Be Debt Free
From Tips and Steps
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- Assess your problems. If you are in debt, figure out how much money you owe. Who do you owe it to? Is it the bank, a car dealership, or simply a friend that you lost a bet to? If it is just $0-100.00's look for a job to work and as soon as you get your paycheck, pay-up your debts. If it is a little bit more, keep working until you have worked it all off. If you need more than a few hundred dollars, you can either work it off, go to step two, or both! If you are deep in debt, you may need help. Churches and ecenomic assistance will have information of where you can go.
- Change your behavior. If your debt is a result of overspending (for example, you buy mass quantities of everything and/or buy things that you want, but are not necessary for living), do some budget planning. Get a friend who can save and doesn't have the spending habit. Bring him/her along when you need to purchase something. That person will be able to provide some advice to you.
- Itemize your highest interest debts (generally credit cards, then car payment, then mortgage, etc.) and make minimal payments on everything but one, which you choose to pay off first. If one debt has much higher interest rate, pay that off first (This is called "Laddering", and may be more cost effective). If interest rates are similar for your debts, pay off the one with the lowest balance first ("Reverse Laddering"). This will allow you see your progress faster, and will make you feel good after each smaller debt is payed off. Review your finances thoroughly, crunch the numbers, and see which method would be the most effective for your situation.
- After debt 1 is paid off, put the payment amount that you used to get it paid off in record time into the next highest interest (or lowest balance) debt, and so on. The new extra money that you put forth into the next debts is called your accelerator margin and you continually build it. Those of you who own Transforming Debt into Wealth know exactly what I mean. You are compounding the money that you are using to pay off your debts. These two steps are IT in a nutshell...except it assumes you have some cash flow.
- Most people try to live beyond their means to temporarily improve their quality of life. This only makes things infinitely more difficult in the future, and impossible to overcome in older age.
- Prevent debt. Every paycheck, put aside some money for bills, food, and other needed necessities of living, and some money aside to save. Also put aside a little money for non-necessities; it is important to be able to buy things you want without going into debt. Keep saving money, and paying off bills so that you can pay off your debt.
- Starting without a plan makes the job of getting out of debt so much harder and so its probably helpful to have some form of a guide
- Do some budget planning. Plan how you will spend your paycheck
- Don't buy something just because you really want it. Buy only things you need.
- Spend as little money as possible.
- Take up a hobby that involves no money-spending.
- Try to save gas money by walking, biking, skateboarding, etc. wherever you need to.
- Avoid using credit cards! Seriously! The easiest way to avoid debt is never, never charge anything on a credit card. If you absolutely think that you need a credit card (to "help" get a good credit score) use the credit card only for purchases that you can pay off at the time you use the credit card. Pay off your credit card bill completely when it's due. Don't leave anything to accrue interest and definitely don't delay for late payment charges, those are just extra expenses. This way you will earn a good credit score without taking on more debt.
- Save money, gain some extra income, and try not to spend more than you earn. Those ways will lead to get rid of debt faster.
- Do Not! fall into the illusion that living a more show-off life NOW in young years will improve your quality of life and friends. No one cares what you own, and if they do, they themselves are insecure. If you want to have nice things, make sure they're for convenience and you can pay cash for them.
Things You'll Need
- Cash flow
- A new way of budgeting, spending and most importantly; living
Related Tips and Steps
- How to Get Out of Debt
- How to Arrange an Individual Voluntary Arrangement (IVA)
- How to Choose a Debt Management Program
- How to Deal With Collection Agencies
- How to File Bankruptcy
- How to Maintain Good Credit
- How to Wake up from the American Dream
- How to Avoid Bad Credit
Sources and Citations
- Debt Advice - A 'Not For Profit' organisation able to offer free impartial debt advice
- IVA website - Free debt advice information and resources in the UK.
- Debt Help Guides Provides debt help guides and information for the UK.
- The IVA Insolvency Helpline Independent Debt Advice for UK & Scotland
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