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Step 1
Adopt the "all debt is bad philosophy". Although many companies and savvy investors would like you to believe that debt is good, debt is really bad. I don't care if you owe credit card, personal loan debt or even student loan debt, owing someone else for a purchase in the past is simply bad business all the way around. Think of it this way, if you had absolutely no bad debt to pay creditors each month, just think of all the money you would have available to help others and make a positive difference in their lives. Think of the financial freedom you would feel and the joy too. By having bad debt, you feel emotionally and physically drained and shackled to pay it off.
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Step 2
Adopt the mindset that cash is king. With cash, you are more in control of your financial situation. When you pay cash, you purchase whatever it is at the present time and you don't have to worry about interest rates or bill collectors. The price you pay is simply the price you pay. In addition, with cash, you make more conscientious purchases and tend to think them out a bit more. For instance, that polka dot party hat on sale for $89.99 doesn't seem like sure a good idea when you're paying cash, now does it?
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Step 3
Evaluate your current financial situation. You absolutely must take the time to evaluate your financial situation. This means getting a copy of ALL your bills. Not just the ones that you are current with but all of them. In fact, you should also get a copy of your credit report. Then, review it carefully and make careful note of how much you owe, whether you're current, required minimum payment etc.
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Step 4
Contact your creditors. Verify the amounts due and try and settle your debts for a lower cash balance or a lower interest rate. Although some companies may say no, it can't hurt to ask. In fact, you may find that they are very accommodating to your needs.
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Step 5
Create a workable spending plan. Once you've chatted with your creditors, it is now time to create a spending plan. With this spending plan, you will take your monthly obligations as well as any amounts that you promised to pay to creditors and write it down. Now, you have a blueprint of where your money goes. If you find that you have to tighten up your income or get a second job to make ends meet then do so. After all, you are in control.
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Step 6
Pay down debt with the debt snowball. With the debt snowball, you take your lowest debt and allocate a certain minimum amount to it. This amount typically includes the minimum payment + an extra debt reduction payment. You continue to pay your other bills as requested. Once this smallest debt has been paid off, you will then pay off the second to largest bill until they are all paid off in full.
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Step 7
Have faith that you can get rid of bad debt. Plenty of people have gotten rid of debt and you can also. You simply have to set your mind to it and work a spending plan and you too will get out of debt. In no time at all, you'll squash debt also.
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Step 8
In conclusion, you can get rid of bad debt. It may take a bit of effort and patience on your part but you can definitely do it. To make the most of this plan, you must understand that debt is bad and cash is king, evaluate your current financial situation, contact creditors, create a workable spending plan, use the debt snowball, and have faith. Once you do this, you'll not only get rid of bad debt but you will achieve financial peace as well. Good luck!
Comments
dinrob said
on 6/14/2009 Great article! I appreciate this one.
openwave said
on 12/5/2008 Great stuff
markhenry said
on 11/26/2008 Thanks for the suggestion. Good article on how to get out of debt.
Ericcanuck said
on 11/24/2008 Thanks for sharing this article. Very interesting.