Eliminate Debt Using These 7 Steps – No Loan-Shark Needed
Getting into debt is only one misstep away. One day, you could skip a bill and send your interest rates skyrocketing. Anyone can work at a company that has to lay off a few employees. Hospital bills, new children in the family and car accidents are just a few problems with big costs. Maybe you got into a deal with a notorious loan-shark. That is not even mentioning the consequences of having a bad credit score. As the average American with debt from student loans or credit cards, your main goal is to get rid of it now. Take 7 steps to get rid of your debt as soon as possible.
1. Make a Budget – That Actually Works
When you have a problem, come up with a solution. Plan the best way to handle your finances now and in the future. However, it is one thing to make a budget that looks good and then another to make one that actually works.
A realistic budget is not a one size fits all. Customize it to your personal finances because what works for someone else may not work for you. Consider changes that could happen to your work schedule. Change the budget if you have a sudden medical expense or a future job raise.
No matter what your job is or how much debt you have, look for several ways to cut down on spending. There are always one or two methods that you have overlooked. While you are at it, increase your spending by putting money into a savings account. Now is the time to learn how to save more money than spend it.
2. Use Helpful Tools
Start with the computer – that is a tool that many people cannot do without. There are plenty of useful software tools to help you manage your financial information. Start by opening up an Excel spreadsheet. List all of your earnings for the day, week, month and year. You will need this information when it is time to buy a car or move into a new residence.
Next to your earnings, list all of your purchases and cut out the inessential ones. Some people cut out the coffee they like to buy every morning and save as much as $100 every month. Many people are surprised by how much money they are wasting on small purchases. Then, they are surprised by how much money they end up saving.
It is possible to over-budget, but it is not necessary. Continue eating out if you want to, but cut it down to once a day instead of three times a week. Everyone has to pay bills every month. It is worth a try to reduce your monthly payments if you just ask.
3. Eliminate the Worst Debt First
Every loan has interest rates that get worse instead of better. Many borrowers make the mistake of not checking their loan statements every month. How much interest are you really accumulating every billing cycle? How much money is being piled onto the loan you already owe?
The “worst” debt is the one you will be paying off the longest. To start, arrange your bills from higher interest rates to the lowest. It makes more sense to pay off the shark loans first than to pay off old shopping bills. The more interest you accumulate, the more money you give away for free.
Change your interest rates from high to low. Switch from paying 20% interest to 10%, especially if you know it will take you a while to pay off the bill.
Also, double up on the payments you make every month. If you pay $30 on a credit card, cut down on your monthly grocery bill and save another $30. That way, you pay $60 for that credit card bill and pay it off sooner.
4. Snowball the Debt
Pay the minimum balances on your credit cards. On a no-interest card, make the payment in full. Focus on the card with the greatest interest rate and pay off that debt as quickly as possible. The debt-snowball method works to pay off all of your bills and maintain good credit.
5. Use Cash, Not Credit Cards
Most people do not walk around with large piles of cash. With cash, they are less likely to overspend and more likely to be frugal. The next time you go shopping, bring cash only. Spending on a credit card is more tempting because the credit limit is higher. You can spend now and pay later on credit. If you still do not like cash, use a debit or prepaid card instead.
6. Avoid the Shark Lenders
The term “shark loans” does not sound good because it is not. Your typical loans, offered at banks and financial institutions, are known for their high interest rates, such as 10% or as much as 20%. The rates of shark loans are double or triple that amount – as much as 100% or 400%! The goal of the loan-shark, is to keep you in debt so that you continue making payments.
Shark loans are illegal in many states and countries, but they are legal in many other regions. No matter how financially desperate you are, you should not pay a visit to a loan-shark. You could get tied up in a cycle of debt that only gets worse over time.
7. Reward Your Accomplishments
It is okay to want a reward for your good work. Start rewarding every big goal you make, especially when it comes to finances. As you save more money, you should be able to afford these rewards. For every small goal, promise yourself a small reward. A small goal is following your budget exactly as planned for three whole months. Some people cannot last more than one month. In the end, focusing on your debt elimination does not have to be a nightmare. Stay focused and look to a better financial future.
You have to be motivated to eliminate your debts and build better finances. It takes strength and strong willpower to come up with a realistic financial plan and stick to it. It may take you longer or sooner than expected, but it will happen eventually. To avoid the loan-shark here and the payday lender there, make sure you continue visiting this website for financial advice.