I read an article the other day in which the writer said that it was obvious that everybody would like to be debt free. I don’t agree with him however, because in today’s modern world there are lots of very good reasons for getting into debt.
If you had enough to buy all the things that you wanted without taking out a loan, or using a credit card (which is really taking out a loan) then you’d obviously prefer not to have any debts, but there’s nothing wrong with taking out a loan to buy a car, an appliance or many of the other things that you might need.
Imagine that because you didn’t want to get into debt, that you moved into an unfurnished apartment.
Would you be ready to live without a refrigerator or a washing machine for years just to avoid getting into debt?
Do those things make any sense in the 21st century?
And there’s also nothing wrong with getting into debt to buy something that you simply want, rather than need, as long as you know that you can handle the debt.
Debt only becomes a burden when it gets out of control and you can’t meet your obligations.
It’s already become a problem when you can no longer buy the things you need or those that you want, because paying the interest on your debts has become a monthly burden and a struggle.
If debts have become a problem for you, then of course it’s possible to slowly reduce them, and even get free from them completely, but only if you’re really determined to do so, and if you’ve already come to terms with the fact that it will take a long time.
And I’m talking about perhaps three to four years and not three to four months.
If you’re sure that you have the resolve, and the determination then read on, but if not then be sure that you have the staying power to deal with the debt collectors and bailiffs that will be phoning, and knocking on your door, because with the exception of bankruptcy, that’s probably the only likely alternative.
If you really want to start reducing your debts, then the first thing you’ll need to prepare is a budget, if you haven’t already got one.
A budget is easy to set up, and the simplest thing to do is to compare your last three months of bills, with your last three months of income.
If the income is bigger, then you’re in great shape to start reducing your debts quickly, but if the outgoings are bigger, then maybe you can raise your income by getting a second job, or perhaps somebody in the house that doesn’t already work can try to get a job.
Other than that, you’ll need to reduce you’re outgoings, and if you can’t figure out how to do it alone, then get a good BBB (Better Business Bureau) recommended credit counseling service to help you.
It’s important not to see your budget as some horrible restraining device, but to see it instead as something that will help free you from the agony and suffering that you’re presently experiencing.
It’s essential that you create a budget that you’ll be able to live with, because if you construct one that feels like a strait-jacket, then sooner or later you’ll want to break free from it.
There are lots of approaches to paying off debts, but which of the two major ones you might choose will depend a lot on your personality type.
One method is to arrange all of your debts, putting the one with the highest interest at the top. You then make minimum payments on all your cards with the exception of the one at the top, the one with the highest interest.
You then have to pay the maximum that you can off of the one at the top, until it’s paid off, and then do the same again with the one that was second on the list. This is the best system from a purely monetary aspect, but it doesn’t offer much of an emotional payoff.
The second way is to arrange the debts with the smallest amount owing on the top, and you make maximum effort to pay that one off first. This system won’t save you so much money as the first one, but it’s better suited to lots of people because the satisfaction of seeing the number of debts reducing quickly is a real motivator.
If your credit is still pretty good and you’re still getting the offer of new cards coming through the door, then it’s a great idea to pay off, or pay down your cards that have the highest interest, with one of the new cards that has a low introductory interest and fee.
If you do this, then be sure that you make a note of the date when the introductory offer expires, which is normally six months, because after that the interest will increase by a lot, and you’ll need to have another low interest card ready to replace it with.
Obviously you won’t be able to pay off your debts if you keep adding to them, so maybe keep your cards locked up, and try to pay for everything that you can with cash.