely free.

A certified credit counselor will review your finances with you once completed. You’ll have a clearer idea of what you can do to stop living paycheck to paycheck.

It might include signing up for programs that can reduce your student loan payments or other programs that can manage your credit card debt but you won’t know about that until you know about yourself first.

So, make that budget!

Howard Dvorkin answers…

First of all, allow me to reminisce for a moment. Back when I began my career as a financial counselor in the 1990s, $5,000 was considered a significant credit card balance, and $12,000 in student loan debt was still a rarity.

Times have certainly changed. The average credit card debt by household in this country is more than $16,000, reports. The average student loan debt is more than $50,000.

So according to these statistics, you’re right, Anthony. You don’t have “a lot of debt.” However, as you’re learning, any debt is a drag — not only on your current financial situation, but you’re future one, too.

Even worse, when you earn very little, the interest rates on your debts chew up a bigger percentage of your income. So the first step is curtailing some of those interest rates.

To accomplish that, try these three options and in this order…

1. Make a budget and stay within it

Anthony, you say you think you have $5,000 of credit card debt. You need to know. The best way to do that: Create a budget. Yes, it’s as boring as it sounds. It’s also as important as it sounds. Read How to Create a Budget and Stick to it.

2. Cut what you can

Now that you know what you bring in and where it all goes, you can intelligently look for ways to save. Shaving a few dollars off a workweek worth of coffee doesn’t seem like much, but once you have a budget and can note how it adds up, you’ll be motivated to do more. It’s akin to dieting: Every calorie counts.

3. Get a professional assessment

If you’ve read before, you know I’m a huge proponent of credit counseling — and why not? It’s free. A certified credit counselor calls you and conducts a financial assessment right on the phone. From there, you can make informed decisions about your finances. Learn more about free credit counseling services.

These three options are just the beginning, Anthony. If you start here, you’ll quickly learn advanced techniques that will save you even more — like how to reduce your student loan payments. First things first, however. Start here, do well, and I can promise you that financial freedom is attainable.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How Can I Convince My Boyfriend To Buy Fewer Gifts This Holiday Season?

Question: My boyfriend is driving me crazy. He agreed that we would both tighten our belts so we can save to get married and get a house and start a family. For the most part, he has been good about this. Then the holidays roll around. 

He believes you need to spend a lot of money on gifts for everyone. When I remind him of our plans, he says, “But these are our friends and our families, I’m not going to be a Scrooge to the ones I love most!”

He also says it’s no big deal to run up our credit cards, because we can make the minimum payments, as little as $15 or $25 a month. If it gets really bad, he says we can sign up for programs that will cut our monthly payments by half. And if THAT fails, we can declare bankruptcy and just start over with a clean slate.

I know he’s full of it, but I don’t have the facts to explain it to him. Can you? He’s a good man the rest of the year, but the holidays might actually break us up.

— Katrina in Michigan

Howard Dvorkin answers…

The holidays are marketed as a time for families to come together. Sadly, I’ve seen them rip families apart — precisely for the reasons you just described, Katrina.

Your boyfriend proves that a little financial knowledge can be a dangerous way to live. Let me give you the facts…

Minimum payments equal maximum cost

For Halloween, compiled an interactive map called Credit Hell. It shows you just how long it takes to pay off the average credit card balance if you only make minimum payments, and it’s broken down by state. For Michigan, it would take 16 years and four months — and in 35 other states, it takes longer.

When you make minimum payments, you rack up huge interest charges. Sure, you don’t have to pay up right now. You will pay even more later.

DMPs are effective but not easy

When your boyfriend mentioned cutting his monthly credit card payments in half, he was most likely referring to a debt management program. Called a DMP for short, these are administered by nonprofit credit counseling agencies and can reduce your payments by 30 to 50 percent. They’re powerful tools, but they’re not panaceas.

I suggest you consult the report, Debt Management Program Pros and Cons. One big con: You can’t open any new credit cards while you’re enrolled in a DMP. That makes sense, because credit card spending is what got you into trouble in the first place, but there are similar restrictions you need to know about.

