Be Debt Free

Herman Tabb


The downward spiral of the economy caught many off guard. In the past 5 years, we’ve seen our credit card payments double, our gas prices nearly triple, an increase in our living expenses and one of the safest investments in the past hit rock bottom, real estate.

The ingredients above would describe a state of chaos. What industry could possibly prosper in such a situation? That industry would be Debt Reduction programs. Why? These programs sound like saviors when heard on radio or television. They boast about avoiding bankruptcy and paying 40% of your debt to become debt free within 18- 36 months. Okay, where do I sign, before you sign lets dissect the program.

Education

Have you ever thought to ask about the credentials of the employees. After all, they do hold your financial future in their hands. Typically, these environments operate similar to a call center. In most cases, the only educational requirement is a high school diploma. Individual companies may have a two-week training course. Would you allow a mechanic to change the oil in your car with such limited training?

No communication

Communication is the key to any relationship. Many debt reduction programs encourage consumers to cease communicating with their creditors. Is this smart? We understand that the letters and calls at times may be overwhelming, but there has to be a better way. Bottom line, you need to know what’s going on with your finances at all times. The lack of communication may result to legal actions taken place against the consumer that could have easily been avoided.

Creditors give less of a deal to debt settlement companies

Some creditors grade credit accounts in accordance with the behavior of their customer. For example, if you obtain the services of a traditional debt settlement company, your account is outsourced to collections. This expedites everything. Now once your accounts charges off, the probability of legal actions taken place against you have increased. In addition, the creditor will give you the consumer a better discount than they will a debt reduction company.

Potential Litigation

Please understand defaulting on a credit obligation could lead to financial disaster. This entails garnishment of wages, depending on your state, liens against property, real or personal or levies against bank accounts. Do you want to be in this situation? There has to be a better way.

Method

Consumers are told to stop paying any unsecured credit obligations. Instead, send payments to the debt reduction companies. Most cases, money is saved and no interest is paid to the consumer.

Fees

Are you sitting down? If not, please do. I don’t want you to faint and fall out. Debt reduction Companies charge thousands of dollars in fees. These fees are called service fees. For example, if you have $60,000 in total unsecured debt, most companies will charge you $9,000.00 to help you. This astronomical fee must be paid before the debt reduction company begins working for you. What if I told you that you, alone, might be able to pay as low as $18,000.00 to settle this debt? What could you do with $9,000.00 that would have other wise gone to a tradional debt reduction company?

For more detail please go to freecreditsolutions.com

Cornie Herring


Both credit counseling and debt reduction are common solutions used by consumers for debt relief. But, people tend to get confuse between these two services and find difficulty to decide which option to select. While there are many similarity between these two types of debt relief programs, there are some key differences that you may want to take into consideration when deciding which option to go for. Let explore the major differences between debt reduction and credit counseling.

1. Credit Accounts

Most credit counseling programs will require you to close all your credit accounts. Although there are a few exceptions that allow you to retain account for business needs, most often you need get your accounts closed if you choose the service. On the other hand, there is no such requirement to close all your credit accounts in a debt reduction program. You will still allow to remain all your credit accounts active. It will be much more convenient to have credit cards, especially the cards standby for emergencies uses. However, keeping your credit cards may put you in risk of creating more debts to be added into your existing balances. So, if you are a person who can’t control the use of credit card, then credit counseling program might be a better option for you.

2. Duration Of Debt Liquidation

Credit counseling program requires longer time to be completed than a debt reduction program. Generally, this program will take about 5 years to liquidate debt, whereas, a debt reduction program often allow consumers to retire their debts in less than 2 years, but there are people manage to do in less than a year .

3. Total Debt Payment

Normally, the credit counseling companies will help their customers to negotiate a lower interest rate, making them pay less in interest. However, the principle of debt is remained, meanings that you will saving in total debt payment by paying less interest on credit counseling service. On the other hand, debt reduction program involves a negotiation to reduce the total debt amount, which can range from anywhere between 20% to 60%. In this program, you pay less in total debt which one of the advantage over credit counseling service.

