Paying Off Debt, It Starts Today!
So, you've got debt. ok, but if your debts are starting to exceed your income, then you've got a real problem. You need to quickly do something about it right now to start paying off your debt. It starts today!
Debt Free Living
10 Practical steps to being Debt Free In 3 Years. We strongly believe that you can become Debt free in 3 years with all these 10 steps.
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 from Federal Trade Commission.
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 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.
Debt Free Living is Possible
Becoming debt free in 3 years is not easy, but if you will follow these 10 steps, and pick one credit card or loan to attack at a time and remain committed, you can truly become debt free in 3 years.
