Steps Towards Being Debt Free
There is always a way to get
out of debts especially if you organize your money and know how
to and when to pay.
If you follow the steps below,
you can help yourself by 90% 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:
|
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 them as an advice add
this amount to your monthly payments.
7- Being debt free is not only,
a way to manage your money, but also a negotiation part. Try to
find the alternate with a lower rate. Use negotiations, pretend
to your current creditor that you’ve got lower rates with
another one; this might help reducing rates to keep you as a
customer.
8- Think before you buy!
Sometimes you buy for an item and later on identify 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. As an advice 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 change the way you think to be convinced with
that.
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 work in most cases when you
have for example 5 bills. You pay the small then allocate an
extra payment from the saved amount into the higher bill.
Again and again,
we repeat the same messages, 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 your eyes.
Take this into
consideration; the credit card business is very competitive.
When you always make your payments on time, call and ask to
lower your interests, this is a right for you.
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.
So 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 or whatever product 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. There is no way to play
games with yourself about it.
Live within your
means. If you can't afford to pay cash, you can't afford to have
it. 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 your 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 forms 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 by plans
on improving you financial situation.
Even though you
do not like to have an third party agency help you get our of
trouble, remember it is 100% better than bankruptcy and you will
have a debt-free date 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 how much you’re late and over limit fees are. You could be
racking up with 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 the well-heeled neighborhoods 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 happen to me and why it happen.
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 one 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 the
debt stress, you will have to give up many things you consider
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 is plenty of websites that offer
home job opportunities. Get a better income will help you to get
out of debt. When you are free, take an hour just to think and
think, try to have new fresh idea that might help you in
improving your income and/or reducing your expenses. Search and
search, for example you can buy the same item with 30% less
price from a different store.
Do not be fooled
with brand name, a xyz mouse for your computer will work the
same than a xyz2 mouse. It is a mouse! Why do you need to spend
double the price for a brand name!
When you have the
same item with different brand names and both of them have a 2
years guarantees. In such situation, do not look for the brand
name, look for the cheapest. There are thousands of tricks and
ways to save! Always 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 fees are double
or triple sometimes.
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.
