How to Get Debt Free
Posted on June 3rd, 2009 by Carmelia
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Accumulating debt is good and even necessary because we all need a good credit history. However, if you have very little control over your spending habits, your debt can get out of hand. It will be more of a bane than a blessing. Get rid of debt for good by following these practical advice.
Review Your Credit Report and Credit Score
When dealing with a big debt, it’s important for you to know what exactly you have been spending on. You should get your credit report for free from your credit card company.
Your credit score is simply a report on how credit-worthy you are. It will track on how much you spend, what you spend on generally and when. You might be interested to see how psychologically, you rationalize your spending habits.
List What You Owe
Once you’ve reviewed your credit history and how the overall debt breaks down, list them. Now there won’t be any surprises and you know what you owe and to who.
Discontinue Your Credit Card
If your debt stems from your abuse of your credit card, discontinue your service immediately. Call your service company and request for the card to refuse further purchases. This is to help you stop using it. It also will get rid of the unnecessary membership charges that you are obligated to pay monthly or annually.
Pay Now
While it may seem tempting to put off payments or to make the smallest payments as possible, avoid it. Try to pay off as much of your debt in the shortest amount of time. Smaller payments or delayed payments are short-term solutions, but it’s not good long-term. The accumulated charges and penalties will come back and bite you where it hurts.
Prioritize
There are small debts and big debts. Pay the smaller ones first, while making minimum payments on the bigger debts. Once you’ve paid off the small debts, you’ll feel much more at ease because there are lesser debts to keep track off. No excuse to slack off, though. Once your small debts are gone, double the payment you are already paying the larger debts.
Another way to prioritize what debts to pay off first is by their penalties. Smaller penalties you can afford to pay a little later, bigger penalties can spell more money loss.
Don’t Roll Over Your Balance
Do not resort to short-term relief. When getting rid of debt, you want to get rid of it forever. Rolling over balances from one credit card to another will only give you a short time to breathe easy. Remember, the debt will come back and haunt you. Man up and pay the debt head-on, with the minimum payment, at least.
Loans or Equity is Not Always the Answer
When in debt, withdrawing equity from your house is one of the big temptations. With the current economy and the lowering premium on houses, you may be losing more than you think. What you pay off with your equity money will just get charged up again. Look for alternative ways to pay off your debt without risking an important asset, such as getting an extra job, or cutting back on other expenses.
Prevent Further Debt
The key to getting rid of your debt for good is to stop accumulating more debt while you’re paying off outstanding debts. This can be achieved by:
- Live on a budget. Have a set daily allowance for yourself by calculating your salary, deducing bill payments and other miscellaneous charges. The rest will be divided up in the days until your next salary. That will be your allowance.
- Forego having savings for now. Sad, but true. You might have to live with minimum savings in the meantime. Remember that the penalties you incur will eat up any savings you plan on having.
- Get help. If your debt was incurred because of an addiction, whether it be a shopping addiction, a gambling addiction or a drinking addiction, get help immediately before it’s too late.
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