Carrying a debt around feels like a burden on your back, which you are struggling to get rid of, in fact people are Googling how to get rid of debt everyday! No matter how hard you try, you can’t get relief and that is what is so bad about debts. What is worse, if you can’t pay back your loan, you could lose the very thing for which you needed the money in the first place such as your car or home. So what do you do?
How to Get Rid of Debt for Good?
Look at your finances. Evaluate your income and your expenses. Usually it is much easier to determine how much money is coming in than how much money is going out. For a month write down every penny you spend and then look at the numbers.
Think where you can save money and be creative and flexible. Start with big things like your auto insurance. Maybe you can shop around or raise your deductible? Look at your cell phone bill. Can you cut on texting or Web usage? Decide if you really need that land line phone and cable TV.
Evaluate your electric provider and switch for less expensive one. After you take care of big things look for the ways to eliminate small ones such as going out for lunches, buying coffee in coffee shops, using vending machines, going out every evening with friends and so on.
Now with all that money available to you look at your debt. There are two types of debt: secured and unsecured. Your mortgage is secured debt while balance on your credit cards is unsecured debt. First thing you need to get rid of is your unsecured debt.
Start paying off credit card with the highest balance applying all of your available money towards paying that balance off. In the meantime pay minimum payments on all other cards. When first card is paid off do the same with the next one. Continue until all balances are paid in full. From now on be sure to pay balance on your credit card in full every month so you are not paying high interest anymore.
Steps to Get Rid of Debt for Good
With perseverance, dedication and a whole lot of self control, people can definitely get out of loans and debts. Yes, it’s tough but it is entirely possible. Here is a step by step procedure which will guide you through the entire process of “how to get rid of debts for good”.
Step One: Figure Out How Much You Owe
First you need to find out where exactly your debt stands and how much you need to pay. The easiest way to do this is to calculate the debt to income ratio. This way you’ll get a clear picture of where you stand and you will understand what percentage of your income goes in paying off the debt.
Step Two: Draw Up a Budget
This involves you planning out exactly how much of money you need to spend for your day to day expenditure. Yes, you need to cut costs, but you can’t do without the basic necessities. On the surface it will look like you can manage your money well enough without budgeting, but this is not true. Once you start budgeting, you will understand the error of your ways. This will definitely go a long way and help you get rid of debt!
Step Three: Don’t Take Fresh Loans and Debts
One of the most common ways in which you take debts – though you probably don’t realize it – is through your credit card. This is a tough habit to break because if you have a credit card it means that you have been in the habit of delaying your payments for quite some time. So the best thing to do would be to cut up your credit cards!
Step Four: Get Your Priorities Right
It might be tempting to pay off small amounts first because you can. But it is definitely not the wisest thing to do. You should always target larger amounts which have a higher rate of interest. You could even double your payment on the next debt you need to settle by taking the payment you made on your first debt and adding it to the present amount.
Step Five: Earn More Income
Now that you’re ready to attack the debts and you have your list in hand, you’ll want to make sure that you’re bringing in enough money to fight off these debts. Since money doesn’t grow on trees, it may be ideal to pick up a second job or even consider investing into an education if your current job just isn’t cutting it. When it comes to the career world, the possibilities are endless.
Step Six: Invest
Now that you have savings and no debt except your house, invest for college or retirement. Get with a reputable financial planner to help with this. Every state has different regulations, so it helps to have a professional help maximize your returns.
Step Seven: Go for a Debt Relief Program
If you are laboring under a burden of payday loans and the like, you can go in for a debt settlement program which will enable you to pay off up to fifty percent of your outstanding debts which are not secured. The remainder can be paid off over a year or two. But this comes with a disadvantage – a management fee.
These are simple strategies that will help you get rid of debts from your life for good. The important thing to do when it comes to debts is to act now and prevent more debts from piling up even further.
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