Thursday, April 5, 2012, AM | Leave Comment
Many articles have been written on a seemingly simple task of getting out of debt since interest was first introduced to the world. Many folks have opined on the bad and good of interest. It’s good for the lender but bad for the borrower. The lender makes money by lending and getting not only principal but the cost – better known as interest – in return.
For example, the bank lends you $100 but you have to pay back more than $100 depending on the interest rate within the time-period both parties agreed upon. We all seem to know that but realizing this fact is quite difficult for some folks.
The lending institutions are in the business of making money. When you borrow, you not only have to pay the borrowed money but a percentage of that money in the form of interest.
Stay away from Quagmire…
Borrowers, if they are not careful with the money, can get into a quagmire. They look for solid ground to stand on but some are way too deep in it that they cannot get out of it. At that point, they need help.
You can get into the quagmire and unable to get out when you keep borrowing new credit without being able to pay off the old debt.
Stop adding more debts
Simple but may not be so easy for many folks especially if you are in the habit of borrowing money. If you want to be completely free of debt, then stop adding more debt to your finances.
Stop using credit cards
If charging with credit cards is the problem that you have gotten into the never ending debt, then stop using them. However, don’t cancel your accounts with the card companies. Cancelling will lower your credit score further.
Change your spending habits
Habits can be changed – some more than others. As humans, we can adapt to anything. Changing your spending habits will turn out to be the best idea in your personal finance. That means spend less than you make.
Cut your spending
Along with changing your habit, don’t make it a habit to shop in the first place. You don’t have to shop when you don’t need it.
Build an emergency fund
This is as important as saving more and spending less. It will do you good in the long run.
Make a budget
Making a budget is probably the easiest thing to start but very hard to follow it through all your life. Most folks after making a budget quit following it after a few months.
Pay more than the minimum payment
If you cannot pay in full every month when you receive your credit card bill, at least add a few dollars more to the minimum and pay it every month. Otherwise you will never be able to get out of debt alive just by paying the minimum.
In a Nutshell
It may not be very hard to get out of debt but whatever method you develop for yourself where the end result can be elimination of your debt, then go ahead and do it. More importantly, stick with it through the life of your debt.