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Reducing Debt
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Debt and bill consolidation - Options for reducing debt
Excessive debt causes a lot of worry and anxiety - and for good reason. While some people are able to control their spending habits and maintain low consumer debt, other people find themselves caught in a financial trap. Credit card and consumer debt is on the rise. The average household in this country owes about $6,000 to $8,000 in credit cards - sometimes higher. Fortunately, individuals with h... Read debt consolidation article
Debt consolidation - Your best way out
When you are living paycheck to paycheck and it seems everyone is getting a piece of the pie except for you, debt consolidation may help you free up a little bit of cash each month. Debt consolidation is usually a great option if you are paying several minimum payments per month on high interest credit cards or loans. If you are behind on any payments, debt consolidation may save your credit, or a... Read debt consolidation article
Reducing Debt
"Money is one of the most important subjects of your entire life. Some of life's greatest enjoyments and most of life's greatest disappointments stem from your decisions about money. Whether you experience great peace of mind or constant anxiety will depend on getting your finances under control." -Robert G Allen
The average individual struggles each month to pay their bills and cover all their expenses. If you are one of these people, you might be asking yourself "I would love to invest but where will I get the money?"
A great place to start is by reducing your debt. You may not realize it but you may be spending more than you earn. Doing so is putting you in a financial crunch and your money is literally floating away. Most people do not even want to think about totaling up their credit card purchases and only pay minimum payments.
It is important to remember that credit card companies charge compound interest which means that you are paying not just for your original purchase but any interest that has accumulated on that original purchase. If you are looking for money to invest with, you need to make a list of your monthly expenses, debts, and income.
Divide your expenses into fixed, variable, and luxury. If you want to reduce your debt, you need to make a clear distinction between what is a want and what is a need. It seems like common sense, but people often forget that new cars and new shoes are not investments. While they may make you feel good in the moment and give the illusion of wealth, it is not reality.
The next step is tomake a list of your credit card bills. At the top of the list put the credit card that has the highest interest rate. This is the card you will start to pay down your debt on. Each month any extra money you have needs to go to paying off that bill. Once that bill is completely gone then take the money you were paying toward that credit card and place that money into a savings account for six months.
For the next six months start on your next credit card bill and repeat the process until your debt is reduced. You do not need a ton of money to start investing. Put away a little cash every month into a money market account. In a year you, will be surprised how much you have saved. With as little as $100 you can invest in the stock market, and with just $1000 you can invest in a mutual fund. Investing is not beyond your reach. All it takes is a bit of planning and self control.
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How Debt Grows Fast
Did you charge it? One of the greatest conveniences in money is not money at all but credit cards. You can pay for something in almost any country in the world and the bill shows up at your door two or three weeks later. There are several downsides to using credit cards I am going to explain how, why and what to do about overspending. Overspending,
"Heck dear it is $1700 only $200 more than we planned to spend. Let's put it on the credit card and the bill will come in three weeks and by then I will have sold the car and we will have the money." What happens next? The car does not sell, or sells for less, or gets in a hailstorm and is worth less. Count on it, something always happens. The bill comes and the minimum payment is only $500. Let's pay that and next month I will pay it all off.
What happens next month? There is another great sale and there is still a little room on the credit card limit. You don't have the money in the bank to pay for last month's bill let alone this purchase. But, magically as you wander up to the cashier you forget that one small detail. You're only thinking about the thrill of knowing tonight you can hook up your new hi-fi system or big screen TV or whatever.
Humans are easily manipulated emotionally. Have you read the expression we buy things emotionally and defend the purchase logically? It is in all the training manuals for sales companies. If you really listen to a good sales person they have found out your emotional ''hot buttons' and are selling to them. Even better, go to a store and listen in on a sales person selling to another couple. See if you can guess what their hot buttons are, it will help you defend yourself the next time someone uses them on you.
Many sales persons are paid on commission and they have as much or more debt as you do. They are highly motivated to sell you something, the more the better. They do not care you are in a lot of debt, at all. They want you to walk out the door with something and something big. Yes, I'm somewhat cynical but only because I know a lot of commission sales people. In the front of your mind is a little voice whispering to you no, no, no. In the back of your mind the emotional part there is a thundering yes, yes, YES!! What happens next?
You overspend. Now you are home and the reality of what you have done hits you. Now it gets interesting. You will start defending the purchase logically. You say things like, ''well I know we can't afford it but it will really help me relax and you were telling me I was too tense'. Or, ''it is a great time saver and will allow me to do some overtime at work to pay for it'. What happens next month? You get the idea, I hope.
How do I stop this from happening? General Douglas MacArthur said, ''a tactic known is a tactic blown'. You now know they are going to sell you emotionally. Stop it before it works on you. Keep front and center in your mind, "I do not have the money for this. I will save up and come back when I have the cash."
Do this and you are one step closer to financial freedom. Be smart to be wealthy.
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Reducing Debt
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