How
to Become Debt Free
by
B. Dear
In
2006, I finally clawed me way out of my last bit of credit card debt. I
still had a mortgage, but the financial freedom and peace of mind I
felt was well worth the years of uphill climb. As I wrote my
last check, I vowed never to return to that situation again. I hope
that those you read this article will be able to acheive this same
level of happiness.
This article is not really for those of you who are good with money.
The "financial types" out there probably already have their act
together in this area and therefore, don't need any advice from me. You
probably have your retirement all planned out and your savings account
is healthy. This article is meant for the large numbers of you out
there who are "spenders", are living month-to-month, and like me, need
to make a change.
Now with that said, I will explain how I managed to do it and
I assure you, with a little discipline and patience, you can too.
Now here is the bad news. You
will have to make some changes in your spending habits.
First, you will need a bit of extra money at the end of each month. you
will have to either increase your income, or decrease your monthly
expenses. This may involve asking for a raise, finding a better job, or
reassessing some expenses to determine which spending is absolutely
necessary. The more extra money you can scrape up each month, the
faster you will be able to get out of debt.
Add up all of your monthly expenses and subtract the amount from your
monthy income. the difference will be the amount of money you will use
to pay down your credit cards.
Next, cut up all of your credit cards, except for one that is
kept for emergencies. This will prevent future temptation. This card
should be one that has a low Annual Percentage Rate (APR), and that you
feel has provided a decent level of service. The card will only be used
to rent hotel rooms, make car repairs, or pay other unexpected
emergency expenses. As a general rule of thumb, never put anything on
this card that you can't pay off in 2 months.
Next set up a schedule for paying off your debt. When doing this, track
which cards are costing you the most in finance charges and pay those
off first. In some cases, the decision to pay one card off before
another will depend on a tradeoff between how much you owe and how much
the card is costing you in finance charges. You will want to apply the
excess money I discussed earlier to the first card in the list, and
month after month, work our way through the cards applying the same
amount each month.
Soon, you will have paid off one card and will be working on the next.
Apply the extra money plus the amount you paid to the first card to the
next and repeat as necessary. Continue to do this until everything is
paid off.
As you pay these credit cardsand loans off, one by one, you will feel
more and more financially free. Be careful not to change the plan and
fall into old habits. The key to achieving financial freedom is to
stick with the schedule.
|
|
|