Eliminate Debt: Six Steps You Must Take To Get Back On Track Financially
Debt can be insidious. Once you start getting into debt, it can just lead to more debt and financial woes. If your budget couldn’t cover the thing you bought with a credit card, you end up with not be able to pay for other bills. Now you are putting something else on the credit card and it soon becomes a vicious circle. If you want to get back on track financially, you really need to eliminate consumer debt.
Learn the difference between good debt and bad debt
Not all debt is bad. Investment debt can be good debt. Generally speaking, consumer debt is bad debt. Investment debt includes taking out a mortgage on a house so you can own a home instead of renting forever, a reasonable amount of student loans so you can get an education, and borrowing money to fix a problem under circumstances where waiting until you have the money will cost you more than borrowing. If you are in debt from buying items you couldn’t afford, that is bad debt that needs eliminated immediately.
Make a budget
You need hard numbers for income and expenses if you are going to get on track financially. To eliminate debt, you also need a comprehensive list of all your debts, what the total debt is, what the payments are, what the interest rate is, and how much your monthly payments are.
Consolidate debt at the lowest possible interest rate
Consolidating debt at a lower interest rate can bring your payments down and take some of the financial pressure off without increasing the length of time it will take to pay it all off. Talk to a financial expert to help you consolidate your debt.
Cut expenses
If you are in debt, you are basically living beyond your means. This will not stop unless you cut expenses. Otherwise, it remains a vicious cycle where the only question is how much are you paying now. Look for ways you can save money at home and at the store, and make changes accordingly.
Start an emergency fund
The only real way out of this vicious cycle is to make sure you have an emergency fund. If you never start an emergency fund, then pulling out the credit card will always be the only answer available when minor emergencies happen.
Talk to a financial professional
If you are unsure what you need to do, get professional help. There is no shame in hiring someone for their expertise in this area. Financial experts can help you understand you debt and make a successful plan to get a hold of your finances again.
Debt can be a serious issue, but you do not have to let it ruin your life. If you are carrying a lot of debt and you know it’s a problem, you can change that over time. Start with these steps to get financial freedom again. Informational credit to Hudson & Company Insolvency Trustee Inc.
Category: Debt
