Please let me ask a few questions below...
Are you worrying about your mounting credit card bills?
Are you currently making minimum payments on your credit card?
Are you currently taking new credit to pay off old credit?
Are you currently obtaining sleepless nights wondering how you are able to spend up existing debts?
If your answer is "yes" to even 1 of the above concerns, you should seriously look into getting out of your present debt scenario.
You will find three actions to debt elimination:
STEP 1 - Don't get into new debt.
The cause why people can't get out of debt is simply because they keep adding to it. Quit financing anything utilizing credit immediately, especially using credit cards to purchase issues which you can barely afford. Never purchase anything which you don't have excess funds in your bank account to pay for it. Credit card will be the worst form of credit facility available. With 14% to 24% annual interest charged by credit cards, it is not difficult to comprehend why people who've accumulated a sizable quantity of debt with their credit cards seemed so challenging to spend off the outstanding balances. Do not bring your credit cards along when you go out if you can?t control credit card usage. Savvy credit card users carry their cards for the comfort of not getting to carry an excessive amount of cash. Nevertheless, they avoid the exorbitant interest by paying the balance due in full each month.
STEP 2 - Build an emergency fund.
Some may ask: ?Why save up before I even spend off my debt? The logical answer is, if you don't save for emergencies, you?ll not be able to cope with the unforeseen costs that could hit anyone. Don't use your credit card as an option for emergencies for factors I've already explained earlier. It is wiser to save cash for occasions of emergencies rather. Open a savings account solely for your emergency fund. Maintain this cash liquid, but don't tie your emergency fund account to a debit card. Ensure that this account is not easily accessible as people have a tendency to be easily tempted to invest the money as the savings grow. Don't sabotage your saving efforts by spending the money in the emergency fund account on non-essentials (like wine, restaurant meals, LV handbags or the newest iPad). It could be greatest if you could ask your bank to automatically transfer a comfortable amount from your earned income to your emergency fund account every month.
I know this might sound like mission impossible, especially so if you're currently mired in debt. But trust me, you are able to do it! I suggest creating 6 to 8 months? worth of living costs as your emergency fund. As soon as this amount is achieved, proceed to the subsequent step to clear your outstanding debts.
STEP 3 - Put debt snowball into action
Based on how big your debt is, this final step could take months or even years. Most financial consultants advise that debts should be paid off from the highest rate of interest to the lowest rate of interest. While this might sound logical mathematically, utilizing debt snowball technique to eliminate debt makes more sense from a psychological point of view. Your morale will probably be much higher whenever you see your debts eliminated one by 1 within the process.
Debt snowball involves the following steps:
1) List down your debts from lowest balance to highest balance.
2) Allocate a minimum payment on all debts except for the 1 with the lowest balance.
3) Spend all you are able to afford on the debt with the lowest balance.
4) When that lowest balance debt is gone, the same monthly amount or much more is utilized to pay the debt using the subsequent lowest balance.
5) Repeat Step 4 till all debts are cleared.
You will find other actions that might be implemented whilst you?re operating to improve your money situation. Focus on the basic wealth building formula which requires you to spend much less than what you earn. See what you can do to increase your income and reduce unnecessary costs at the same time. Differentiate between"needs" and"wants", then proceed to cut costs attributed to your"wants".
Obtaining out of debt is a step-by-step process. Physical exercise discipline and take one step at a time (regardless of how small that step is in the beginning) and you will eventually get there. Most importantly, don't procrastinate and begin your debt elimination process now!