How To Eliminate Debt: Seven Not-So-Secrets To Function Finance
Network television reports on debt portray a world where everyone is drowning in debt, unable to pay for food, unsure where the money for the electric bill will come from, where each paycheck is spent nearly before it hits the bank. Find
eliminate.html so that you don't become a slave to your credit. Credit card offers are everywhere, and you can purchase anything from donuts to hotel chains on credit these days, or so they say. Although credit seems to be the nation's accepted form of currency, no one really wants to be in debt.
Debt means you have to pay out money each month.
It means your savings account takes a hit and you have to deal with numerous bills and payments, endlessly losing money to interest.
Debt is not convenient, fun or productive. Many people do not know how to eliminate debt in a systematic fashion, however. There really is no secret, easy way to reduce debt. Common sense and a bit of will power will get you further than any get-rich-quick scheme. Here are seven ways to create a more functional financial life.
1. Treat Home Finances like a Business 2. No, you probably should not create time cards for your kids and place them on minimum wage for all chores they do. However, you can look at your income and expenses with a business mind-set. People often treat expenses with emotions. They might say, "I've had a really bad day, and deserve a treat." Those feelings lead to everything from a $5 cup of coffee to new car purchases. A business mindset avoids emotions in financial transactions.
No matter how bad your day is, if you cannot afford the treat, you should not buy it.
3. Stop the Bleeding
This is a business term that has little to do with band-aids and antiseptic cream. Stop the bleeding means stop using credit, bleeding money out to interest and bills that could otherwise be saved. If your credit purchases equal or exceed your credit payments each month, you will never reduce debt.
Buy only the things you can afford to pay cash for and save any existing credit cards for emergencies.
4. Learn to Define Emergencies
It is Thursday before payday, the checking account is almost on empty, you are running late, the kids are hungry and everyone has had a horrible day. This is an emergency, right? This is the time to bring out the credit card and purchase a couple of pizzas for a stress-free dinner. Although many people may think this is the case, an urgent need for pizza is not a credit-worthy emergency. If you keep a credit card on hand for emergencies, limit use to things like paying for crutches when your teen breaks her ankle in a cheer-leading fall or covering the cost of a new transmission when the car dies.
Only use emergency credit when cash is not available.
5. Make Payments
When it comes to knowing how to eliminate debt, the number one strategy is akin to Nike's Just Do It slogan. If you do not make payments, debt remains the same or increases. When making secure loan payments on homes or vehicles, round up. You may only pay an extra $5 or $10 dollars each month, but in the end, it makes a big difference in total interest cost. If you have credit card debt, pay more than once a month.
If you can afford an extra $50 or $100 each week, you will pay off the card much faster.
6. Juggle Your Interest Rates
A clear understanding of the costs involved in your debt can help you pay 3
off debt faster. If you have two credit cards, for example, and one has a higher interest rate, it may be better to move that balance to the card with a lower rate. If you do this, close the other card to avoid racking up even more debt.
Learn to manage and reduce your debt financing costs.
7. Start Small and Cross Off
Books and articles on productivity have been proclaiming the list and division method for years. You can apply this goal-reaching strategy to paying down debt. Make a list of all your debt, dividing it up into accounts. Find the smallest balances and pay those first. Small successes can spur you on to bigger goals. Make sure you cross off each account as you pay it off so you can see your list shrinking.
Pay off small debts first to build momentum.
8. Practice Dollar Rollovers
You may not realize it, but dollars can rollover just like popular cell phone minutes. Instead of rolling your dollars month to month, roll them debt to debt. Once you pay off your first account, use that money to pay off additional debt. Eventually, you will be paying off your largest accounts with larger amounts of money. Popular personal finance experts refer to this as the Snowball Effect. When used, this strategy can help you pay off debt in record time.
Use extra savings to increase the speed by which you eliminate your debts.
You must continue to follow the strategies for reducing debt in your life, or you will find yourself back in the same place. Make sacrifices to pay down debt once is hard. Doing it a second time can be worse.
After you have effectively eliminated your debts, go out and show someone you care about how to eliminate debt. Take care of your personal finances first, but then help others achieve what you have. Helping someone else become debt free is the ultimate investment you can make.
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