Debt, You can get out of it!

Ignorance never is bliss, and when it comes to debt it is a curse. If you’re like most individuals, you have debt, and if you’re like many individuals you try not to think about how much debt you have. Debt can affect your personal lives, relationships, your performance at work and your happiness level overall. Living under a constant pressure of ever increasing debt is something nobody wants, but has to live with in these days of consumerism and plastic money.

If you have ever thought about it, and know how much it is then I can bet you are not having a good sleep every night, but it still is a better condition than ignoring the fact, that you do have debt.

Acknowledging the problem is first step towards solution. What follows is a ten step solution to all your debt problems. Read it, and see if it fits your situation.

1. Don’t get deeper into it. Plain Simple NO. We are trying to weed out the problem and the last thing you would want is a problem which is always on the rise. Spend what you can afford, or even less since you’re the one who’s going to be happy person once out of debt. Make smart purchases, shop at discount stores, do not use credit cards which are already into debt, or default. Spend only as much as you can afford.

2. How much? Sit down and work out all the loans, credit cards, mortgages. Divide it by your savings each month, and see how many months it is going to take at current speed. How much money can you spare after your monthly expenses towards clearing of debt? Will it be enough?

By now, the picture should be clear to you, and you should be ready for sleepless nights thinking about it. A strong resolve here and the feeling of being debt free at the end of it all should be enough to get you through. Remember you’re not the only one in debt, but you’re amongst the smarter one who has decided to get rid of it.

3. Write down all your debt amounts in decreasing rate of interest. Ideally people have the notion to close the debt with highest rate of interest first. But doing opposite can also help sometimes. If you have 5 different loans/cards, and the least one can be paid with ease, pay it. At least you’d have one less check going out per month. This should make you feel better; one down, four more to go. In normal course, one should try to pay off the loan with highest interest first.

4. Liquidate Savings. Most of the savings schemes earn you meager interest as compared to the interest you pay on loans. It surely does give you a feeling of comfort, that you have money to fall back on to, but face it. The money lying ideal in your savings account can help you reduce the dreaded debt. Do it.

5. Consolidate. See if any of the loans can be taken over by another bank at a lower rate of interest. Consolidating all the loans into one bigger loan or increasing your mortgage can be another option here. Do not fall for easy payday loans. These loans may seem like an easy solution to a temporary cash shortfall, but they can be the beginning of a vicious cycle that is difficult if not impossible to escape.

6. Pay minimum at least. Whenever possible, pay more than minimum on your credit cards. These are the debts with highest rate of interest, and penalties. Pay minimum amount to all the cards, and a little more on the one with highest interest, until it is paid off. Do the same to others.

7. Do not default. Never ever default on any of your loans. If the resources are not enough to pay off the debt, try rescheduling of payments. Defaulting on payments hurt your credit rating and your chances of availing a loan in future.

8. Write it. Write down the steps that you’re going to take to be debt free. Not a resolution but a budget for your monthly expenses, things you are going to cut down on, and everyday money saving ideas.

9. Measure it. See where you stand at the end of each payment cycle. A reducing debt graph should make you feel comfortable, and motivated enough to see you through.

10. Control it. Do not go off the commitments you’ve made to yourself on expenses. Renting out a DVD, than going to Cinema saves you a lot of money. If you’re eating out a lot, limit it to once a week or may be lesser than that.

Loan in any form, be it credit card, a mortgage, auto loan or a personal loan should be dealt with utmost care. Credit card companies don't want you to pay on time, because they earn heavy interests and penalties if you delay. Make it a point to pay all your dues on time. Try to control your impulsive buying.

It is difficult to live without loans these days. Used well, all these things help you live your life better, but once it goes on wrong track your debt can ruin your life. Do not let it go out of your control.