Bankruptcy is serious business

Likewise, I suggest you read — or insist your boyfriend read — The Pros and Cons of Bankruptcy. From student loans (which aren’t discharged) to your credit score (which will take a hit), bankruptcy is a last resort. Thinking of it as an easy way out is like driving your car recklessly because, “Hey, I have airbags to protect me if I crash!”

 If none of this sways your boyfriend, Katrina, I have one idea that’s been known to work wonders: Talk to his parents. I bet you they’d be horrified by his approach to holiday spending, and they’ll be the first to tell him: We love you, not what you buy us. Take us to a movie or a reasonable dinner, and we’ll be happy.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How to Make a Holiday Budget

Craft a holiday spending plan that helps you avoid overspending that leads to credit card debt.

[On-screen text] How to Budget for the Holidays

The winter holidays are a wonderful time of year, but they’re also a time when people get into debt. With so many expenses, including gifts and big family dinners, it can be easy to turn to credit to get by.

You put things on your credit card with the idea that you’ll deal with the debt once the festivities are over. Then you wind up reeling in the aftermath, looking at all credit card debt you have to pay off. This is called a holiday debt hangover and it can be a nightmare to handle in the New Year.

If you want to avoid it, you have to plan ahead. The earlier you can start putting a plan together and getting it into action, the better. This gives you time to be smart and shop for the best deals, so you can spread out the cost over several months. And this is how you avoid amassing large volumes of debt in the last few months of the year.

Start by making a budget for all your holiday expenses. This includes not only a list of gifts, but also things like decorations, shipping and postal charges for cards, family meals, and flights and accommodations, if you’ll be travelling.

The more detailed you can be in outlining all of the expenses you’ll face, the more you can plan ahead. With the right strategy, you can get through the holidays debt free and start the year on the right foot. Don’t forget to download our holiday money guide to have your best season yet.

If you’re struggling with debt or have other financial issues, give us all call to see if we can help. We’re A+ rated by the Better Business Bureau and have helped thousands of people become financially stable. When life happens, we’re here for you!

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Use’s Holiday Money Guide to make a practical, effective holiday budget that lets you spread holiday cheer without causing overspending that leads to credit card debt.

Download our Holiday Guide!

The winter holidays are the most expensive time of year for most Americans. Retail estimates show shoppers will spend $678-$682 billion between November and December of this year. Experts predict that the average household will shell out about $967 to make the season merry and bright.

Give yourself the gift of extra cash under the tree with a smart holiday budget
Considering that most Americans say that they don’t have the savings to cover a $500 emergency expense, it doesn’t bode well holiday debt. Fortunately for you, is here with the top tips for crafting an effective and frugal holiday budget. Use the tips you find below to make your holiday spending plan. And if you still run into trouble with credit card debt this year, call in the New Year to make a plan to pay it off fast.

How to make a holiday budget step by step

  • First, write down everyone that you think you need to buy a gift for; if you know what you want to buy for that person list that, too.
    • Make sure to include everyone on your list, including:
      • immediate family
      • extended family
      • neighbors
      • bosses and co-workers
      • friends
      • kids’ teachers
  • Next divide that gift list into two categories: (1) people who need more expensive unique gifts and (2) people who can receive less expensive universal items or handmade gifts
  • For the second group, set a dollar limit on what you want to spend per person.
  • Within your family, also decide if you want to set dollar spending limits for each other; this keeps you from going overboard on gifts for the immediate family.
  • Now add in all your other holiday costs, including expenses:
    • Decorations
    • Food
    • Travel
    • Entertaining
    • Postage and Shipping
    • End of Year Tipping
    • Charitable Donations
  • Put all of this into spending planner worksheet or spreadsheet with two columns for each holiday expense:
    • Planned Spending
    • Actual Spending
  • Total up Planned Spending to see how much you’ll spend over the season, in total.
    • Compare this to the cash you have available for holiday spending
    • If it’s too high, adjust your list to cut back or limit gift items
  • Once your list is ready, don’t shop without it; use the money-saving tips below to help ensure you stay on budget.
  • As you spend money over the holiday shopping season, be sure to note what you actually spent on each item.
  • That way, if you start to go over-budget, you can cut some items off your list and stop spending!

