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from: 10 Practical Steps To Becoming Debt Free In 3 to 5 Years.
Preston Hill
This articles presents 10 steps or ideas that, if acted upon,
will improve your quality of life by reducing your financial
burden and providing a debt free existance.
Debt relief is a serious problem for most Americans. We live in
a society where everyone wants the coolest gadgets, a nice car
and a nicer house. There's nothing wrong with that.
Unfortunately, the good life that you've worked so hard to
achieve is not free, nor does it come cheap.
If you earn any sort of a decent salary, then chances are you've
got student loans to pay off. Education is probably one of the
most expensive debts that most people will ever have. The cost
of your first car is more often than not, considerably less
expensive than your student loans.
So, you've got debt. Nearly everyone has debt, but that doesn't
make it any easier to live with. And, if your debts are starting
to exceed your income, then you've got a real problem that can
keep you up nights on end without sleep.
You need to do something about it. And you need to do something
about it right now. Today!
Have no fear, you and I are of a similar kind. We know that the
best way to live a good life is to have more money. But what is
not obvious, is that we also need to spend less.
Really, it's not the little stuff that knocks your budget out of
whack. Time and time again, I've heard of people trying to
budget by cutting back on a café latte'. That latte' at $5 a
whack, twice per day is $3, 650.00 per year. That may seem like
a lot, but not so much as compared to new $20,000 car.
Which one is going to hurt you the most? The latte' or the car
at 9% interest. After 4 years, the car is going to cost you an
additional $4,000 in interest or $24,000.
My point is, that no matter how much the gurus bombard you with
the idea that you need to cut every corner, stop buying bottled
water, eat peanut butter sandwiches and stop eating out. The
effect is negligible compared to making the big purchases, such
as cars, houses and taking education loans. You can save getting
a better rate on auto or mortage loans. Also, if you have kids
in college, before you take that student loan, seek scholarships
first.
So what can you do?
1. Check your credit rating first to make sure that there are no
errors on your report. Everyone in the USA is entitled to one
annual free credit report. Also, if you are turned down for a
credit card, you can get a free report.
http://www.ftc.gov/freereports
2. Get all your expenses into an excel spreadsheet and add them
all up. First add up the monthly payments, then on a separate
sheet, add up the total amounts of each debt. How much is
required to pay them all off?
3. Gather up all your credit cards are start calling the banks
to see if you can get a reduction in interest rates. Sometimes
simply asking will help. You never know until you ask.
4. Create a list of just your credit cards and loans. Make a
decision to pay off either the largest balance or the highest
interest rate. We start with the credit cards because they
typically have the higher rates.
5. Pick one card or loan payment at a time to attack. You can
make minimum payments on the other cards that you did not select
to payoff. Yes, interest will accrue on the others, but you have
a plan. You will double your payment on the one loan that you
have selected to payoff early. For credit cards, take all the
money saved from paying the minimums on the other accounts and
put that money on the one you want to attack. This may seem
radical but it works! This is an extremely powerful method for
reducing debt.
If you decide to tackle your mortgage, then you must be aware
that some mortgage companies require that you fill in the
payment blank explicitly telling them how much extra goes to the
principle. If you do not answer this question, they may put the
extra money into an escrow account which gains no interest and
is not applied to reducing the mortgage debt.
6. Stop making unnecessary credit card charges. Don't pay for
groceries or McDonalds using credit cards. Use cash for
McDonalds and debit cards for groceries. You can have that
latte', but you should use cash to pay for it.
7. Take all the cards but two, one for yourself, and one for
your spouse and put them in a box. Don't cut them up or close
the accounts, as some people are saying. The reason being is
that your credit score reflects your "total available credit."
So, if you start closing accounts, you reduce your available
credit, which hurts your credit score. We are trying to help
your score, not hurt it.
8. Transfer balances for higher rate cards to lower rates. If
you receive an offer for 0% for six months and you've got a card
at 20%, then make the transfer. However, be careful to find out
what is the normal rate for the 0% card. The normal rate needs
to be lower than the higher rate card or you may find yourself
stuck in a worse situation. 9% is a decent normal rate. Do your
homework.
9. Become a bargain hunter. Don't settle for paying retail
prices. The internet is a great place to find bargains. Also,
the Sunday paper can help you with coupons and other great
deals. Don't ever walk onto a car dealership without first
visiting their website and viewing their clearance vehicles. Go
the kbb.com and find out what your trade-in is worth before you
start negotiation. Don't let the big purchases bite you.
10. Do not borrow against the equity in your home. There are
lot's of great deals out there. Maybe you're thinking about a
new kitchen or a swimming pool. Don't do it. When you decide to
sell your home, your going to take one in the shorts. You'll
never get that money back when you sell your home. Brokers are
typically going to charge you about 6% to sell your home, on a
$200,000 home, that's $12,000. That comes straight out of your
pocket. Real estate values all across the country are on the
decline. There are too many new houses on the market and the
market is in constant change. Even though the interest on home
equity loans is tax deductible, don't borrow against your home
for any reason. You need to maintain your equity.
Try these tips before going to a debt counselor. Most debt
services will reduce the amount of your loans but at a terrible
cost to your credit rating. Generally, it takes about 7 years to
remove bad credit from your report. It takes 10 years to remove
a bankruptcy. Most agencies provide very little in the way of
actual debt counseling. What they provide is debt relief by
negotiating with the same credit card companies who pay them.
Becoming debt free is not easy, but if you will follow these
tips, and pick one credit card or loan to attack at a time, you
can truly become debt free in three to five years. Good luck and
best wishes.
Other Resources:
http://www.easyinfo123.com/debtfree.html
http://www.easyinfo123.com/mortgage.html
http://www.easyinfo123.com/auto.html
About the author:
Preston Hill is a part-time writer and researcher. To find out
how more about how you can become debt free visit:
http://www.easyinfo123.com/debtfree.html
This article may be distributed freely as long as it remains
unaltered and the resource box remains intact.
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