4. Credit Score

If you choose to enroll into a credit counseling program, your accounts will be re-aged to current status after you have made three payments. On the other hand, your credit score will suffer if you choose to follow a debt reduction program because your credit report will still stated as late payment while you are settling your debt. But, at the end of the program, the creditor will report that your account has been “settled in full” which is one of the agreements in a debt reduction contract.

Summary

Now, you have a better idea on what are the differences between credit counseling and debt reduction program. You should consider them when deciding which option best fit your need for debt relief.

Preston Hill


This article provides 10 practical steps or ideas to help you become debt free in three to five years.

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 http://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 and remain committed, 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/auto.html

http://www.easyinfo123.com/mortgage.html

http://www.collegeforkatie.com

Thomas Erikson


Debt squeezes your finances, opportunities, health, and family relationships. It constrains, constricts, restricts and stifles. Heavy debt payments every month can leave their mark on your confidence, hopes, dreams, and your health. So how would using a debt consolidation loan solve your problems?

The most important thing you need to do is to free yourself from the strong grip of debt. While you may not be able to pay off your debts in a single hit, you can do the next best thing - consolidate your debts using one low interest debt consolidation loan. This will simplify your financial life by reducing the number of debt payments to one (apart from your mortgage) as well as reducing the size of your monthly debt payment.

By lowering interest rates and only having to make one monthly payment, you can substantially reduce your monthly debt costs. It’s not uncommon to be able to halve your monthly payments this way. Depending on the size of your debt and monthly payments, this can be a considerable saving, leaving you with more money in your pocket.

Furthermore, by freeing up more of your income for family use by using a debt consolidation loan to combine debts, you can improve your lifestyle, pay off debt faster, save or invest or pay for something as important as your children’s education that may have been beyond your reach.

There are many debt consolidation loan options including a home equity loan for those with adequate equity in their homes, an unsecured personal loan for those who either lack home equity or don’t want to risk their homes and a low interest credit card which may suit circumstances where extra borrowing for may be necessary for expenses that haven’t come in yet.

Whichever debt consolidation loan option you choose, be sure to cancel all credit cards and lines of credit once the balance has been paid off by your debt consolidation loan to avoid getting into debt again. An advantage of using a debt consolidation service or a debt counselor is that they will handle everything for you and help you to ensure you are in the best financial position for success.

Ideally, as well as organizing a debt consolidation loan, they will also help you to create a workable budget and a along term financial plan. They will also work with you to evaluate your spending habits so that you can identify problem areas and make necessary changes.

Even if you don’t want to use a professional service to do these things for you, you should certainly do them for yourself. Create your own budget. There are many free budget forms available on the internet that you can download or fill in online. You can also become more educated on financial planning and begin to create a long term vision for your financial success.

A debt consolidation loan is literally your first, significant step to financial freedom and the longer you delay taking this action, the longer you will continue to suffer the debt squeeze.

Jed Jones


Being in debt can feel like having a heavy weight chained to your foot, dragging you below the surface and drowning you in unpaid bills and a deteriorating credit score. Here are 5 smart moves to unchain yourself from that debt without resorting to credit counseling.

Move #1: Ask your credit card company for a lower rate: Your credit card company wants to keep your business. After all, if you carry with them a large balance at a high interest rate, you are paying them a hefty fee every month. Try calling them and asking them to reduce your rate, explaining that you have received lower-interest offers from other companies and that you are considering transferring your balances away unless they can match those lower rates. Believe me, your credit card company would rather keep some of that income than have it reduced to zero. Remember, there is no need to get nasty or threatening with them. Just be matter of fact about it and see what happens. If they refuse, go ahead and apply to other, lower-interest cards.

Move #2: Improve your credit score: A 50-point improvement in your credit score can save you $1000s per year in debt payments by making you eligible for lower interest rates. Do whatever you can to improve your credit score, including ordering your credit reports on the Internet and quickly correcting any errors you may find there.

Move #3: Pay yourself weekly: You may already have a monthly budget. If not, go ahead and prepare one. Then, divide it into 4 and make it a weekly budget. Now, pay yourself and your spouse a weekly allowance. Once your weekly allowance is gone (even if it is only Wednesday!), agree that you will halt all further purchases until the following week. This is a hard one to implement in terms of willpower. I suggest having 2-3 savings accounts and having one account for each week of the month. This is an easy way to keep track of how you are doing that week in terms of sticking to your budget.

