It wasn't all that long ago that
American's faced great financial crisis. As a nation, we struggle
with debt, and it keeps us from achieving a better life. Debt
Education is here to help you change all that ... just ask!
REAL PEOPLE ... CARING ABOUT REAL
ISSUES
Debt Free
How Can I Become Debt Free?
by: Stuart Simpson
1. You must change. You have to change your spending habits and spend less than you make no matter what. Its good for everyone. Especially if you are in debt. I know it’s hard to do with our current lifestyle of keeping up, but when you are debt free, it’ll be much easier.
2. Cash only. You have to go to a full time cash only basis. What cash you have to spend is all the cash you have. Once its gone, it’s gone. You have to spend correctly. Don’t spend it all before your next payday.
3. Document. You have to document your spending to see what you are buying. This will help you see if you still have a problem and where the money is going. This will allow you to control your spending if you see all of your monthly spending in one place.
4. Attack Debt. Pay off credit card debt first. The highest interest rate must go! Pay them off and then work towards assets that appreciate in value – like your house. Pay it off last.
5. Lower your interest rate. I called the credit card company to tell them I was going to cancel their card as I consolidated and paid off my other cards. To my surprise, they offered to drop the interest lower than all my other cards so I put all those higher rate cards on this lower rate card. They did that just for the asking and now I’m paying less interest and more towards the principal! Go team!
6. Plan. You have to have a plan and may need to create a payment plan. There are tons of software out there to look at and use, but don’t hide behind the software on trying to find a debt free solution. Plan on paper if you have to. Just do it.
7. Stay the course. Don’t waiver. Spending less and paying off bills is a drag, but it will get better soon and you have to stay strong to make your life even better. Keep your goals. Write it down. Check your progress. You can become debt free!
Sometimes debt can become overwhelming and even scary at times. If you spend too much, you must make changes before it gets out of hand. You can get out of this pit of debt and become debt free and have even more buying power.
Many people have been taught that you cannot get ahead without debt. We are also inundated with advertising telling us we can have anything we want. All we need to do is put it on our credit card.
We have become an impatient society, we want it right now. We have lost the ethic of working for what we want.
It is not how much money you make; it is what you do with it. By living without debt you can actually have a higher income since you are not paying out interest, you are actually getting paid interest on invested money.
All debt is not created equal. We will classify them as good debt and bad debt.
To simplify the classification we will say that good debt is a loan for something that you could sell at any time and repay the debt. This narrows down good debt to a home loan and possibly a home equity loan.
A bad debt, of course, is a loan on anything that will lose value.
Let's take a look at some debts that we would consider bad debt.
Home equity loans are in the gray area. They could be considered good debt if they are used to repair or improve your home, but you would be a lot better off to just save up the money for the project. Home equity loans become bad debt when used for purposes other than home improvement or maintenance. In other words a bad home equity loan is for anything that does not add to the value of your house. Do not jeopardize your home by taking out a home equity loan on unnecessary items.
One possible good use for a home equity loan is when the interest rates are low. You can use a home equity loan to refinance your mortgage. Home equity loans generally have lower costs than conventional home loans.
We consider school loans bad debt. If you finish school, get a good high paying job and then attack the loan like mad, a school loan may work out. The problem is that there are too many things that can go wrong. At best, even if you do graduate and get a good job there are always a lot of other expenses at this time in ones life. You are really behind financially when you start your working life in debt.
Auto loans are bad loans that have become common practice to us. We pay interest on a vehicle that will only be worth one half of its original purchase price in five years. Lately it has also been common for us to borrow more than a vehicle is worth. We can trade a car in that we still owe on, and roll that owed amount over into another vehicle. This gives us a loan amount that is higher than the value of the car that we drive away. We have lost our capacity to say NO.
Co-signing is a bad debt that usually and unfortunately involves family. If someone cannot qualify for a loan at a regular lending institution, they should not get a loan. The fact that they can’t qualify for a loan elsewhere should tell you that they are a huge risk. Use this opportunity to teach them how they can get what they want by working harder for it and delaying the purchase.
If you want to get off of the debt treadmill, you must run as far away from debt as you can. You cannot use debt to get out of debt. Even if you do, you have not changed your habits; you must change your lifestyle.
Author: John Cook likes to help people get off and stay off the debt
treadmill, and secure the financial future of their family. You can read more
about securing your families finances at his website: www.financeforfamilies.com.
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