Holiday spending tips

These tips can help you stick to your holiday spending plan:

  • Always shop with your list. This way, you can ensure you stick to the spending plan that you made. These days, keeping your list on your smartphone can be an easy way to ensure it stays with you. You can even in share it in your family cloud, so anyone can check something off if they buy it. Also have your list with you when you shop online.
  • Only take cash with you when you shop. Shopping with cash helps you avoid overspending and impulse purchases. You can only spend the money you have, so those holiday store displays don’t tempt you into spending on things you don’t need.
  • Consider using PayPal or prepaid credit. With so much online shopping, the holidays are a prime time for identity theft. Although credit cards limit theft liability to $50, giving a cyber thief access to your high-limit card can end up being a hassle to dispute. Debit cards are even worse, because liability limitations depend on when you notice and report the theft; if it’s reported after 60 days, there’s no liability limit.
  • At most, you should use 1-3 credit cards for holiday spending. This includes one low-APR credit card for most purchases. Then you can strategically use travel or rewards credit cards, as needed. We explain this more below.

Ways to trim down gift costs

You can also improve your holiday budget by trimming down gift costs. Either reduce the number of people on your list or cut costs per person:

  • Set up gift swaps and exchanges. Instead of buying unique gifts among groups of adults, set up a Yankee Gift Swap or White Elephant Exchange. Each person buys a gift under a certain dollar limit, then you have a party where everyone opens and swaps the gifts out.
  • Don’t buy gifts for yourself or your pets. If you want something, it should be on your list for someone else to buy it for you. People now waste up over $100 each Christmas self-gifting; also, don’t buy for your pets – they have no idea it’s a holiday, nor do they care.
  • Buy in bulk or build gift baskets. For non-immediate family, there’s no need for unique gifts; either buy general, universal items that you can get cheaply at bulk discount stores or get drafty and make gift baskets filled with holiday items or baked goods.
  • Get the kids crafting. Handmade and homemade gifts are good for grandparents, teachers and neighbors. Just make sure to start crafting early so you have time to learn from mistakes.
  • Play Secret Santa or let your kids do it. This is where you do chores or other acts of kindness while someone is away from their home. You can mow lawns, pick up leaves, wash cars or shovel driveways, depending on the weather where you live. Kids can get really into doing chores for others when you make it a game.
  • Give actions instead of things. Gift your significant other a coupon book of dates or time together; give your grandchild a coupon book of fun outings. Or give of yourself through actions, like babysitting for a stressed mom.

Holiday decorating ideas on a budget

If you love to decorate for the holidays, it’s all too easy to overspend. So, how do you deck the halls without putting a serious dent in your wallet? Use these tips:

  • A fake tree is more cost effective. The cost of getting a real tree is something you incur annually. If you get a fake tree, you can usually get it for about the same price or less; then you can use it year after year.
  • Replace lights instead of strings. Let’s be honest, going through a light string to find the dud can be tedious, but it’s also basically free if you use the replacement lights that came with your string. Even if you need to buy replacements, it’s still cheaper.
  • Set up a decoration swap with friends or family. Inflatables and other yard art are one of the biggest expenses in holiday decorating. Set up a decoration swap among your friends or family to trade out holiday decorations. That way, everyone’s house looks new without anyone incurring new expenses. Just be sure to agree, in advance, what to do if something gets damaged.
  • Revitalize decorations that are worn out. Say you bought some glittery outdoor gift boxes that light up, as well as some outdoor ornaments for your trees. These types of decorations start to look worn and dingy after a few years. Instead of buying new decorations, get some glue and glitter and go to town to make those old decoration pop again.
  • Get crafty. Making decorations like ornaments at home is fun and a great project if you have kids. You can buy supplies and get a lot of decorative details for your house for the cost of one pricey piece of tchotchke from a store.