Move #4: Keep a spending diary: Each evening, write down roughly how much you spent that day in a special spending diary or notebook. Create three columns: one for the name of the item, one for how much you spent, and one with a comment that labels the item “need” or “want.” For the wants, write a sentence or two about how that want was more important than your getting out of debt. By doing this, you will become much more self-aware about your spending habits.

Move #5: Set debt pay-down milestones: Everything is easier to achieve if you have clear goals in mind. Write down only your total unsecured debt. Now, think about the next 6 to 24 months and determine a realistic timeframe during which you will pay down that debt. Next, set two or three pay-down milestones during that time period and write down what your total debt balance will be by each milestone date. Then, as time passes, do periodic checks to make sure that you are on track and make adjustments accordingly.

To loosen the heavy weight of debt from your foot without resorting to credit counseling, you need to become more aware of your spending habits, improve your credit score, be smart about how you spend, and set goals for paying down that debt. You will soon be sitting pretty and debt-free.

Cheryl Johnson


Do you sometimes feel like you’re making a lot of sacrifices to live debt free? Debt free living is easy if you don’t have any debt. But, living debt free and working to eliminate debt, at the same time, can be a struggle. It can feel like you’re always giving up what you really want to meet that goal.

Sometimes we can’t help but get discouraged. Our desires and wishes get the best of us from time to time. But, it seems to me that things always work out for the best if you just hang in there a little longer.

On a diet commercial the other day, they said that all cravings pass within about 15 minutes. If you can just hold off for those 15 minutes, the craving will pass. I’ve found this to be somewhat true with impulse buying. Justification of a non-purchase takes about 15-20 minutes and the urge to buy goes away. Let me tell you my own experience.

I’ve been wanting a front loading washer and dryer set ever since they become popular styles for the home. Each time I go into a store that sells them, I stand and gaze at the beautiful pieces of machinery and even go so far as to compare prices. But, even at the low end, a set of these machines will cost you about $1600. I couldn’t tell you how many times I almost approached the salesman about that “easy pay plan.”

Each time I hesitated, and after about 15 minutes of thinking about it, I would walk away. I would tell myself that the purchase wasn’t necessary right now. Besides, my antique washer and dryer were still working by some miracle . And, I didn’t really need a set that cost $1500 when I could get a perfectly fine washer and dryer for about $650, when I “really” need them.

Talking yourself out of a purchase is hard when you’ve been talking yourself into them for so long. Justifying a non-purchase for the cause of living and becoming debt free is well worth it. I have about four years to go before I see zero debt. After that, I can save enough to buy any washer/dryer set I want in as little as two months, based on my current debt payment. By then, my tastes and the styles may have changed.

I got my new washer and dryer. They aren’t front loaders and they aren’t “new.” But, they are new to me. During a remodeling project, a friend discovered that the machines they had would not be accommodated in the space and decided to invest in a new stackable set. They are less than five years old. Less than 1/4 the age of my current set (which wasn’t even a matching pair), and in great condition. We acquired both for a total of $150.

I’m happy with the purchase. It satisfies my goal to become debt free and saved me money. It’s a debt free purchase I can live with! Now, I don’t have to worry about getting stuck without a washer or dryer. The old ones were getting temperamental and it was obvious that the day of retirement was nearing for both. Living without a washer and dryer is just not practical with a family of six.

Living to become and remain debt free is often a challenge in a world that’s credit card crazy. We live with constant exposure to credit card debt “pushers.” If they can’t get you at home, by mail or TV commercial, they get you as you walk in the door of the store and at the checkout.

When you want something and you happen to stop and look, just remember the 15 minute non-purchase theory. Walk around and justify not making the purchase for at least 15 minutes. That’s long enough to talk yourself out of it and save the day. You’ll save money and stay true to your goal to become or remain debt free!

Lisa Phillips


There’s nothing more unrealistic then to have a financial expert advise everyone to stop getting hair cuts, don’t buy a cup of coffee, cut off your cable, and the one that really boils my blood is “don’t eat out”. It’s just not realistic for everyone. In fact, it’s like telling an overweight person to “just stop eating”.  It’s not going to happen, at least not overnight.  While this is not bad advice, there are other ways, more realistic, that will lead you to financial freedom. Start by gradual change because you are more likely to stick with it and not feel deprived.

