Do you ever wonder how you will ever reach financial freedom and become debt free, even though you are currently working on paying off a substantial number of bills and credit cards? If so, you are not alone. In fact, according to a 2014 survey from NerdWallet, the average household in the United States has more than $15,000 in credit card debt. Fortunately, you don’t need to let debt control you for the rest of your life. If you would like to become debt-free, here are six tips to make it a possibility:
Make a Budget – In order to succeed at becoming debt-free, you will need to develop a realistic budget. A monthly budget is a necessity. Whether you use your computer or a pencil or paper, list your income in one column and your projected expenses in the other. If you have extra funds, then promise yourself that you will apply the extra money to reducing your debt. If you don’t have extra money, you are going to have to reduce expenses, increase your income, or do both. Several years ago, our firm insisted that one of our clients create a budget. Although their car was fully paid for, they discovered that the money they spent on gas and constantly fixing it was the primary source of their problem. They got rid of the car, bought one that was more economical, and they were able to pay all of their credit card balances in two years without filing for bankruptcy. Some financial issues are difficult to identify without creating a budget.
Tackle the Greatest Debt First – After you’ve created your budget, it’s time to come up with a plan to pay off your debt. You should pay off the debt that bears the highest interest rate first. Many credit card companies offer either no interest or minimal interest balance transfers. Take advantage of them if they are available to you. Pay the minimum amounts on the lower interest rate cards until you have paid the higher interest cards in full.
Increase Your Payments – Once you have paid off the cards with the higher interest rates, the amount of the monthly payments should also decline. Use those extra funds to pay down the balances at an even more rapid rate.
Do Not Succumb to the Temptation to Start Charging Again – In order to stop adding to your debt, you will need to stop spending with your credit cards. Start shopping with cash or your debit card and leave the credit cards at home. Even if you receive cash back and other tempting rewards from your credit cards, it’s best to stop spending with them until you are debt-free. Credit cards are a necessary tool but only in the case of an emergency. For example, if your car needs a new transmission and you are away from home, a credit card may be the only way you can pay for a new transmission. But use your card only in emergency situations.
Put Extra Earned Money Toward Your Debt – Even fixed income people will get extra cash from time to time. One family asked their family and close friends who would normally give them Christmas gifts to give the parents cash and the children the normal Christmas gift items such as toys. They were surprised by how much money they actually received. Their family and close friends were pleased that they admitted that they were in debt and wanted to help them get out of debt. They were completely out of debt in two Christmases.
Once You Are Out of Debt, Pay the Total Balance on Your Cards and Other Debts Each and Every Month – Once you are debt-free, the offers for new cards and credit line increases will start to flow into you. Let history teach you a lesson. If you can’t pay a balance because of an unexpected financial reversal – a car transmission went out, for example – use the strategy set forth above. Adjust your budget and set a goal for paying off the balance. In the meantime, you must forgo other discretionary charges.
When it comes to tackling debt, you may need additional help, especially if you are considering filing for bankruptcy. We have been advising clients in financial distress since 1978. You don’t have to feel alone! Call the Bankruptcy Advocates at (618) 549-9800 for a free consultation with the experts to see how you can attain financial freedom!
Southern Illinois Bankruptcy Attorney law firm Bankruptcy Advocates is located in Carbondale and serves a wide geographic community. The first consultation is always free. Give us a call at 618-549-9800 or email us at [email protected] to speak about your case or legal matter. Convenient appointment times are available.