Minimizing your Debt

lilac2

Nobody likes debt.  AND nobody thinks about that when they go into debt!  Swiping that little plastic card can lead to devastating circumstances for families.  Most people put something on credit and just assume they will pay it off quickly, but then…the car breaks down, the roof leaks, the water tank bites the dust.  Those are things that happen and they are NEEDS!  A lot of times where we run into trouble is that we owe our credit cards, but we see that outfit we want, or those new shoes, or that new TV.  Here lies the problem.  We intend to pay off debt, only while going into MORE debt! I was a manager at a credit recovery agency before I got married.  I spent my entire day trying to get people on a plan to pay their debt.  Here’s how to start…

#1) GET MOTIVATED! You will not become debt free unless you are motivated to do so.  You have to work at it! It’s like dieting, no one enjoys it, but you work at it because of the outcome.  To get there, you need to get motivated!

#2) DON’T PAY THE MINIMUM- Break that habit of only paying the minimum each month.  Understand the game of banking, you borrow from them and the longer you take to pay them back, the more they make, and the less you have! That is EXACTLY what they want you to do.  Pay as much as you can each month.  (see #7 below) We all have our “luxuries” for things.  And you know what yours is.  Mine happens to be dunkin donuts coffee!  Cut out the coffee shops, the eating out, the things that you do that you don’t NEED to do.  If I owe money to someone, I don’t have luxuries until they are paid first!  Cut those things out and you’ll find the extra money that you need to pay a little more on your debt.

#3) CHECK WHAT YOUR PAYING IN INTEREST- If you have one credit card with 27-30% (yes it’s true some cards charge you 27% interest and you probably don’t even know it). If you can’t pay it off quickly, then transfer it to a card that has a low interest rate.  If you can’t transfer, then pay that card off first.  Make that your goal.  Don’t pay the banks 30% interest on your accounts.

#4) CALL YOUR CREDITORS- Last year I helped a family call all of their creditors to see if they could remove some of the interest and late payments on their accounts.  Their accounts were past due and they wanted to start trying to pay them off.  We called every creditor they had, and guess what, every single one took charges off.  Negotiate! With their last creditor, they had $500 left to try and pay the account off.  Their bill was $1100, we called and asked if the account could be settled for $500, after a little negotiating, they agreed!

#5) PAY OFF THOSE LITTLE BILLS BEFORE THEY COME BACK AROUND AND BITE YOU- A couple of years ago, a friend of mine had a newspaper subscription that was unpaid, they were sinking in debt and the newspaper bill was not even something they were considering.  After they worked hard to pay everything off, that little $30 newspaper subscription went to collections and became a $300 newspaper subscription after collection fees and late charges! Obviously you need to be wise but don’t let those little ones snowball into something ridiculous.  Make sure you are keeping track of everything you owe.  At one point I worked on a Citibank contract collecting unpaid debt.  You wouldn’t believe how many people had an original balance less than $10 and after late fees, and collection charges for years, they now owed hundreds.  Keep track of what you owe and when you pay something off, keep your $0 balance bill for proof that it was paid (just incase)

#6) USE WHAT YOU HAVE- It’s wise to keep a buffer in your savings account incase of emergencies.  If you owe on your credit cards, put your saving to a halt for now.  What you’re saving you are really paying in interest if you owe credit card debt.  I’m not saying to drain your savings, because I think it is important to have money in case of a major emergency….BUT pay toward your debt.  We keep a certain amount in our savings account, and each month anything that we have over that amount we put toward our mortgage.

#7) DON’T ROB PETER TO PAY PAUL! Make sure you are not skipping one payment in order to pay extra on another.  Pay the minimum of all of your payments except one.  Pick the one that  either has the highest interest or the lowest balance.  Pay every extra penny you can towards it.  I really mean every penny.  If you can only pay $5 extra this month, PAY IT! Once you get one paid off then go to the next.

Like I said, it’s something that you have to work toward.  No one wants to be in debt but sometimes it happens, but you CAN get yourself out of it.  Imagine the feeling of being debt free, now go ahead and get started.

“Let no debt remain outstanding except the continuing debt to love one another.”  Romans 13:8 NIV

 

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