Reducing Debt To Increase Your Life
Posted by
patrick
Forgive the cliche, but it's true. If you had less debt, would you be less stressed? Of course you would! I know I would. Less stress means a longer, happier life. You can start paying yourself back by, well, paying yourself back.
Reducing debt starts with a pioneer attitude. You only have $5 left at the end of the month is what your bank tells you. Humbug! You have more than that, you just have to be creative. Start with the little stuff. Eat out one less time per month - saves another $5. Only shop at places along your commute to work - saves gas money. Get creative!
Saving a bit here or a it there may probably won't decrease your debt at first. Prudent spending will slow and may even stop the downward spiral. More importantly, when you see things starting to "level out" you might just find you've suddenly inherited a "can-do" attitude towards debt reduction.
Take a good hard look at your bills. Write a budget. List everything you pay, even if you don't pay it every month. Add it up, and allow yourself a buffer - perhaps 10%? - on the bills that fluctuate like electricity. Eliminate what you can. Maybe you find it's cheaper the kill the cable and buy two movies for yourself every month.
Next are your loans. Make a list of all the loans you have, the outstanding balance, how many payments you have left, and the interest rate. Look at the two with the smallest balance. Which one has the higher interest rate? Throw all of your extra funds at that one first, that way you pay it off even faster.
Once loan #1 is paid, you now have that monthly payment AND all the extra from before that you can throw at #2. Keep going with this pattern of reducing debt until it is all gone. Once all of your loans are gone, you will have learned the habit of living inside of very tight means. You might suddenly have $900 extra every month, but you are used to living modestly.
You've finally paid of your debt. Now what? The rule here would be don't go out and buy yourself a congratulatory present, on credit? It's OK to celebrate, you deserve it, just don't go overboard. The next goals are to stay out of debt , save, and invest in your future. Watching your saving and investments grow is much more fun than watching your debt increase.
The savings you "pay" yourself will be useful in the future when you are ready to make large purchases. Instead of financing a new car at 8%, you can stay out of debt and maybe get a discount by paying cash, or you could make a large down payment on a home or send a child to college. The sky is the limit!
Reducing debt starts with a pioneer attitude. You only have $5 left at the end of the month is what your bank tells you. Humbug! You have more than that, you just have to be creative. Start with the little stuff. Eat out one less time per month - saves another $5. Only shop at places along your commute to work - saves gas money. Get creative!
Saving a bit here or a it there may probably won't decrease your debt at first. Prudent spending will slow and may even stop the downward spiral. More importantly, when you see things starting to "level out" you might just find you've suddenly inherited a "can-do" attitude towards debt reduction.
Take a good hard look at your bills. Write a budget. List everything you pay, even if you don't pay it every month. Add it up, and allow yourself a buffer - perhaps 10%? - on the bills that fluctuate like electricity. Eliminate what you can. Maybe you find it's cheaper the kill the cable and buy two movies for yourself every month.
Next are your loans. Make a list of all the loans you have, the outstanding balance, how many payments you have left, and the interest rate. Look at the two with the smallest balance. Which one has the higher interest rate? Throw all of your extra funds at that one first, that way you pay it off even faster.
Once loan #1 is paid, you now have that monthly payment AND all the extra from before that you can throw at #2. Keep going with this pattern of reducing debt until it is all gone. Once all of your loans are gone, you will have learned the habit of living inside of very tight means. You might suddenly have $900 extra every month, but you are used to living modestly.
You've finally paid of your debt. Now what? The rule here would be don't go out and buy yourself a congratulatory present, on credit? It's OK to celebrate, you deserve it, just don't go overboard. The next goals are to stay out of debt , save, and invest in your future. Watching your saving and investments grow is much more fun than watching your debt increase.
The savings you "pay" yourself will be useful in the future when you are ready to make large purchases. Instead of financing a new car at 8%, you can stay out of debt and maybe get a discount by paying cash, or you could make a large down payment on a home or send a child to college. The sky is the limit!
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