(1)  Create a budget

The first step to financial freedom is creating a budget you can stick with. Begin with the household necessities such as mortgage, rent, utilities, car payment and insurance. These are your fixed expenses. Next, tackle your variable costs such as groceries, cell phone, credit card bills, entertainment and clothing. Once you have these items budgeted take a look at what is left and then create a reserved budget for dining out, vacations, hair stylists and pampering needs. Be realistic and set reasonable constraints on these items.

(2)  Rebuild your credit scores

The cost of having bad credit is immeasurable. If you are going to be financially free you must improve your credit rating. It makes a huge difference in the amount of money you save by having a good credit score. The bottom line is that lower interest rates equal money saved. For instance, if you have a $400,000 mortgage at a 6.00% (30-year fixed interest rate) your monthly payment will be $2,398. That same $400,000 mortgage at a 9.00% (30-year fixed interest rate) will be a monthly payment of $3,218. That’s a difference of about $820 a month! The same rules apply with automobile loans, credit cards and other types of bank loans. The better your credit score, the lower your interest rate and the more money you save.

(3) Create a good cushion

You never know when you’ll need money outside of what you have budgeted. Auto repairs, an emergency out of state trip, plumbing problems….you name it….it could happen. The money you save by having a budget and sticking to it should go into a savings account. Having a savings account not only gives you peace of mind but also keeps you from incurring more debt when an emergency occurs.

Instead of relying on your credit card or creating more debt when an emergency occurs, you can use your cushion. Just as you have a budget plan, have a savings plan also. Pay yourself first. Start with at least 10% of your income. You may even want to include it in your fixed expenses budget as a line item. The funny thing about saving money is that it can be addictive. The more you save and watch your savings grow, the more you want to save. You become accustomed to seeing that money in your savings account increase each month. Start saving today. No more excuses.

(4) Cable T.V.

I know I said it’s not realistic for everyone to just cancel cable and I’m going to stick to my word. However, you can save money on your cable bill by limiting your premium channels and not ordering pay-per-view movies. You can save money each month by having just one premium channel instead of four. Depending on how much you pay for premium and pay-per-view channels, you will save hundreds of dollars each year.

(5) Lower your credit card interest rates

As stated above, the lower your interest rates, the more money you save. Lowering your credit card interest rates could save you hundreds, if not thousands of dollars. Call your credit card company and request a lower rate. Many consumers are intimidated by the thought of requesting a lower rate. Don’t be one of those consumers. You’d be surprised at the results. Your chances are good if you have been a customer for some time, you are not at your credit limit and you have been making timely payments.

 Visit www.rebuildcreditscores.com/Lower_Your_Interest_Rates.html to view a short video on how easy it can be to get your credit card interest rates lowered.

(6)  Never pay just the minimum payment due

Making minimum payments to your creditors will not lead you to financial freedom. It may even help you dig your way deeper into debt. Always pay as much as you can afford. Credit card companies compound interest daily. Any additional money toward your debt reduces the principal balance as well as the amount of interest you will pay over time.

(7)  Switch banks

Monthly bank and ATM fees can really add up. When using the ATM you may not think about the $2.00 or $3.00 charge for ATM withdrawals. But if you use the ATM a couple times a week not to mention if your spouse does the same thing, ATM fees can be astronomical. Consider switching to a bank that does not charge ATM withdrawal fees. Many banks offer free checking and at most credit unions, you can get free checking with interest, with no minimum balance.

(8)  Balance your check book and avoid overdraft fees

Not surprisingly, many of us do not balance our checkbook. We feel the automated phone teller or online banking is enough to keep us informed about our finances. It’s not. Good old fashion basic math skills can save you a lot of money. Bank overdraft fees can range from $22 to $35. Overdraft fees are through the roof and there is no sign of them decreasing. Balancing your checkbook whenever you transact business using your checking account, i.e. (writing checks, ATM withdrawals, bank service fees, etc.), will save you money in the long run.