Planning a holiday party on a budget

Another time when overspending occurs easily during the holiday season is for holiday parties. Between decorations, party supplies, food and beverages, things can get pricey quickly. That’s especially true if you try and offer a full bar.

  • Potluck is cost effective and easier on you. Instead of trying to cook 12 different hors d’oeuvres yourself or (even worse) an 8-course sit down meal yourself, make the party potluck. Everyone brings their favorite holiday dish or winter comfort food to share. It limits your expenses and keeps you from spending the whole day in the kitchen.
  • BYOB or at least BYOA. Alcohol is usually the biggest expense, especially if try to offer a full bar for cocktails. Instead of getting a dozen bottles yourself, ask guests to bring the alcohol they want. Then you can provide mixers and non-alcoholic beverages.
  • Buy in bulk. This is particularly good for those non-alcoholic beverages you need and other items that can be used later if they aren’t used up during the party.
  • Holiday parties are perfect for gift swaps. And you don’t have to set a high dollar limit to make this fun at a party. If everyone buys the dumbest thing they can find for $10-15, you can have a lot of fun with a White Elephant Exchange of your weird gifts.
  • Find cheap games to play online. Don’t waste money on adult party games. Most of these can be recreated with simple supplies you have around your house. Just Google “free party games” and go to town.
  • Decorate at the dollar store. If you aren’t satisfied with your regular home holiday decorations for the party, don’t go crazy with expensive home décor retailers. Instead, hit the dollar store and deck your halls on the cheap.

Christmas on Credit:’s Best Holiday Credit Card Tips

Putting Christmas on credit can get costly with interest charges
Let’s be honest: Most people depend on credit cards to cover at least some of their holiday expenses. But if you use credit during the holidays, then you need a game plan to minimize debt and maximize rewards. Follow these tips to develop the best holiday credit card strategy:

  • First, any cards that you plan to use for holiday shopping should start with a zero balance.
    • This way, if you pay off the charges within the first billing cycle, you make those purchases interest-free.
    • No interest charges ensure you get the most out of any rewards you earn.
  • Next, you should assign cards for specific parts of your holiday spending plan
    • If you have a rewards card that offers bigger bonuses for shopping at certain places, limit card uses accordingly.
    • If you have a travel credit card, use it to make your reservations and accommodations to earn miles.
    • Only use store credit cards if they offer rewards AND if you can pay off the balance in-full.
  • Everything else should go on your credit card with the lowest APR.
    • This minimizes interest charges, so you pay less money as you work your way out of debt.
  • Then, when the bills come in, pay off the rewards, store and travel credit cards in-full; make the minimum payment on the low APR card.
  • Once the other balances are gone, pay off the low-APR balance in the biggest chunks possible on your budget.

Christmas on Credit: Card Use

Card typeBest used forRepayment plan
Low APR credit cardUse for big-ticket purchases that can’t be paid off within a single billing cycleMinimum payments while you focus on your other card, then pay it off in chunks
Rewards credit card (cash back or points)Limit use to what you can pay off within 1 billing cycle; start with a zero balance to eliminate interest chargesStart and end the billing cycle with a zero balance to use the card interest-free
Travel rewards credit cardUse for airline reservations and hotel accommodations to earn milesPay off quickly to avoid offsetting value of miles earned with interest charges
Store credit cardsAvoid use unless the card offers incentives without time limitsAlways pay off store balances quickly, since these cards tend to have the highest APR

Why not put everything on rewards?

Putting all your holiday expenses on rewards credit cards is rarely an effective strategy. Remember, retail experts predict the average family spends close to $1,000 during the holidays. Most people don’t have $1,000 sitting around to pay off that full cost all at once; if you did, you would’ve paid for Christmas in cash instead of using credit.

