Getting Out Of Debt 8 Easy Steps
More and more people find themselves buried under a mountain of personal debt with no idea how they got there and no idea how to get out
. The first and foremost thing most people do is lie to themselves about their debt problems. But unfortunately, unless you accept that you are in debt and talk about it, you will never understand how deep of a hole you are in. It is important to dig yourself out of debt before it is too late. Follow this simple eight step plan to be rid of debt for good.
1.Get a clear snapshot of your finances Start by getting a clear picture of your finances, debts, investments, mortgages, etc. List out all of your mortgage payments, credit card payments, loans or any other such expenditures. Calculate your debt-to-income ratio and viola! You will know where you stand. This will give you deeper insight into which areas you should concentrate your efforts first.
2.Pay off your credit card debt This should be your second step towards financial freedom. Line up all of your credit cards from highest interest rate to lowest. Start attacking them one by one. Pay the minimum on all of them, but pay more on the card with the highest interest. Once you have paid off that card, use the same money to start paying extra on the second card. Continue until you have paid off all of your credit cards, but remember not to acquire any new debt in the meantime. Once you are free from credit card debt, keep only one, and do away with others.
3.Learn to use cash - Keep one credit card and use it only for emergencies when cash is not available, such as an illness. Put away your credit card so that it is not available for everyday use. See to it that your credit limit is not increased; do not accept increases above an amount you can easily pay off in three months.
4.Evaluate you expenses and lifestyle Refinance your home mortgage, and shop around for lower insurance rates and more economical utility plans. Your mortgage payment, insurance and property tax should not be more than 35% of your income.
5.Dont borrow money to pay off debt Many credit card companies and banks offer consolidation loans. Consolidation means combining all of your debts into one. By tying all your loans together in this way though, you could lose everything if you do not pay it back. If you want to borrow, ask a friend or family member in order to get the loan interest free or at a nominal rate.
6.Look for part time work options To bring in some extra cash, look for alternative ways of earning money. A part time job is a great idea, but there are many ways to bring in that extra buck.
7.Be a savvy shopper Look out for deals, discounts and bargains when you go shopping. You can also find coupons online. Surf online to compare rates before you buy. You will be surprised at how much you can save.
8.Ask for help Dont hesitate to ask for help if you feel that you are not able to handle your financial problems. There are many non profit debt management companies that provide free
debt management advice. Their counselors can provide you with an effective
debt management program that is customized and has easy-to-follow steps.
While these tips can help you overcome a debt crisis, you also need to remember that you have to follow some basic
money management principles to avoid falling into the trap again.
by: brianwarren
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