Debt Elimination Tactics: Eliminating Debt Tips
How Much Pain Are You In?
Evaluate the impact that your debt has on your life. Are you using so much of your income to pay debt that you have nothing left for fun? Is the amount of debt creating worry, anxiety, or lack of sleep? Do you think about your debt frequently throughout the day? If you answer "yes" to any of these questions, you have too much debt and have to begin eliminating it. If your creditors are calling every day because you are behind in payments, you are beyond worry - you are in deep trouble.
First Debt Elimination Steps
You are now going to stop spending money on anything that is not a necessity, and if you think that eating out or going for happy hour is a necessity, you are not going to succeed at this. Necessities are housing, food, clothing, transportation, etc. Decide that, until you are back on track, nothing will be spent unless it is on a necessity.
You are now going to take the following steps:
- Make a list of all of your revolving debt - this includes charge cards, car loans, personal loans, anything you have purchased on which you are making monthly payments.
- Beside each item, list the total amount owed and then the minimum monthly payment required.
- Divide the total owed on each item by the minimum payment. This will give you a "monthly" total to pay it off. (This is not the actual number of months, but bear with me).
- Find the debt that has the smallest number of months. This is number 1. The next smallest number of months becomes number "2," and so on. You now know the order in which you are going to pay these debts off.
- Plunk as much money as you possibly can on #1, paying the minimum on all others. As soon as #1 is paid off, take all of that monthly payment and plunk it on #2. Proceed this way until your debt is down to a reasonable amount, certainly an amount that is not creating stress and anxiety.
For some people, this can take a few years. Vow to stick with it. You do not want to spend the rest of your life stressing out and avoiding creditors' calls.
Cash or No-Buy Policy
Adopt a policy that you are not going to buy any non-essential item unless you have the money in your bank account to purchase it. Credit purchases are for big-ticket items and emergencies, not whims and desires.
Other Tips
- If you credit is still good enough to warrant credit card offers with low or zero percent introductory rates, take them and transfer higher interest debts to them. Cancel the credit cards that you zero-out immediately, so there is no temptation to use them again.
- Pay yourself something out of each paycheck, in the form of savings, no matter how small. It may surprise you how quickly this may grow, and it can be used for those emergencies that arise.
- Reward yourself. When you get a debt paid off, celebrate with a small splurge. Go out for a steak dinner, buy great tickets to a sporting event, buy that purse or pair of shoe you've been dying to have. This will motivate you to keep on!
When You Are Truly In Over Your Head
If you are just not able to use the tips, and creditors are dunning you, get to a credit counselor or bill consolidator, and let them take over. There are good ones out there, and you will need to do a little research and comparison shopping to get the right one. Once you have selected a counselor, follow his/her advice exactly.
The Final Solution
Obviously, this final step is bankruptcy. Bankruptcy is not necessarily a bad thing, if you do not have assets that you could lose. It can promise a new start and, if you are willing to change the habits that got you into this mess, it can be beneficial. Bankruptcy will ruin your credit for some time to come, so be certain that this is the only viable option for you.
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