Rewards that you earn are quickly offset by the high interest charges that come with most rewards credit cards. Even with excellent credit, the average APR on a rewards credit card is over 16% APR. At that rate, interest charges quickly offset any rewards you earn. That only takes 1-2 billing cycles.

For example, let’s say you put $1,000 on a cash back credit card at 16% APR. You earn 3% cash back on the purchases. The minimum payment schedule is a standard 2% of your balance.

  • With 3% cash back, you earn $30 on your holiday purchases
  • The minimum payment is $20
  • However, over $13 of that payment goes to cover accrued monthly interest charges
  • So, within 3 payments (just over 2, actually), you completely negate your cash back earning with interest charges.

This is why you should use rewards cards strategically in order to avoid interest charges. Otherwise, you really don’t “earn” anything.

Be careful with store credit cards

These cards tend to have relatively high interest rates even compared to other credit cards. It’s rare to see a store credit card that has APR less than 20%; many go much higher than that. They may also have stricter terms on repayment.

So, unless you’re earning good rewards AND you can pay off the balance in-full within the billing cycle the charges were incurred, steer clear! For the record, earning limited-time bonus cash to use in the store is usually not a good enough perk. The last thing you need in January is a push to spend more money while you pay off your debt.

When Is It OK To Cash In My Retirement To Remodel My Home?

Question: Should we roll over our 401K to an IRA to use this asset to pay for remodeling our home?

— Gayle in Texas

Steve Rhode answers…

Gayle, it is amazing how such a simple question can have such big consequences. There are some basic issues worth considering before you launch into this obvious plan of action.

For example, your 401(k) is most likely protected from your creditors right now. But if you roll it into an IRA with commingled money, you can risk losing it all if you were unexpectedly sued.

And these suits are totally unpredictable. All it takes is a bad accident you could be blamed for — and poof, there potentially goes your retirement. I’d make sure you consult with an attorney who is licensed in your state to best understand how any rollover might expose you to a loss in this situation.

Then there’s this: If this is a company 401(k), you will lose the ability to access the funds at an earlier age without a tax penalty.

What I am assuming from your question is you want to borrow against your IRA or use some money from this exchange to help fund your remodel. It’s your money, and you can do whatever you want with it, include lose as much as you want.

My primary issue with the access of retirement funds like a 401(k) or IRA is the loss of return. People get distracted and think they are borrowing their own money at a low-interest rate like 5 percent. But what most miss is that a 5 percent loan is really costing you 20 percent in good return years. And right now, we’re in a span of good return years.

During the time that the money you’ve borrowed is out of your retirement account, it is now growing with the rest of your funds and bringing down the entire value of what your retirement funds would have been.

So borrowed remodel funds can now wind up costing you a lot just when you need it most.  For example, using this online retirement fund loan calculator from Bankrate.

You can see that a $30,000 loan from your retirement funds — 401(k) or IRA — will cost you $78,091 in repayment and lost growth on the funds while they were borrowed. If something comes up and you can’t repay it in time, then the lost value can be as much as $1,138,148.

Yes, that’s more than $1 million.

I guess you could label me as a financial libertarian because I believe people need the facts and they are entitled to make their own wrong choices. Ultimately, the question is not if you can do this, but if you should do it. Only you can make that choice. Good luck.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

We Might Win $100,000. What Should We Do With It?

Question: My husband is now part of a class-action lawsuit. It looks like he’ll win around $100,000. He wants to use it to buy a $92,000 condo near us and then spend $8,000 fixing it up so we can rent it.

He says this way, we can make much more than $100,000. I want to use the money to pay off our mortgage and maybe even our credit cards, since we have around $10,000, I think, on five or six cards.

My husband says this is short-sighted, and that every rich person has debt, and that wealth is simply juggling your debts. We’re at loggerheads. What do you think? 

— Marilyn in Lousiana

Howard Dvorkin CPA answers…

If you really want to know what I think, Marilyn, here it is. You both need to take a deep breath and consider what you’re proposing.

