In the UK, the average household debt is ?8,290 (excluding mortgages). In the USA, 8.3 percent of households owe $9,000 or more on their cards and total consumer debt reached $2.46 trillion in June 2007. They say money doesn?t grow on trees, but the modern reality is that it does. We?re being offered credit cards and ?Buy Now, Pay in 12 months? special promotions wherever we go. No wonder so many people are in debt!
There is no quick fix or easy way out of debt. It?s hard work and to achieve it you need to be extremely disciplined. The key is to come up with a financial plan that has achievable goals. This article will explain the best ways that you can improve your life and reduce your stress by creating a simple and effective financial plan.
Top Tips For Reducing Your Debt
Get help
It sounds simple, but many people keep their debt a secret ? even from their family and loved ones. Ever heard the expression ?A problem shared is a problem halved?? It?s true. Seeking help from your friends and family will remove a great deal of burden and weight from your shoulders, allowing you to think more clearly. You will soon realise that you have people close to you that will help you to stay strong while you achieve your goals to get debt free. You can also visit the Consumer Credit Counseling Service at http://www.cccservices.com/home.asp if you?re in the USA and http://www.cccs.co.uk if you?re in the UK.
Contact your creditors
If you know you?re going to miss one of your payments, contact your creditor as soon as possible. They will be more likely to work with you if you contact then before the payment is due. They are also trained to solve payment problems and can advise you on alternative solutions. Be honest with them and explain your financial situation and why you can?t pay the bill. Often you can work out lower payments to accommodate your income. Also, if you agree to pay them on a certain date, make sure your honour that agreement. It will show you are willing and motivated to pay your debts.
Cut up your credit cards
This is a big one. Avoid the temptation that carrying a credit card brings and destroy it. The last thing you want to do is get yourself further into debt. It can be very tempting once you?ve paid off some of your debt to then spend more because we convince ourselves that we?ve worked hard and we deserve a treat. Don?t do it! You?ll be right back where you started and the whole process needs to start again. Don?t take out any more credit cards or credit accounts.
Set your budget (and stick to it)
Unless you?ve got a new job lined up, it?s going to be easier to reduce your monthly spend than increase your income. Work out your monthly outgoings and set aside a budget for the essential items needed for the month with the remainder of the money. Don?t make any non-essential purchases until you?ve made substantial headway towards your goals. If you have a large amount of debt, consider selling some of your assets to fund payments.
Prioritise
Pay the most important bills first. The mortgage, car insurance, heating, electricity etc. This includes any bills which have been handed over to a collection agency. Once you?ve determined your high priority debts, move down the list by focusing on the high interest debts.
Track personal expenses
You wouldn?t believe how quickly your money can disappear through simple day to day items such as food and drink. Take a notebook with you wherever you go and keep a log. Alternatively, keep your receipts and keep track of the data using www.expensr.com. This will accurately tell you where your money is going.
Set financial goals
Small, achievable goals can help you to monitor your progress. Make all financial decisions with your end goals in mind. Remember your target ? A debt free life.
Following these tips you can ensure that your debt is shrinking, rather than growing. Stay focused and your debt will decrease. Once you?ve reached your debt-free goals, you can then put the extra money you have each month into a savings plan to provide a better future for you and your family.
February 19th, 2008 at 4:39 pm
Yes, a person can be debt free, however, the system we have in America is a self generating debt system. The federal reserve bank is a centralized bank that controls the entire money supply for the country, even to the government. Now keep in mind that they are a bank and they are still a business just like any other bank and they want to make money. So, every dollar that they produce is on LOAN AT INTEREST to the people and government. So how are we to pay back the debt? WITH MORE MONEY THAT IS ISSUED AGAIN BY THE FEDERAL RESERVE. And guess what? The money that is used to pay back the debt, has interest tacked on it as well. It’s a self generating debt system. The federal reserve was not set up so everyone can get ahead, it was set up so everyone will be in debt for the rest of our lives.