There is always a way to get out of debt especially if you organize your money
and know how to and when to pay.
If you
follow the steps below, you can help yourself to become debt
free.
1- KNOW
what you owe.
You must
know and identify clearly what you owe; the best way is to create a
debt list with details for example:
Useful
Tips
Name/Item
|
Amount
|
Interest rate
|
Monthly Payment
|
Credit card
|
$5600
|
3%
|
$680
|
….
|
…
|
…
|
…
|
And
identify which payment has the highest rate thus allocate the highest
priority to it.
2. Avoid
creating new Debts. When you are already in debt, do NOT create a new
debt. Try your best to create savings strategies for the expenses that
you do not pay monthly, for example some bills are paid quarterly. Even
though, this bill is paid quarterly, keep aside the amount aside each
month.
3.
Decrease your expenses by developing a clear strategy and try to
increase your income.
4. Do
not always use your credit card.
5.
Always create a list of items you plan to purchase and know the amount
you are planning to spend.
6. As
soon as you develop a plan with your monthly income and expenses, you
can set the good amount for paying your debts. Remember, as we
discussed previously, adding an extra amount to your monthly debts
payment can decrease the interest payment and save time. When you have
money with you, and you really do not need to spend it add this
amount to your monthly payments.
7. Being
debt free is not only a way to manage your money, but also a
negotiation tool. Try to find an alternative with a lower rate. Use
negotiation, tell your current creditor that you’ve obtained
lower rates with another provider; this might result in their reducing
rates to
keep you as a customer.
8. Think
before you buy! Sometimes you buy for an item and later on realise
that you do not really need it at the moment. Think well before
planning to buy. Ask yourself “do I really need this
item?”
9. As we
mentioned in Chapter 1, we have good and bad debts, stay away from bad
debt. Stay away from:
- High
interest credit cards
- High
interest items
- Big
mortgage
10. Do
not buy a brand new car when you cannot afford to pay it.
Get a used one and keep it for many years.
11. Be
smart and reasonable.
Those
are some steps toward being debt free, but getting out of debt is
challenging but for sure it can be done especially with dedication and
perseverance.
When you
are asked to decrease your expenses, cancel your credit cards, develop
a plan, etc… you are changing the way you live, and
especially the way you think. Following the steps mentioned above is
not a rule to follow. You must be convinced that you need to change the way you think.
Saving
one dollar every day or any very small amount of money can be useful
for a rainy day or to help in your debts.
Always
pay off the smallest bills at first, this way you will save some money
and add it to the highest bill. This works in most cases when you have
for example 5 bills. You pay the small ones then allocate an extra payment
from the saved amount into the higher bill.
Again
and again, remind yourself, keep your credit card for
emergencies, do not carry the card with you, and have cash in your
pocket unless you really and urgently need it. Get out of troubles, and
put your credit card at home. Hide it somewhere out of sight.
Remember; the credit card business is very competitive.
When you always make your payments on time, call and ask to lower your
interest, it is your right to do so.
Nowadays, everyone carries a mobile phone or a PDA (Personal digital
assistant) or a pocket PC. Carry them with you all the time, and record
your purchases whether by writing a note or downloading a free or paid
financial management software, it wont cost you more then 30 bucks. If
you are only using notes, write down the amount and what it was for.
That way you can really see how much you are frittering away each
month. This is the best way, to keep records of your financial life in
your pocket every time and everywhere.
It would be better to carry your PDA or small notebook rather then your
credit card(s). When you need to buy something take a look at your
notes, and see your total debt or purchases and the budget that you can
really work with. You do not really need to buy an item unless you really cannot live without it. In most cases, you
spend money for something with less priority while you can save this
money for something with higher priority or to pay existing debts.
Always
make a monthly budget for yourself, if possible do it weekly or even
daily; being financially organized is the key to success. You must
include details in your budget. Add foods, bills, entertainment,
transportation, shopping, miscellaneous and other and this way you will
see how much you really need to spend and which is higher in
priority… If you can make changes to your way of life and
save some money, do so. Use that money to pay back debts and in the
meantime you should stop adding to your borrowing by surviving only on
cash or debit cards
Are you
a student? An employee? Bring everything with you to school/university
or to work. Have your lunch, snacks and even your drink. It is better
then buying from machine. You will save even with small amount but you
are SAVING.
