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Executive Republic
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culled from:bankingsense.com
Being in debt is, to some extent, an inescapable fact of life. A health crisis or a catastrophe such as a house fire can happen to anyone, and insurance does not always cover the total cost. For others, debt is good. Some people are able to take out a mortgage and own a home for less than the cost of renting a comparable living space.
However, not all debt is quite so black and white. The national average for credit card debt among consumers hovers between 10 and 14 thousand dollars. If you want to get out of debt and stay out, here are some strategies you can employ.
Write Out a Detailed Budget and Trim Out the Fat
Sit down with your last few bank statements and take a long look at your spending. If getting out of debt is a serious endeavor, you’ll need to throw as much money as you can towards paying it down. Look to eliminate or reduce as many line items as possible. Check your credit card statements for recurring charges, too. Can you cancel you cable or home phone? What about reducing your cell phone plan? If you’re spending money on coffee and lunch every day, switching to a thermos and a packed lunch could add up to a lot of savings. Be ruthless. Once you’ve canceled or trimming down your costs as much as possible, add together the saved money and write the figure down for future reference.
Increase Your Earnings, If Possible
If you already live quite lean or you just want to pay down your debt faster, making more money will definitely help. Picking up extra hours at work is a good strategy, as is launching a side business to make even more money. Freelancing and consulting are usually easy to work into a tight schedule. If you have the time, a second job in the evenings or a seasonal gig can really help you get out of debt. Finally, check your tax withholding. If you are used to receiving a huge income tax refund, that means you are lending money to the government interest-free all year long. Refile your paperwork for correct withholding and you’ll see a rise in your paycheck.
Consider Moving Debt Around a Bit
Unless you believe you can pay off your debts quite quickly, it may be a smart financial move to consolidate your debt and move it around a bit. For example, if you have several credit cards with small balances that you are paying the minimum payments on, it may make sense to move all the debt onto the card charging you the lowest interest rate. If you have a good credit score and payment history, it’s likely this won’t be a problem. Then, you will save money on interest as you are paying down the debt.
Pay Down Aggressively
Once you have added up all the money you have available from trimming your budget and increasing income, make sure you send it off to the debt you are trying to eliminate first. Once that debt is paid in full, move on to the next, and don’t forget to add the minimum payment for the now-retired debt onto the amount you send to the next in line. This will snowball and you will see the debt paying down faster and faster, which can be quite motivating.
Earmark Windfalls for Debt Repayment
If you receive an income tax refund, keep a portion of it for discretionary spending and use the rest to pay down debt. The same goes for any bonus checks or inheritances you receive. Don’t fritter these windfalls away. Use them to help you out of debt.
Getting out of debt is usually a slow process. Don’t become discouraged if you have setbacks along the way. By keeping these strategies in mind, you will be on the path to escaping it and living a debt-free life!
culled from:bankingsense.com
Being in debt is, to some extent, an inescapable fact of life. A health crisis or a catastrophe such as a house fire can happen to anyone, and insurance does not always cover the total cost. For others, debt is good. Some people are able to take out a mortgage and own a home for less than the cost of renting a comparable living space.
However, not all debt is quite so black and white. The national average for credit card debt among consumers hovers between 10 and 14 thousand dollars. If you want to get out of debt and stay out, here are some strategies you can employ.
Write Out a Detailed Budget and Trim Out the Fat
Sit down with your last few bank statements and take a long look at your spending. If getting out of debt is a serious endeavor, you’ll need to throw as much money as you can towards paying it down. Look to eliminate or reduce as many line items as possible. Check your credit card statements for recurring charges, too. Can you cancel you cable or home phone? What about reducing your cell phone plan? If you’re spending money on coffee and lunch every day, switching to a thermos and a packed lunch could add up to a lot of savings. Be ruthless. Once you’ve canceled or trimming down your costs as much as possible, add together the saved money and write the figure down for future reference.
Increase Your Earnings, If Possible
If you already live quite lean or you just want to pay down your debt faster, making more money will definitely help. Picking up extra hours at work is a good strategy, as is launching a side business to make even more money. Freelancing and consulting are usually easy to work into a tight schedule. If you have the time, a second job in the evenings or a seasonal gig can really help you get out of debt. Finally, check your tax withholding. If you are used to receiving a huge income tax refund, that means you are lending money to the government interest-free all year long. Refile your paperwork for correct withholding and you’ll see a rise in your paycheck.
Consider Moving Debt Around a Bit
Unless you believe you can pay off your debts quite quickly, it may be a smart financial move to consolidate your debt and move it around a bit. For example, if you have several credit cards with small balances that you are paying the minimum payments on, it may make sense to move all the debt onto the card charging you the lowest interest rate. If you have a good credit score and payment history, it’s likely this won’t be a problem. Then, you will save money on interest as you are paying down the debt.
Pay Down Aggressively
Once you have added up all the money you have available from trimming your budget and increasing income, make sure you send it off to the debt you are trying to eliminate first. Once that debt is paid in full, move on to the next, and don’t forget to add the minimum payment for the now-retired debt onto the amount you send to the next in line. This will snowball and you will see the debt paying down faster and faster, which can be quite motivating.
Earmark Windfalls for Debt Repayment
If you receive an income tax refund, keep a portion of it for discretionary spending and use the rest to pay down debt. The same goes for any bonus checks or inheritances you receive. Don’t fritter these windfalls away. Use them to help you out of debt.
Getting out of debt is usually a slow process. Don’t become discouraged if you have setbacks along the way. By keeping these strategies in mind, you will be on the path to escaping it and living a debt-free life!
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