A Method For Debt Reduction That Can Help You Get Rid Of Debt Easily Over Time Without Too Much Struggle.
Debt Reduction seems to have become fashionable and its not considered a dirty word anymore. The biggest factor contributing to this perhaps is the financial turmoil and resulting economic slowdown we have experienced from 2008 to the present. Some by necessity have had to take a hard look at Debt Reduction due to loosing their employment, while others simply impacted by what was going on around them, simply decided the getting rid of credit card debt and other debt was simply an idea that they had put off for too long and began to eliminate debt.
There is a process which we list below, that you can use you whittle down debt. These are general guidelines and may not practical and applicable to everyone. Depending on your circumstances seeking professional help is a good idea.
This will reduce the time and increase the amount of money you can save. In the end the big benefit of this process is reducing the stress in your life and achieving financial freedom. Using professional may have a cost, but the benefits derived are normally much greater thank try going at it alone.
The Debt Reduction process is as follows:
First you must get your debt organized and separate into three categories:
Mortgages – This is the type of debt that is secured by your house. This type of debt has two advantages it gives you tax deduction and you may be able to use it to retire more costly debt such as credit cards.
Installment Debt – This is debt that is paid at a fix rate for a set amount of time or months. This would include cars, bank loans and similar.
Revolving Debt – This type of debt is almost synonymous with credit card debt were interest is added to the outstanding balance each month. Paying the minimum balance each month does not do much in retiring the loan and it may take 8 to 12 years or longer to do so.. The interest on it is not fixed, you may get an introductory rate at first which sextupled after the initial period is over.
As we seen this past year many credit card companies raised their effective rate as high as 30%, not including other charges that are imposed at their discretion. Debt Reduction naturally should address revolving debt, which is where individuals encounter their biggest problems.
• First part of the process is to make a personal commitment to debt reduction and that you will stick with it until its achieved.
• Next you need to assess exactly what kind of debt you have, how much you owe and the monthly minimums. Best way is to prepare a worksheets that has columns for, type of debt, whom it’s owed to Interest rare, current balance, monthly minimum payment and any other information that you feel is important.
The add the current balance and minimum payments and this will tell you the total amount of debt you have and how much you make each month to pay the minimum payments of all your debt.
• Prepare a budget. You already have the numbers for the amount you need to service your debt. This budget also includes, rent (if mortgage is not included above), utilities, insurance, food, clothes and other normal recurring monthly expenses.
• Test your budget for a period of three months and determine if any adjustment need to be made. When you have established that the budget is valid, then you can begin your debt reduction program.
• With any excess money each month dedicate it to eliminating debt. If you can pay a little extra on each account, concentrating on reducing the most expensive or revolving debt first. By paying something extra you monthly minimum payments are reduced and your budget surplus increases allowing for more debt reduction. This give you the ability to pay eliminate debt faster.
• Party!! And enjoy your that you have begun your journey to financial freedom, now you can treat yourself to something special, without incurring any debt of course.
• Go back to step 5 and repeat the process until you eliminated all debt. Repeating this cycle has the avalanche affect and before you know it you will have become debt free.
You may look at the above process and say to yourself that its not applicable in your case or numbers are not your thing. Don’t despair or lose hope. There are circumstances were the above methods may not be applicable.
You only need professional advice from those that can help you eliminate debt. Depending on your particular situation they will tailor a debt reduction plan for you and help you become debt free.. I still believe that it’s a eliminate debt.
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