Here are the troubling signs I see from your email…

  • Lawsuit settlements are often taxable. This being taxes, it get complicated. For instance, if the settlement includes money for “pain and suffering,” that’s not usually taxed because the IRS might consider it a reimbursement for your injuries. However, the point is: You need to ask before you count on the money.
  • Lawsuits are rarely slam dunks. Right up to the end, not only can the verdict change, but so can the terms. I’m concerned that you might be counting your settlement before it’s sealed.
  • Credit card debt is one figure you can know for sure. You say you “think” you’re carrying $10,000 on “five or six” credit cards. Before you decide what to do with new money, you need to be sure what’s happened to your old money — right down to the penny.

For the purposes of illustration and education, let’s assume you get a cool $100,000.  If the condo costs $92,000, I’m assuming your husband hasn’t factored in closing costs, insurance, and other expenses. Just selling a home can add $15,000 in hidden fees. Even if buying this condo is half that, you’re already over budget if you need to make $8,000 in renovations.

Now let’s turn to paying down your existing mortgage. You don’t mention what your interest rate is, but let’s assume it’s 5 percent. You also don’t mention what the interest rates are on your credit cards, but the national average right now is hovering around 15 percent.

I’m sure you see where I’m going with this. Paying off your credit cards will save you around 10 percent more than paying off your mortgage. If you really want to know what I think, Marilyn, I suggest paying off your credit cards with whatever money you may be awarded.

Next, I’d make sure I had at least three months of living expenses in an emergency fund. If hurricanes Harvey and Irma have taught us anything, it’s that a natural disaster can cost a lot of money.

Finally, with whatever settlement money is left, I would look at other debts I have: an auto loan, student loans, personal loans. These I would pay off from highest interest rate to lowest. Finally, I might indeed pay down some of the mortgage.

Whatever you do, Marilyn, I urge you to gather facts and make dispassionate decisions with your husband. Facts like I’ve outlined here can help avoid a fight over this windfall — if it becomes a reality.

Even if it doesn’t, you can use this experience to still do the things I’ve outlined here.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How Can I Pay Off My Debt Without Eating Ramen Noodles Forever?

Question: For the past year I’ve been spending all of my extra monthly income on paying off my credit cards and student loans – but to be honest – it’s leading to a lower quality of life.  I’m just not allowing my self to spend money on those little things like the movies and going to dinner with friends.  How can I balance being smart with paying off my debt, but not living in a “Netflix and chill” only bubble? I don’t want to eat ramen noodles for the rest of my life.

— David in Florida

Howard Dvorkin CPA answers…

This is one of the most common and troubling questions I hear. It pains me, because Americans who really want to get out of debt are fast becoming a rarity. As I’ve written before, being in debt is becoming a terrible new normal.

An exasperated woman once asked me, “How can I get out of debt when I have no money — which is why I got into debt in the first place? Is there any bigger Catch-22?”

I don’t know if there’s a bigger Catch-22, but I know of few more pervasive and painful. Fortunately, there are seven concrete steps you can do. None involve ramen noodles.

1. Pay what you can smarter

If you’re making monthly payments on several credit cards, don’t make the mistake of making minimum or minimal payments equally to each card. You either want to pay off the card with the highest APR or the card with the lowest balance. Learn more: Credit Card Debt Reduction Plans.

2. Ask and you shall reprieve

This sounds too easy to be true, but you can simply call your credit card company and ask for a lower interest rate. Why would they do this? Because they might not want to lose a good customer. Like anything else, there’s a right and proper way to ask. Learn how by reading Credit Card Interest Rate Negotiation.

3. Move your debts

Some credit cards offer a zero-percent introductory interest rate, and they let you transfer your current high-interest debt. Why? Because, sadly, they know most folks won’t pay off their debts by the time the introductory period (up to 18 months) ends. If you do it right, however you can save thousands. Here’s how: Credit Card Debt Transfer for DIY Consolidation.

