How to get debt free

If you’re like a lot of people, the goal for the coming years is to be debt-free, or at least, on top of debt. I’m with you, if there’s one thing in life that hangs over me, it’s debt.

It doesn’t matter whether it’s a mortgage or a couple of thousand in consumer debt, if it’s causing you to lose sleep, now is the time to start conquering it. A fresh start, a fresh approach. Onwards and upwards to a debt-free existence.

Here are some tips to get you on the way.

Know What You Owe

Want a good credit report? What better way than to pay off your debts more quickly than minimum, eliminate high interest credit cards and pay your bills on-time or early?

Sit down and start working out dates. This is the first step. When are your bills due? Write it down in your diary and put a coloured Post-It next to it so you don’t forget.

When are your repayments due, and what’s the minimum you can pay? Write down how much you owe in total, and keep a progress report.

Get Organised

Pay your bills on the same day every month. That way, you’ll never be incurring late fees or being threatened with any utility being turned off. Pay your bills with cash, not credit.

The last thing you need to be doing is paying off debt on one hand, and increasing it on the other. Then organise to pay off your debt on the same day of every month (or with a credit card, paying off a little every week). The routine makes it easier, and makes it unlikely you’ll forget and get yourself a nasty late fee.

Know What You Can Change

How can you start to pay back your debt faster? Is there an expense you can eliminate, or some extra income you can channel towards repayments? Start thinking about how you can get rid of chunks of your debt. Maybe start with eliminating credit card debt, or paying off your higher interest cards. Choose one debt you are going to aggressively attack. Once you’ve gotten control of that debt, move onto the next one.

The Bare Minimum


Paying the minimum on your credit card isn’t going to cut it. If you want to get on top of your debt, you need to be repaying over the minimum repayments. It doesn’t have to be an astronomical amount, just enough to get a handle on your debt within a sensible timeframe.

Once you start getting somewhere, you’ll start feeling in control and finding it easier to control your debt.

Budget

You need a budget if you are going to get on top of the beast. Work out expenses, and some savings. There will always be a couple of variables, so ensure that you’ve left some space for them. Then budget everything else into your debt repayments.

Rewrite your budget once a month to make sure it’s completely realistic and has taken account of all the changes in your income or expenditure. This is your decade. Make it a debt-free one, or at least, a decade that’ll make the decades after that much more pleasant.

source: bigpondmoney.com.au

Ten Practical Moves to Avoid Problem Debt in 2013

To avoid your own "fiscal cliff" in 2013, I suggest you stop arguing with yourself and take 10 -- and by that, I mean 10 positive steps for a better, more prosperous new year.

Tip 1: Develop a spending plan
If you don't have a plan for your money, you will end up following someone else's plan. That's no fun! A plan puts you in control of how much you spend and on what. Trust me, plan for spending, and you will have a much richer financial life.

Tip 2: Save for emergencies
If you don't have savings, you will fail. End of story. Life can't be totally predicted, so to avoid being in a hole every time a surprise happens, you must have savings. Your goal is to save six to 12 months' worth of living expenses. Not what you earn each month, but what you spend each month. They should be different, and what you earn should be more.

Tip 3: Study up before taking on student loan debt
Starting a working career with six figures of student loan debt drastically reduces your spending options once you graduate -- that is, if you graduate and if you get a job. Be smart. Limit your student debt to what your take-home pay in your chosen career can afford. Crunch the numbers before you sign on the dotted line. Remember, it is a bill you will have to pay no matter what. If you don't have a career field in mind, don't take on any debt until you do.

Tip 4: Don't try to borrow your way out of debt
Consolidating debts into one lower payment sounds like a perfect financial move. It may not be, however. The main reason is because many people continue to add to their debt burden after the consolidation and end up with more debt than they can manage. Restructure your spending instead of your debt, and make a concerted effort to pay down what you owe as quickly as possible.

Tip 5: Never co-sign on a loan -- never, ever
You have ample opportunity to mess up your finances. Never share that opportunity with someone else. There is a reason why a professional lender won't approve this loan. So, why should you? Lend your support and encouragement, but not access to your credit.

Tip 6: Payday loans: No, no and no
You need money that you don't have, so you borrow what you need for a very large fee and a promise to pay when you are next paid. The problem, and it's a big one, is you won't have the extra money to pay back the loan when you get paid next time, either. This begins a vicious cycle of ever-increasing fees. Do without, pay something late, borrow from a friend, work part time, but don't take out a payday loan.

Tip 7: Avoid an upside-down car loan
If you need to sell your car, you need to make enough from the sale to pay off your car loan. Because vehicles depreciate so much, a large down payment will give you the freedom to sell when you want or need to sell.

Tip 8: Pay off no-interest offers as soon as you can
Having 48 months to pay means having 48 chances to let a mistake happen. One late payment, and the retroactive interest payment will make your head spin!

Tip 9: Never turn your back on a debt
As much as we would like to believe an ignored problem will go away, it doesn't. Ignoring a debt means high interest rates, large fees, a summons to appear in court, years of bad credit and a possible wage garnishment. Look that debt in the eye, and get help if you don't know what to do now, not later.

Tip 10: File bankruptcy only as a last resort
Bankruptcy is a viable choice only after all other reasonable options have been exhausted. It may not get rid of all your debts, but it will ruin your credit and job prospects, and you'll have to wait from three to seven years before you are eligible to file again. Think of bankruptcy like a financial nuclear weapon. You may be worse off from the fallout than you were before.

Copyright 2012, Bankrate Inc.

source: foxbusiness.com