(9)  Earn extra income

Are you due for a raise? Negotiate a good raise if you are due for one and save that extra money.  If a raise is not in the cards take on an extra job. Extra income can be earned by taking on a weekend or part-time job. With the Internet many opportunities exist for home-based businesses without much start-up costs. Take a look at 25 business ideas to start those creative juices flowing. With today’s unstable economy it is wise to have multiple streams of income. For more tips on eliminating debt visit: www.rebuildcreditscores.com/Eliminate_Your_Debt.html

 

Muna wa Wanjiru


As you look at the different ways that you can lower your debts you will find there are various avenues that you can look at. These avenues will for the most part be dependent on the laws regulating different countries. To be debt free UK has various schemes, agencies and laws in place.

You can look for these various debt free UK companies from the internet. From this facility you will gain an idea of the help that you can expect to get. As there are numerous companies and agencies that are dedicated to helping people it is to your benefit if you take the time to look these companies over.

While these laws may sound somewhat confusing at first they can be made clearer to you when you talk with trained personnel from various debt relief agencies. At these places you will need to inform the personnel what your problems are. This in reality means letting these people know the exact state of your finances.

You may be embarrassed at first to reveal how badly controlled your finances are. To gain the complete picture and provide valid help for you, it is necessary to reveal these finances. For the complete picture to seen clearly you should make sure that the debt free UK companies have an accurate idea of what your monthly earnings are like before taxes and after.

You will need to let them know how much you spend per month on household bills, food, car maintenance and other essentials. After this amount has been deducted you will be able to show the debt free UK agencies the amount that you have left to spend for other items. Let them see what your spending habits are like.

Answer any questions these people may have about the use of your credit cards and the payments on these cards. You should also ask the debt free UK agencies about the different options that are available so that you will have a good idea of what you can do.

Once you know what you can and can’t accomplish with your current way of living you be able to decide which debts you want to clear out first. Get help from the debt free UK company that you have contacted. Inform them of your decision and receive professional advice as to whether you are choosing a sensible option that will help you to get out from under your debt problems.

While you may feel that lowering your debt is a problem that will never go away with some hard work you will soon find yourself at the end of your problems with being in debt. The advice that you receive from debt free UK companies can make all of the difference when you are looking to getting out of debt.

Sandra Clair


If you are like most Americans, you are probably drowning in debt. In fact, recent data indicates that the average American is currently drowning in more than $9,000 worth of credit card debt. Even if you are one of the lucky few to be in a below average amount of debt, any debt is too much. The longer you are in debt, the more money you lose in finance charges. Therefore, becoming debt free should be at the top of your priority list - no matter how much debt you are in.

In order to become debt free, you need to first take control of the debt you already have. To take control, you might need to consolidate your debt onto one card. By transferring your debt to one card, you can effectively lower your interest rate and reduce the amount of finance charges you pay each month.

When it comes to consolidating your loans, it is better to avoid transferring your credit card debt to a home equity loan. Although home equity loans offer lower interest rates, you are putting your home up for collateral if you default on the loan. By keeping the debt on credit cards, you don’t have to worry about losing your home if you fail to make your payments. So, unless you are absolutely certain you will be able to make the payments, you should keep the debt on your credit cards.

Simply transferring your debt from many cards to one is not the only step it takes to becoming debt free. After all, it doesn’t matter what your interest rates are if you just keep adding to your debt. The first step in budgeting is to sit down and take a look at your current financial situation.

Monitor your spending habits for a month to see where your money is going. You may be surprised to find that you are spending a substantial amount of money on things that you really don’t need. Cutting out that $3 cup of coffee each day, for example, can save you $90 per month. If you can make it by without that cup, or if you can make your own coffee in the morning, you can apply that money toward your credit card and begin the process of becoming debt free.

Once you have determined the things that you need and the things that you don’t need, create a budget that will allow you to pay all of your bills on time. Then, plan on sending the remaining money to your credit card every month to pay off your debt. And, if you happen to come into some extra money, such as in the form of a bonus from work, send that to your card as well. Strive to pay more than just the minimum monthly payment each month and, before you know it, you will be debt free and financially independent again!

Thomas Erikson


Debt reduction doesn’t have to be an overwhelming experience. Who wants to deal with a cure that’s more painful than the ailment? Mounting debt is stressful enough - then you have to face the task of figuring out just where to start if you want to get rid of it. Then there are all the different angles of attack you can take and that just adds to the frustration.