For
example, you can save between 1 and 3 dollars every day if you avoid
using machines, this way you have around 60 dollars each month
saved.
Instead
of saying that something only costs one dollar, say if I don't buy it
that is one dollar that I can put away for a rainy day or put toward
debt.
Look at
your monthly income based on the net amount. Deduct taxes, health
plans, social security etc… and you will have the net income.
If you are in debt, it is a given that you are spending more money than
you make. You are in the red. This is something you must recognise.
Live
within your means. If you can't afford to pay cash, you can't afford to
have it. Also pay off highest interest debts first.
Usually,
when you have less free time, you spend less money on nights out or
shopping. When you are in debt, do not go out for shopping or for
entertainment until you are managing your financial life the good way.
Find something beneficial to do with yourself rather than going to the
mall. This way, you're reducing your debt, and most importantly, not
adding more to your debt. If you cannot keep up, you may enter a debt
consolidation program. Do not ever work with private firms or lawyers
with these issues. There are plenty of non-profit agencies who are glad
and ready to help you anytime by negotiating maybe a lower interest
rates or helping you with plans on improving you financial situation.
Even
though you may not like to have a third party agency help you get our
of trouble, remember it is 100% better than bankruptcy and you will
have a debt-free life to look forward to.
Take
this advice from someone who work in the credit card industry; pay your
bill every single month, whether you have a due payment or not. Look at
your overdue period and what your over limit fees are. You could be
racking up monthly fees which are added to your principal balance
and are then charged interest on the next month.
If
you're a real shopaholic, go to the thrift stores. They are often
charity run and often don't take credit cards, so you have to pay cash.
Keep you living within your means and you can find great stuff there.
Go to garage sales in well-heeled neighborhoods. Go early for the best stuff. You can
get great items if you keep your eyes open. Would you rather have a big
credit card bill you can't pay or a few scuffs on furniture or
appliances that has lots of life left?
It's a
real high to find the things you need and still stay out of debt.
Be
honest with yourself, this way you are on the road to freedom. Ask
yourself how this happened to me and why it happened.
You will need to really assess all the debts. Look at all your
statements. Cut up and cancel all the cards and accounts, except the
ones with the highest remaining credit available.
You
should keep one account open for an emergency; we are not saying that
you must live without a credit card.
To get
rid of debt stress, you will have to give up many things you
consider as needs. Believe it you can live without new clothes for awhile,
without buying the latest smart phone, the cable TV, the higher
bandwidth internet connection, and much more, believe it or not. You
have to face the responsibility and the consequences.
Luxury
items and things you want will be more valuable to you, when you really
can afford them with cash up front, or using credit in a wise way.
If you
are an employee, be willing to work overtime, get a part-time home job
or something similar, there are plenty of websites that offer home job
opportunities. Getting a better income will help you to get out of debt.
When you are free, take an hour just to think, try to have
new fresh ideas that might help you in improving your income and/or
reducing your expenses. Search and research. For example you can buy the
same item at 30% less by just shopping around at different stores.
Do not
be fooled by brand names, an xyz mouse for your computer will work as
well as an xyz2 mouse. It is a mouse! Why do you need to spend double
the price for a brand name!
When you
have an identical item with different brand names and both with a 2
year guarantee, do not look for the brand name,
look for the cheapest. There are many ways to save! All you need
is a little effort and some patience. So go ahead search and save!
If you
can buy directly from the factory do it, stores are buying from
resellers and resellers from the factory so the retail prices are double or
triple the factory cost at times.
When
your debts are high and your monthly income is not enough to cover the
payments, there are ways to solve your debt problem. But the road to
financial recovery takes a total commitment. You must decide you want
to be debt-free. You have to discipline yourself to take the necessary
action to pay back your debts. Only you can determine if you are
willing to make the necessary sacrifices to achieve this goal.
Finally,
it is inadvisable to take out new loans to pay off old ones. So-called
consolidation loans are often offered at very high interest rates,
quite often all they do is saddle people with new debts they can ill
afford.
***Note: This article is from a website that was recently merged into this site and may not represent the views of the sites owner. ***---
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