Free Steps to Start the Journey Out of Debt
You look at your credit account balances and want to jump off the nearest bridge! Take it easy. There are some things you can do to help yourself get toward the goal of being debt free, even with the money you make now. These steps on your path to debt freedom will cost you nothing.First, you need to minimize your cash outflow every month. There are many ways to save money every month. I've detailed many of them here on previous posts. Every dollar you save is like giving yourself a raise. Even better, the money you've saved is pretax income, meaning it's worth even more than its face value. As you save, continue living on your existing budget and funnel the savings into paying off your credit cards and other consumer debt. Pay off the higher interest obligations first.
Next, Take all of that junk mail you get every month and try to put it to some use. Sift through the thousands of dead trees in that pile on your desk and pull out those zero percent balance transfer offers. Wait! Don't blindly start filling out forms. Look carefully at the offers first. Some of them are so laden with terms and conditions that you could find yourself worse off than if you'd stayed where you were. Take those offers that will really let you transfer your balance with no fees and don't hit you with all sorts of fine print. Look at the rate for new purchases if you plan on actually using the card. You'll have a grace period for your balance transfer, but typically not any new purchases. Usually the companies will only apply your payments to the transfer until it's paid off, leaving your new purchases accruing interest until the next ice age. Just be careful and read everything.
Then, call all your credit card companies that you have not transferred the balances away from. Negotiate with them to lower your interest rate. If you've had no late payments for the last 6 months or so, most of them will comply. You could easily find yourself saving 2 to 5 percentage points in your interest rate.
If you've got any cards with small balances, pay them off to get them off your back. With fewer cards, you will also lessen the chance you accidentally mess up and pay one of them late. Then you've really screwed the pooch. That little mistake could cost you big time as all the other credit card companies raise their rates too. That happens more and more these days. Whatever you do, avoid late credit card payment s at all costs. Late payments just open the door to so many hidden fees and charges. It's similar to what an accident does to your car insurance, only worse.
Here's the real secret. Pay yourself first. Pick a number, say 8%, hell, maybe you can only afford 2%, and put that percentage of your income into whatever retirement vehicle you've chosen. (you are saving for retirement, aren't you??) There have been many financial experts and personal finance texts that give this piece of advice, and with good reason. It works. The fact is, you can try to save money after you've paid all your bills every month, but usually there'll be nothing in the pot. It all gets boiled away. Somewhere. Who knows where, but it's gone. (Have you made a budget?) That's why you've got to get that money into your retirement fund now. For god's sake, if you are in a 401k and your employer offers any matching, take advantage of every last dime. With the power of compounding, the real payoff is to start the money growing as early as possible. If you're fortunate enough to still be in your 20's, you're not only lucky to still be young, but way ahead in the savings game as well. Pay yourself now, or prepare to get paid by your employer until you're 70.
Please Subscribe to My Feed With Feeedburner
