We are all trying to get out of some type of debt, whether it be credit card debt, school loans, car loans or mortgages. According to Financial Planning, debt is a form of slavery that we usually entered into voluntarily and that keeps us from experiencing financial freedom. You should create a plan by listing all your debts and the minimum required payments each month. Also create a budget that includes all income as well as all monthly bills not considered debt, such as child care costs, food allowances and utilities. You must determine how much money you can put toward your debts after all required expenses. Determine the amounts you will pay toward each debt each month and then stick to the plan. If you find you can't afford to pay all debts, debt consolidation may be the best solution.
Pay as Much as Possible
Always try to pay more than the minimum payment required. According to MasterCard, paying more than the minimum payment is critical to achieving your financial goals.
Pay Off the Smallest Bill First
Do your best to pay off your smallest debt quickly, while still paying all other debts. Once that bill is paid off, take the money you would normally have paid to it and add it to the payment for the next smallest debt. This is called the snowball effect. You continue to pay the same amount to debt each month but you redirect the amounts once smaller bills are paid. This solution provides a greater sense of accomplishment as you are able to cross the paid debts off your list.
Stop Spending
Stop using your credit cards and acquiring more debt. It doesn't make much sense to try to get out of debt while still accumulating more debt. Once a credit card balance has been paid off, consider closing the account. For all cards you keep, once the balance is paid down, lower the credit limit. Limit your spending to only essentials. Take your lunch instead of buying it. Don't buy things you really don't need. Try to save on spending so you can apply all extra money toward your debts.
Debt Consolidation
Many people find debt consolidation a more manageable solution. With the aid of a financial consultant, you merge all your debts together and end up with only one large payment per month. The financial institution is, in essence, paying your debts and now you must pay the institution back, usually at a much lower interest rate than most credit card companies. Of course, when you do this, you should also close most of the paid accounts so as not to accumulate more debt.
Create More Income
Most of us have a set income. I am not suggesting you go out and get a better paying job, unless that is a feasible option, but there are other ways to acquire more income. Get a part-time or seasonal job, if possible. Hold a yard sale or sell unneeded items on auction websites. Make or sew things to sell without acquiring more debt.
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