Wednesday, April 16, 2008

7 Ways to Eliminate Debt

Reducing or eliminating your debt can see like an insurmountable task. You may feel like you can never get out of debt but you can. Other financial experts have been $100,000 to $1,000,000 in debt. I was $19,000 in debt making $21,000 a year and got myself out of debt. If we can do it you can too.

First, you have to admit you have a problem. Then you have to be committed to getting out of debt, just like you are committed to going to the gym, going to the hair salon or barbershop, or going shopping. Here are 7 ways to help you manage your credit card debt or any type of debt.

1. Stop spending. Don't spend money you don't have. This will result in your owing more money. Use your credit card for emergencies only.

2. Educate yourself. Educate yourself about credit and your credit rights. Read as much information as you can about credit cards. Start by reading the credit card agreement or disclosure that was sent to you when you first received your credit card in the mail.

3. Setup a debt payoff plan. Setup a debt payoff plan to prioritize your bills. By using the debt snowball method you will be able to quickly pay off some of your debts. Start by paying off the smallest bills first, then use the money paid towards a previous bill and apply it to the next bill and continue this process until all your debts are paid.

4. Setup a payment plan. Setup a payment plan with each of your creditors to pay off your debts. Be honest, humble and sincere. Identify any terms and negotiations you would like to make and stick to the terms.

5. Pay more than minimum monthly payment. If pay the minimum monthly payment you will end up paying 2 to 3 times what you actually charged due to the interest and finance charges that accrue on your balance. Try to send extra towards your balance each month.

6. Don't transfer balances. Transferring balances to another credit card may lower your credit score and there may be fees associated with transferring the balance. It is important to pay off the full balance before the introductory rate special ends because after the introductory rate ends the interest rate may drastically increase.

7. Pay with cash. Pay for purchases with cash until your credit card balances are paid in full. If you pay for an item with a credit card you end up paying 112% the original cost of the item.

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