When you have a significant amount of debt, it can be a very frustrating time in your financial life. While debt can be a large problem, it is not a problem that is insurmountable. By using the proper techniques, you can slowly start to eliminate your debt and become debt-free.
Debt Accumulation
Regardless of what debt elimination techniques you try, they will do no good if you continue to accumulate new debt. One of the problems that many people have is finding a way to stop the habit of accumulating more debt. You have to stop using your credit cards and store accounts when you want to get out of debt. While you are eliminating your debt, you may want to cut up your cards and live on a cash basis.
Debt Snowball Method
One of the most effective ways to eliminate your debt is to use the debt snowball technique. With this technique, you only make the minimum payments on all of your debt accounts. Then, with the smallest account that you have, you apply any extra money that you have to paying it off. When you pay off the first account, you take all the money that you were applying to that account and apply it to the next-smallest account that you have. The amount that you can pay on each account starts to grow and your debts get paid off faster.
Lower Interest
When you start the process of eliminating debt, you most likely have to pay high interest on some of your accounts. Most people have some type of credit card debt and credit card companies typically charge over 10 percent in interest. If you want to speed up your efforts and save money, you need to try to negotiate lower interest rates. If you talk to your credit card company and tell them that you are trying to pay off your debt, they may lower the interest rate for you.
Emergency Fund
When you are working on paying off your debt, you may want to focus on creating an emergency fund. An emergency fund is an amount of money that you keep on hand only for emergency expenses. For example, you can set aside $500 or $1,000 in a savings account for emergencies. If you do not have this cushion, you may not be able to stick to your budget and keep paying off debt. It is better to use your emergency fund for unexpected expenses and keep paying down your debt.
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