No one likes to be in debt but it can happen either due to something unforeseen happening, such as an accident or serious illness that caused you to miss a lot of work or maybe just due to a lack of fiscal responsibility. But the result is the same.
You reach a point where you feel like you have a huge weight around your neck and you are frantically trying to tread water. But the more you focus on trying to stay above water the more exhausted you get.
You really do feel like you are drowning but in debt not water.
The solution is to take a long hard look at yourself and your budget. If you are really ready to take control of your life and your debt then you will need to learn some money management skills and implement them in your everyday life.
Invest Time to Save Money
Interest is a fact of life for everyone who is in debt. But you don’t need to be paying super high rates on store credit cards and personal loans. Spend a few hours and make a list of all of your debt. Include the lender, the amount of debt and the interest rate. Now look at the items with the highest interest rate and figure out what you can do to lower that interest rate. Sometimes you can find a no interest introductory offer on a new credit card. Other times you can move a balance from a high interest card to a lower interest card.
Use the Equity in Your Home
Use a home equity line of credit to pay off your high interest loans. The bonus on a home equity line of credit is that the interest rates are much lower than a credit card rate and the interest is tax deductible. Once you have relocated your debt to the lowest interest rates that you can find, set a priority to pay off your single debt with the highest interest rate. Focus extra cash to that bill until it is paid off and then move to the next highest rate debt and focus on paying it off. Along the way you can also determine which extra items and wants from your budget you can reduce or eliminate to provide the money to make the extra payments. But as you progress down the list you will find that it is getting easier and easier to pay off items because you are reducing the amount that was being wasted on high interest rates. Just taking a $10,000 credit card and moving it to a no interest introductory offer can save you around $100 each month.
Borrow From Yourself
If you are paying off a large debt then why not pay the interest to yourself? If you have a 401k plan then you might be eligible to take a loan out against that retirement plan. You will need to speak to someone at your company in the HR department to see if your retirement plan offers this feature. If it does then you need to complete the request and submit to get the loan. There might be a certain amount that is the cap that you can borrow but it is normally a based on a percentage of the account. And the best part is that this is a loan that you know you will qualify for.
Having a lot of store credit card debt and personal loans can mean that you are paying a very high interest rate. If you do not have the option of moving that debt to a low or no interest card then consider a debt consolidation loan. Many times you will work with a credit counselor or advisor who can offer you advice and also help you to lower some of your interest rates. The debt consolidation company will work with your lenders to reduce your debt load and then consolidate that total amount into one payment that you make each month. Not only does it make your accounting and bill paying easier each month but it also reduced the principal and interest that you are paying.
Trim Your Budget
Everyone has bills that they must pay every month. We all need shelter, food and clothing. But many people get to a point where they don’t see any difference between what they need and what they want. If you are really tired of being in debt than you are going to need to be willing to give up a few luxuries to pay down your debt. Eliminating a few cable movie channels can save $25 each month, put that money toward a credit card bill. Buying lunch at a fast food restaurant each day is about $50 a week so take your lunch for $10 a week and put that extra $160 a month toward a bill. And $125 for a night out can eliminated or reduced to $25 at home for a rented movie and a pizza. All of these little savings don’t sound like enough to help you pay off big bills but they do add up. These three easy reductions in spending just added up to close to an extra $300 a month to pay on your debt. Start small and you will be surprised how much you can really afford to pay each month on a large debt.
Say Good Bye to Toys
If you are serious about wanted to be debt free then you should be willing to sell as few toys to achieve your goal. If you have an extra vehicle, a boat or some other expensive recreational item then selling that will make a huge dent in your debt. Maybe you have collected baseball cards or some other collectible item, do you enjoy looking at those items knowing that you are deep in debt? Selling a few items can reduce your debt, and reduce your stress. If you want to pay off your debt and then save to buy another toy, let that be your motivation to work diligently to get your debt paid off. Then use your new money management skills to save for that reward item that you want.