4. Condense your debts

In some cases, it makes sense to take out a loan to consolidate all your debts into one monthly payment that’s lower than all the little payments you’ve been making. It’s relatively easy if it makes sense for your financial situation, but of course, it’s a tad complicated to figure out if it’s indeed right for you. That’s why you first need to read the Credit Card Debt Consolidation Loan Guide.

5. Consult an expert

Of the options on this list, my favorite is surely this one: credit counseling. There might be no such thing as a free lunch, but there is such a thing as a free debt analysis from a certified credit counselor. Many people don’t pursue this because they don’t believe it. I urge you to read Credit Counseling: Certified Credit Card Debt Help and become a believer.

6. Learn about DMPs

That’s short for debt management program. Unlike credit counseling, you’ll pay a small fee, but in exchange, you’ll reduce your total monthly payments by 30 to 50 percent. These programs have been around for decades and have helped millions. Check out the Debt Management Program Guide.

7. Settle for less

Finally, you can simply settle your debts for less than you owe, sometimes even half. This is the most complicated option, and not one you should entertain frivolously. Read the details here: Credit Card Debt Settlement Programs.

I don’t know which option is best for you, David. In fact, more than one might be best. However, I don’t know how much you owe, at what interest rates, how much you earn, what your must-pay bills are, and if you have other debts like a car payment or mortgage.

These are the questions you’ll be asked if you pursue a free debt analysis with a credit counseling agency. I’d suggest you do that first. The sooner you do, the sooner you can replace ramen with steak!

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How Do We Prepare For The Next Recession?

Question: My husband and I have read many articles by you and other experts that predict a recession is coming soon. We’re very scared about this, as we barely survived the last recession. We still haven’t paid off all the debts we incurred during that time period.

My husband read this article on the Fox Business website and wants to invest in silver stocks. He wants to divert the $50 a month we put into an IRA we have for retirement. This doesn’t feel right, but I can’t explain why it feels wrong. What do you think?

— Regina in Texas

Howard Dvorkin CPA answers…

When I originally wrote we’ll suffer another recession during President Trump’s first four years, I was worried. I wanted Americans like you, Regina, to know what might be coming — and get ready for it. However, I didn’t want to cause panic or even angst.

I have a formula: Preparation plus time equals inner peace.

So you can indeed prep for the next recession, but you don’t need to take hasty risks like investing in precious metals. Only a few months ago, I told another husband not to buy gold on his credit card. Now I’m telling your husband not to stop saving for retirement to buy silver.

What I wrote about gold also applies to silver or any metal: Prices fluctuate wildly, they’re impossible to predict, and you can lose your entire investment if you’re not careful.

Even worse, you seem to imply, Regina, that you still have credit card debt that you’ve been carrying since the last recession. Your first priority should be paying that off. If your husband is unconvinced, tell him to think about it this way…

  • Silver has a 16 percent annual rate of return, although that can fly in either direction at any given time. You might make 200 percent, or you might lose 100 percent.
  • The average interest rate on a credit card for someone with good credit is around 15 percent. It balloons to 21 percent for those with fair credit. It sounds like you might be somewhere in the middle, Regina.

…so paying off your credit cards will put just as much money in your pocket as investing in silver, and without the risk.

Investing in the stock market is something you should only do when you have money you don’t desperately need. Even then, it’s folly to buy individual stocks or even stock funds that are invested so narrowly in industries you and your husband know nothing about.

If you really want to prepare for the next recession, has a special report that shows how Americans recession-proof their finances. Unlike that Fox Business story your husband showed you, Regina — which ended with a pitch to separate you from your money — the report is free.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

Why Even Bother with New Year’s Resolutions to Pay Down Debt?

Question: We’re not even six weeks into 2017 and my boyfriend has already blown his New Year’s resolution to stop running up his credit cards and actually start paying them down.

