Ten Steps To Help You Be Debt Free
February 6, 2010
The current economy is now making it harder than ever before to pay off debt and remain debt free for any significant amount of time.
Top economist are now advising consumers to pay off their current debt and use cash whenever possible. These top economist have listed their key points in books and Internet articles. I have compiled the top ten key points that will help every consumer pay off their current debt and make changes to ensure they remain debt free.
The top ten key points are:
- Pay your bills on time. This is an obvious point, but it is most often overlooked. Staying current with every bill is important for not only your credit rating but also to your bottom line. Overdue charges can add up quickly. This will also give you the added benefit of credibility, this can work in your favor if you ever find yourself unable to pay on time and in need of an extension. Be aware when creditors offer extensions or payment delays, the interest is still building in the absence of any payment.
- Keep the portion of your income that is allocated to debt repayment under 35%. This should include payments for housing and transportation.
- Do not pay for consumable items with credit. This would include food and entertainment. A nice $50.00 dinner can easily turn into a $75.00 dinner by missing one credit card payment.
- Pay more than the minimum due on credit card bills. The accumulated interest on a credit card with a balance of $1200 and an interest rate set at 15.9%, while paying only the minimum amount due, will take almost seven years to pay off while the interest charges could total almost $780… two-thirds of the original balance.
- Avoid transferring balances from one credit card to another. Transferring your balance to a new lower interest credit card will only be successful if you are going to pay off the card during the 6 month teaser introductory rate period. Currently new laws have been enacted to protect the consumer from financial wrangling tactics commonly employed by most institutions. You can read about those here.
- Stay up to date with your credit report status. This is most important just before a major purchase such as a home or automobile. Any activity on your credit report that you do not recognize can indicate fraud or identity theft. Investigate all errors and report them to your creditor immediately.
- Any and all correspondence occurring between you and your creditors should always be in the form of writing. This documentation of all negotiations with creditors will protect you from lost documents and creditor representative errors.
- Negotiate with the collectors to create a payment plan that works for you. If any of your accounts have been placed in the debt collection process, you do not need a third party debt negotiating company. Consumers who are opting for this service are finding delays, red tape and high fees. Most creditors will not work with these companies without your written consent which creates more delays, higher fees and more time consuming paperwork.
- Keep in mind the goals you have set for yourself. Financial freedom is a long process. Suze Orman says, “The setbacks you may have today or next year will not keep you from financial freedom. If you hold on to your goals and dreams, you will get there”.
- Learn to recognize true wealth. This final tip, also from Suze Orman, reminds us that true wealth is a state of mind that we must nurture to sustain a life of financial freedom. “Learn to recognize true wealth. Money itself will not make you financially free. That comes as a result of only that powerful state of mind which tells us that we are worth far more than our money”.
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