Everyone has some debt, and that’s okay. What’s not okay is when your debt becomes the thing you worry about endlessly. Once you’re ready to get a handle on your spending, put a plan together to make it happen. These steps will help.
Start with Knowing Where You Are
Get a free copy of your credit report. Look at your report for any errors, such as accounts that don’t belong to you. According to CNN Money, 42 million in the U.S. have some type of error on their credit report. If you find any, dispute them with the credit bureaus. Keeping this in mind, scan your report not just for errors, but also to give you a snapshot of what you owe. This is where the realization will come into play.
Change Your Perception
This is the hardest part of the entire process. Did you know, for example, the richest people live very frugally? Consider Warren Buffet, for example, who has an estimated net worth, according to Forbes.com, of $53.5 billion, yet lives in the same home in Omaha he’s had since childhood. It’s critical to change your perception of what you really need and what you want. To get rid of debt, you have to change your perception of needs versus wants and ingrained consumerism.
Use Credit Wisely
You can, and should use credit. However, when you do, use it wisely. For example, getting a loan from DriveTime, the nation’s largest dealer who helps individuals with credit issues, will allow you to establish credit. When you make these payments monthly, and on time, you’ll prove to the lender that you pose little risk. This type of action can build your credit score and save you money for years to come.
Use Extra Money to Pay Off Down Debt
If you make the minimum payment on your credit cards, it will take you decades to pay off in some cases. If you don’t think so, checkout Federalreserve.gov where you can use a calculator onsite to determine how long it will take. On a $5,000 loan (or credit debt) with a 15 percent interest, your minimum payment would be about $100. It would take you 24 years and $7,246 in interest to pay this one off!
But, you may be asking, where can you find the money to pay this debt?
- Use your tax return to make a big dent in it.
- Find something you can cut out of your budget weekly (perhaps the $5 coffee you purchase each morning) and add that to your debt.
- Take on overtime or get a second job.
- Ask an employer for a raise.
- Have your employer set aside funds directly into a savings account from your paycheck to use to pay back debt?
You will likely still need some tips to tackle this problem. Be sure to consider these:
- Consider balance transfers to credit cards with zero APR for an introductory offer so that you can consolidate your debt.
- Organize a budget and stick with it.
- Invest the time into a financial counselor if you have to do so.
- Avoid closing any old accounts.