Debts To Get Rid Off

Friday, May 8th, 2009 at 5:24 pm

debts-to-get-rid-off If you want to prosper financially, there are plenty of debts that you will want to wipe out. The most obvious are those where you are paying high interest and penalties, things such as credit cards, lines of credit, taxes, or any other debt that is much higher than inflation.

Rent or mortgage. Make paying your rent or mortgage a top priority. Payments on a home equity line of credit or second mortgage are also essential because you can lose your house if you don’t pay.
Car payments. Make the payments. If you don’t, the car will be repossessed.
Utility bills. These services are important, and the bills usually have heavy late payment penalties.
Child support or alimony. Not paying these debts can land you in jail.
Taxes. Taxes may be put off for awhile if necessary, and we show you how to do so later on in the book, but if the IRS is about to take your paycheck, bank account, house, or other property, you should set up a repayment plan immediately.

If you are going to start getting out of debt, you have to stop going into debt. One way to start is to begin to wean yourself from the credit card teat if you think that is part ofyour problem. You don’t have to cut up all your credit cards; that would be impractical and unreasonable. Start slowly, but build up to it and get strong. You can do it. The only way to stop going into debt is to stop going into debt. You might as well start now because the sooner you start, the sooner you will get out of debt. The longer you wait, the longer it will take.

I will post about how to easily trim your budget (well, almost easily) so that you need not incur more debt to stay afloat. But begin now. You are going to have to stop sooner or later. Down the road you will see that this is one of the most important steps you can take in getting out of debt. You will thank yourself for this gift. Remember the first rule of holes: Stop digging!

Now is the time to begin to think about your longrange financial vision. What is it you hope to accomplish by getting out of debt? Changing some habits? Paying off your MasterCard? Probably what you really want is a less stressful life, one that’s free from money worries. But you can have even more. Getting out of debt is one thing, but prosperity is another thing altogether.

You have read this once already, and you will read it again in this book: If you don’t begin to do some things differently, to change the way you think and treat money, you might get out of debt, but you won’t stay out of debt. If you do make some simple changes to your thinking and your behavior, not only will you get out of debt, but you also will get ahead. You will get what you deserve: a life of abundance.

The Least You Need to Know

Going into debt for essentials makes financial sense; doing so for non essentials does not. Not all debt is bad debt. You may want to keep debts that enhance your life and get rid of the rest.Stop adding to your debt right now. Cultivate a long-term plan of action.

Early Warning Signs of Trouble

How serious are your debt problems? The spectrum of possibilities ranges from negligible to severe. The fact that you bought this book indicates that debt is something you are concerned about. As you read this chapter and review the most common signs of debt problems, consider that the more signs that apply to you, the more serious your situation is.

Where Have All the Dollars Gone?

The first sign that debt is becoming more of an issue in your life than it should be is the incredible shrinking bank balance. Although you make enough to pay your regular bills, more and more of your monthly income goes toward servicing your rising debt. It gets to a point where money is tight, and you feel like you are choking because there is never enough money. Unfortunately, this situation creates a negative domino effect upon the rest of your financial life.

But I Still Have Room on My Card

The first to fall is the credit card domino. Your lack of funds causes you to begin to take cash advances to pay your minimum balances or basic living expenses. You know that your gold card still has about $5,000 left on it, so you begin to use it to live on. Or, even worse, you begin to accept all of those credit card offers that come in the mail, and before you know it, you have 10 open credit cards You take out $100 here and $500 there. “No big deal,” you think. After all, you are used to paying off your cards, or at least paying enough that the debt has not, so far, seemed burdensome. You begin to rationalize. You tell yourself that you’re just in a temporary cash crunch, that this is why credit cards were invented. Feeling better, you take out another $500.

Money Talks

When you use your credit cards to withdraw cash, extra fees kick in. Cash advances carry an upfront fee of up to 4 percent of the amount advanced. There is a higher interest charge for cash advances than regular card charges, and many issuers also require you to pay down the balances for purchases before you pay down the higher-interest cash advance balance. Finally, cash advances carry no grace period; interest charges begin to mount as soon as the ATM spits out the money.

The Balance Transfer Shuffle

“Not to worry,” you tell your spouse or yourself. You have a plan. These stupid credit cards can’t outfox you. You will just transfer your balances from the card with the high balance or the high interest rate to a different card. You are smarter than the credit card companies. Not only do you transfer balances, but you start to use those convenient checks the credit card companies are always sending you. You begin to pay one card with another card. In the meantime, not wanting to upset your precarious financial balance, you begin to use your cards more to pay for everyday things such as food.

The bills grow. Whereas you used to be able to pay more than the minimum, now the minimum is more than you can pay. In an effort to conserve your rapidly dwindling cash reserves, you decide you have no choice but to save money-by using your credit cards more!

Money Talks

Debt got you down? Consider these rules penned by Thomas Jefferson: 1. Never put off till tomorrow what you can do today. 2. Never trouble another for what you can do yourself.

3. Never spend your money before you have it.

4. Never buy what you do not want because it is cheap; it will never be dear to you.

5. Pride costs us more than hunger, thirst, and cold.

6. Never repent of having eaten too little.

7. Nothing is troublesome that we do willingly.

8. Don’t let the evils which have never happened cost you pain.

9. Always take things by their smooth handle.

10. When angry, count to 10 before you speak; if very angry, count to 100.

Relief is in sight. Using your cards more and not spending your precious cash to pay off these credit card balances gives you a (false) sense of security. Your money situation is not that bad. For a few months, things seem back to normal. Anyway, those tiny classified ads you are going to start running all over the country are going to make you rich, and then you will pay off all of your cards, and this situation will be something to laugh about in five years. Then the card with the low interest rate jacks up your rate to 18.9 percent. You have a $10,000 balance on that card! It’s OK. Stay cool. You still have two more cards with room on them. All the while, you are getting deeper and deeper in debt. What do you do? Eureka, you have a solution! You can apply for more cards, get some more low “teaser” rates, and transfer some more balances. So you do, and so it goes. Sound familiar…..