So here’s a simplified approach that will get you started in the right direction for debt reduction. After all, sometimes the simplest approach is the most effective. This 9 step plan can help you get out of debt and stay out.

1. Spend less than you make. Easier said than done, right? I agree, but this is the very first step in any debt reduction effort. And there’s no getting around it. The only way to get out of debt is to spend less than you make. The key is to get determined to make it happen.

2. Make a budget. Your budget is your plan. Follow it and it will get you where you want to go. Most people don’t like the budgeting part but it’s absolutely necessary. The key to a budget is don’t make it too complicated. You don’t need to account for every single penny.

To find your starting point, determine how much you spend each month and what you spend it on. Make a list of all your typical expenses you would have over a one month period. Then you see where you can make cuts and adjustments. Keep finding ways to reduce those expenses until you are spending less than you make. Laying it all out in a budget and sticking to it will help keep your spending under control.

3. Know the difference between good debt and bad debt. Good debt helps you make money in the long run or at least won’t help you lose money. Your mortgage and student loans are examples of good debt. Your house usually appreciates over time and an education usually helps you get better paying jobs.

A car loan is neither good nor bad. They tend to be lower interest loans but cars typically don’t appreciate in value. So the best thing is to make sure your car loan is manageable and fits within your budget.

All other debt is bad debt. This includes credit card debt, payday advances, and all high interest credit or loans. These are the things that don’t appreciate in value and now that you have put them on credit or loan, you just continue to pay for them month after month in the form of interest. So you want to tackle these debts head on in your debt reduction efforts.

4. Choose the one credit card you have that has the lowest interest rate. Make sure the monthly spending limit is within your monthly budget and use this card for emergencies only. Then cut up the rest of your credit cards. Now that you have your lowest interest rate card, never take it with you when you go shopping. Use cash or your debit card only.

5. Take all your bills from your ‘bad debt’ pile and spread them out where you can see them all. Find out how much you owe by adding up all the minimum monthly payments. You’ll want to pay this and more each month in order to pay off all that bad debt. Make sure you don’t just pay the minimum or it’ll never go away. After all, the name of the game is debt reduction. If this doesn’t realistically fit into your monthly budget, then step 6 will help tackle the problem.

6. Consolidate your debt. Getting a debt consolidation loan can make your debt reduction efforts much easier. First, it lumps all of your loans into one loan so your monthly payments are lower and fit within your budget. Second, you can probably get a much lower interest rate than what you’re currently paying (especially on credit card debt). Third, it simplifies things. Debt consolidation bundles it all into one loan with one monthly payment which means it’s easier to keep on top of it.

7. Stack your bill payments. What is this? It happens to be one of the most important things you can do when it comes to debt reduction. Stacking (or snowballing) is a way of accelerating your effectiveness when paying off your debt. This is how it works.

Take your ‘bad debt’ bills from step 5, and put them in order from highest interest rate charged to lowest. Choose the highest interest rate bill and pay the minimum plus as much extra as you can on that bill, while paying the minimum payments on the rest of the lower interest rate bills. Keep doing that until the highest interest rate bill is completely paid off. Then repeat the process with the next highest interest bill, paying the minimum plus as much extra as possible while paying the minimum payments on the rest of your lower interest rate bills. Because you no longer have that first bill to pay, the extra monthly savings help pay off the second highest bill even faster. Then just keep repeating until they are all paid off.

8. Ask for a lower interest rate. With each of your outstanding credit card bills, call the company and ask for a lower rate. You can explain that you are a loyal customer but you’re being offered much lower rates from other companies. This includes the bills for the cards you have already cut up. They don’t need to know that you cut up their card. The goal is to pay as little interest as possible while you are trying to get rid of the debt. That way you have more money each month for your debt reduction efforts.

9. Make sure you have enough for emergencies. It’s great to be aggressively paying off your debt but you need to plan for the unexpected. You don’t want to be on such a tight budget each month that it doesn’t allow for a misstep. You need to be in a position where you can make your mortgage payment or car loan payment.

Each of these debt reduction steps is achievable if you put your mind to it. A little willpower and this 9 step plan and instead of stressing about your debts you may find yourself trying to figure out what to do with all your savings.