This is the age of debt - more people are in debt than ever. Living paycheck to paycheck is now seen as a fact of life. Society teaches us debt is good - every time you go through the cashier at Target stores you are asked if you would like a 10% discount to get their store card. Most major department stores do this as they know you will buy more and then make minimum monthly payments so their 20-40% profit margin gets another 15-20% or more of interest per year. Rarely does one buy a car with cash nowadays. Its amazing how everyone wants to be seen in a nice new Mercedes or similar and we think they are rich, but are they really? 99% of car buyers don't own their vehicle, the bank does. Some even finance the wheels on their cars. The message to spend is quite obvious. Now, more than ever, with the potential for gas prices to multiply, energy costs to continue rising, an unstable economy, no job guarantees regardless of your profession, etc... we need to reconsider our spending habits and stop spending money that isn't ours (let the government do this - just look at our ever increasing national debt). We can stop this downward spiral into more and more debt.
Debt can add unneeded stress and even ruin a marriage. First thing to do is to gain control of the situation. Become determined that we will stop living beyond our means. Many of us do this to impress others. Why? They don't care. People that are impressed solely by material things are shallow and don't make good dependable or trustworthy friends. Become committed to paying off all your debt. Stop incurring debt. Don't buy anything you can't afford. Debt should only be for emergencies (acceptable debt - a mortgage. Home ownership is good debt because it increases in value. A mercedes is bad debt as it decreases in value greatly the moment you drive it off the dealers lot. Contrary to what a salesperson says, a new car is a horrible investment. Buy a used car and shop around. The best deals can actually be found on Ebay - I bought 2 cars through Ebay and both were cream puffs and way below what a dealer could get them for. Plus no bogus processing fees (aka additional dealer profit).
Take your credit and store cards. Cut up all store cards. They are completely unnecessary. Then cut up all credit cards but 1 - keep the one with the lowest rate, fee, etc... (best deal). This one will be for emergencies. Make out a payment plan to pay off the others. If you are in over your head (over 25% of income goes to paying credit cards or other unnecessary extravagances) then contact a not-for-profit debt counseling service. Make sure they are not-for-profit or you will get ripped off as the for-profits can't do anything different and charge you for the same. The best services can be found by contacting your local Better Business Bureau and asking for a referral to a not-for-profit debt counseling service. They will negotiate your debt, interest, payments, etc... with your creditors solely in your favor and make a debt free plan for you. Stick to this plan and then you will soon realize the wonderful relief and feeling brought by debt freedom.
As your debt goes away, your credit score will rise, new debt will become less expensive - so don't get sucked back in - refuse the temptation of 0 down and 0 interest on a new car or similar. Only buy a car if you must and buy what you need, not what would impress your neighbors. Case in point - wouldn't you rather have the comfort of knowing you could live comfortably for 4-6 years without having to scramble to find a job if you should, unfortunately, find yourself unemployed? Or would you rather have a new Mercedes or BMW every 2-3 years through leasing and have zero safety cushion? Next time you hear the salesman tell you their car is an investment ask him if he will make your payments if you lose your job. Not such a great investment after all. For the same price of that Mercedes you can buy a $100-$150K home, fix it up a little (repaint and such for around $2000), rent it out and make $50,000 back on your investment in the first year. Hint, hint - get into real estate. It is the single best investment you can ever, ever make.
There you have it. How to get out of debt free. I would also highly recommend these 2 books: The Armchair Millionaire, and The Millionaire Next Door. Good luck and I hope you take the path of zero debt and a better quality of life. Being debt free is one of the best feelings you can have. Please pass this article on to everyone you know as you will help more people than any donation could - take a moment to help someone as I have done for you. Its the right thing to do. |
