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September 24, 2012
10 Ways To Pay Off Debts
 |
This could be you
if you don't regulate your
spending! |
It is now considered
"normal" to live paycheck to paycheck. This leaves no room for
error, or in the case of a surprise bill, is a ticking time bomb.
We're getting to be just one accident away from financial hardship.
Most of the time that looming over our heads is a form of poverty in
itself.
On average, a normal
American family has a little under $4,000 in the bank. There is no
retirement account in half of our households. The other half has only
around $35,000 saved for retirement. The average family makes roughly
$45,000 a year, but carries with them a $2,000 credit card debt.
A quarter of the American family not only is devoid of retirement
savings, but any savings at all. On average, though, the American
household has over $100,000 in debts. All together we as a people
hold $2 Trillion dollars in debt! That's
$2,000,000,000,000!
With this kind of debt building up for our hard working families,
we all need to put a handle on our spending, and work towards paying
off this huge, ever-present, and increasing debt. I hope these 10
spending suggestions can help us actually start saving for retirement
and/or help us pay off all the debt we've been accumulating for far
too long!
Don't only have a rough estimate of where your money goes.
If you don't sit down and actually inventory all of your spending,
you're probably spending more than just a few bills you can name
offhand. If you're not a fan of just sitting down and writing down
all your expenses through at least 3 months, there are apps and
websites you can visit to type up a spreadsheet or work on your
finances while you're busy running around. Working towards savings
has to start with building your budget, I just hope you're not
plugging numbers in while driving!
Don't spend more than your budget allows. After
you've made your budget, look back over those expenses, and start
"trimming the fat." No matter how much or how little you make,
chances are you can save more by just changing your spending habits.
Remember that there are people out there living off of LESS
than you are right now, so there is always something you can cut back
on or realize you don't need at all.
Don't spend on impulses.
Late night infomercials and the home shopping network are completely
evil the vast majority of time they are on. A good rule of thumb is
to try and see yourself still wanting this item after a week. Trust
me, you will still be able to find it, no matter how many times the
salesman says, "Supplies are going fast!" This brings me to my
next topic...
Don't be swayed by salespeople or
their sales pitches. Companies
and businesses spend millions on advertising and sales psychologists,
all to make you think you want their product. When someone says buy
1, get 1 free, you have to think of the price of the goods and how
much they're charging. The best value may be just to skip out on the
product.
Make sure you shop around. There
are a lot of companies who fight for your allegiance. In order to win
the war of your hard-earned money, many are prepared to offer you the
same great service for less than others. It is in your best interest
to shop around to make sure you're not overpaying for something that
someone else will give you for a cheaper cost.
Avoid high-interest rates at all
costs. It is imperative that any debt you accumulate has to be
put in the lowest interest possible. Most credit cards have interest
rates of 15-30%, but have a 0% introductory interest rate to get you
hooked. If you can pay your debts off in that introductory period,
take advantage of the low interest, otherwise it's just another sales
pitch that won you, and your money, over.
Keeping a balance on your credit
cards. If you get stuck in this
hamster wheel, it is often very hard to get out of. Each month that
you pay on this credit card, another round of interest will count
against you, until you end up paying more for your interest than the
actual debt! Avoid this trap at all cost.
Carrying a credit card balance with high interest rates. When
you carry a credit card balance, you pay a high rate of interest.
Every month that you have a balance, that is another month that you
have to pay interest that does nothing for you. This trap is a
vicious cycle that continues to spiral you down deeper into debt.
Living beyond your means, such as an
expensive house you can't afford. Everyone
involved in selling and financing houses are trying to make you buy
the house. It is as simple as that. They don't have to pay the bills,
but they assure you that you can afford it. They just want to make a
sale. They don't care about YOU or how you will make the payments. If
you can't make the payments, and you have to foreclose or get more
loans to pay it off, they win.
With property and
houses continuing to lose value, salespeople are in a greater rush to
get someone else to pay for those places. They may make you think
that your home is worth sacrificing everything now and making you
poor in every other facet in your life, but you must resist their
sales pitches. Don't make a rash decision that will hurt your
financial situation in the long run. It's better to have a smaller
home and the ability to furnish it and enjoy your life than to have a
big home and a mountain of debt it's built upon.
Don't
use your home equity loan to pay off any other debts. Many
lenders will try and sell you on this scheme to pay off other things,
when in reality this only compounds your debt. This will only work if
you stop making more debt on things like your credit cards. If you
continue to swipe your cards you will have to borrow more from your
home equity, which increases your monthly payments. Just like the
above point, this is a sales pitch to make you pay the creditors more
money. This is a great option if you use it in emergencies, but only
if what your paying off will stay away forever, leaving you to pay
back what you borrowed with the extra income. Make sure you plan
ahead and use caution with this method.
Using
careful planning and real expectations from your financial status are
the only real ways to prevent going in to debt. If it means sometimes
you have to sacrifice certain things and not be able to keep up with
the times or have the latest gadgets, it will be better in the long
run than having credit card debt for 20 years on a product that will
go out of style in under a year. It can be very hard to practice
patience and discipline in this world of reckless spending, but the
benefits outweigh the negatives of becoming a victim of debt.
Sources:
Images: FreeDigitalPhotos.net
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