Why is it that everyone who has debt problems wants to get
out from under the burden of excessive debt, but most
people labor unsuccessfully to get out of debt their entire
lives? The lending industry has an interest in keeping
people in debt, because they need a ready supply of people
living beyond their means, and willing to go into debt to
maintain a certain lifestyle. Of course, their lending or
credit card services are presented as the best way to have
it all now.
Since the lending industry has a plan to entice you to go
into debt, you need to protect yourself from the
temptation to buy things that you cannot afford.
Practical budgeting can protect you from getting into
trouble with excessive debt, and help decrease your total
debt burden. Here are some steps you can take to avoid
debt problems:
1. Have a budget. It does not have to be complicated; in
fact, the simpler you can keep it, the more likely you will
be to stick to it. Make an itemized list of all of your
monthly expenses like gas, insurance, mortgage or rent
payments, utilities, food, etc... When you have a complete
list of your necessary expenses, subtract them from your
total monthly income. Now you have an idea of how much you
have left for spending money and savings. Seeing your
budget on paper will allow you to identify unnecessary
spending, and see exactly where your money is going.
2. If you have high interest debts, you should attempt to
transfer the balances to a lower interest credit card or
line of credit. Doing so will give you extra money to
spend or use to reduce your debt. Be careful not to run up
even more debt with your new card or line of credit.
Increasing your debt load runs counter to your efforts to
get out of debt.
3. Check your credit at least once a year. You are
entitled to one free credit report each year, so take
advantage of it and make sure that all items on the report
are accurate and reflect your true credit history.
4. Contact your creditors, whether or not your account is
up to date. Better interest rates may be available, and
the lender may be willing to restructure your loan to lower
your monthly payments.
5. Be careful with store credit cards. They may offer a
discount for opening a new credit account, but if you
maintain a balance, you could be surprised at just how high
the regular interest rate is.
6. If you don't already have some money set aside for
emergencies, now is the time to begin saving. Having
something set aside can help you pay your bills on time
when you are short on cash, and can prevent slow payments
which would adversely affect your credit score. Even a
small contribution to your savings account each month can
create a financial safety net over time. You will be
surprised how quickly your savings can accumulate by
contributing only $20 per month.
7. When constructing your budget, calculate how much money
you will have available every month for paying off debt.
Rank your debts in order of interest rates, from highest to
lowest. Make the minimum monthly payment toward all of the
accounts except for the one with the highest interest rate.
On the highest interest rate debt you will pay the
remaining amount that you have set aside for making debt
payments. When you have completely paid off the most
expensive debt, continue in the same manner with the other
debts on the list until your debt has been eliminated.
If you follow these simple steps, you will quickly be able
to reduce your debt, and by sticking to your budget you can
begin to improve your financial situation.
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Gregg Pennington writes articles on a number of topics
including loans, debt and credit. For more information
about debt help and credit repair visit:
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