He was doing fine until the Super Bowl last weekend. Then he not only spent $200 on buying drinks for his friends (because he says his team won, and it’s a tradition) but he also spent another $120 on football jerseys and hats, even though he has a lot of them already. He wears them when we go out on dates, and it’s annoying.

Meanwhile, I’m sticking to my New Year’s resolution to pay extra on my car loan so it’ll be paid off a year early, and I’m not buying any more sexy boots. (I admit I’m addicted to boots, but I also admit I have a shelf full and don’t need any more this year.)

I’m wondering if this relationship has a future if my boyfriend can’t even make it two months on his promise. What do you think?

— Paula in South Carolina

Howard Dvorkin CPA answers…

I’ve never been keen on New Year’s resolutions, Paula. Last month, I compared them to dental floss. My main objection is that a resolution is like a diet, which we’re all likely to give up on at some point.

Just like you should make lifestyle changes instead of hop on the latest diet fad, financial resolutions don’t help as much as small, permanent changes in your financial planning.

Your boyfriend has essentially cheated on his diet — but he hasn’t cheated on your relationship. Few Americans take their New Year’s resolutions seriously. As I’ve mentioned before, a mere 8 percent of us keep them.

It also turns out that women make more resolutions about finances than men do. In fact, they make more resolutions in general. A recent Harris Poll asked men and women what kind of New Year’s resolutions they’ve made this year…

  • Eat healthier (33 percent of women vs. 23 of men)
  • Save more money (29 percent vs. 21 percent)
  • Lose weight (29 percent vs. 18 percent)
  • Pay down debt (19 percent vs. 14 percent)

As you can see, the top four resolutions split neatly between food and money. As you can also see, there’s no way that many Americans are keeping that many resolutions.

So I wouldn’t harshly judge your boyfriend for slipping on Super Sunday. Ask yourself how tempted you might be if you spied a once-a-year sale on boots!

Instead, if you really want to judge your boyfriend’s commitment to both a loving and financial relationship, sit down together and discuss the basics of personal finance and money management.

If you can agree on these principles, I still can’t guarantee your relationship will last. However, if you don’t agree, I can predict (based on more than two decades of counseling couples about money) that your relationship will suffer or possibly even fail.

Bottom line: This is about being resolute about money every day, not making a New Year’s resolution.


Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

Ask The Expert: How Can I Save My Kids?

Question: I have two young girls, ages 3 and 5. My husband and I follow your advice, as well as that from other bloggers like Money Talks News and Dollar Stretcher. (I think those are our three favorites.)

But here’s the thing: We both grew up in families that declared bankruptcy a couple of times and still run up big bills on their credit cards, buying stupid things they can’t afford. I don’t want my daughters growing up to be like that. But what can I do?

When I search online for “how to teach your kids about money,” lots of advice comes up. But really, my kids aren’t going to do that stuff. Dave Ramsey said to “use a clear jar to save,” but I want something that’s not a gimmick.

What can I do, Howard? Please give me something REAL.

— Megan in Iowa

Howard Dvorkin CPA answers…

Howard Dvorkin on how to get out of debt fastLast month, I was interviewed on just this topic by the National Financial Educators Council, a wonderful organization. Here’s part of what I said…

I’ve never understood why schools teach economics but not personal finance. Or why we teach our children geometry but not compound interest. High schoolers learn about the broad strokes of capitalism versus communism, but they don’t know the basics of APR or what ‘debt-to-income ratio’ means.

If our schools aren’t going to teach the crucial skill of money management, then it’s up to enlightened parents like you, Megan. While you can do many little things to reinforce the value of money, one of the biggest things you can do is take your daughters to Junior Achievement when they’re old enough.

I’m a big fan of Junior Achievement — so much so I donate both my time and my money to its amazing programs. What does JA do? The nonprofit teaches by letting children learn by doing, starting as early as the third grade. When it comes to teaching kids about money, it’s one of the most important resources out there.

They can start their own mock businesses, learn financial literacy by visiting a virtual community, and even shadow successful business people on their jobs. Here’s how to find a JA near you.


Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a  CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.