Getting free of debts is a goal that many millions of Americans today would love to achieve. Unfortunately, very, very few of us actually end up doing that. Thereâs always something that needs to be taken care of. Whether itâs the television going on the blink or the car giving up the ghost, there will always be something else that will go awry. Thatâs often what makes it tough to get ahead. Additionally, doing away with debt entirely, and within a year, no less, is for many Americans utterly impossible.
Itâs not impossible for everyone, however. First off, letâs get one thing over with. Unless you manage to win the lottery, chances are good youâre not going to be able to pay off your mortgage. Likewise your car, and for many, student loans. Hereâs the trick, though. These types of debt donât necessarily count against you. Itâs the bad debt that can really wreak havoc on your finances.
So, what do I mean by âbad debt?â Isnât all debt bad? The answer is, of course, not quite. Bad debt is debt that gives a strike against you on your credit report. It includes delinquent debts of all sorts, store credit debt that has lapsed into those sky-high interest rates after promotional periods have given out, and general credit card debt. These forms of ârevolving creditâ usually carry huge interest rates, if not fees as well, and always seem innocuous at first, then hit you at the end with huge interest charges.
Getting yourself out of bad debt isnât as difficult as some people would have you believe, especially if you arenât actually delinquent on any of your payments. Following these simple tips will help you get yourself away from bad debt traps, and back on the road to financial wellness in no time!
First off, round up all your credit cards, statements, and financial documents, organize them, and separate them by balance owed. This organization process is critical, since it allows you to see what you owe, and what you can do about it.
Next, check to see if any of your credit cards that have low or no balances have any outstanding refinancing offers. You may be able to take advantage of a low-interest or no-interest promotional period if you transfer balances. This could give you as much as 24 months, but usually close to 12 months of low or no interest depending on what card you have. If you have an offer that will work, use that card to consolidate the cards and/or loans you have outstanding.
Destroy the cards. Now. Donât spend another dime on them. Donât question this advice, just do it. Without the temptation to use them, credit cards will begin to lose their power over you, and youâll begin to be free.
With the loans and balances consolidated, and with the cards destroyed, look at your balance. Chances are good youâre saving around 20% per month with this move. Now, rather than figuring youâve got an extra 20% to spend, put it toward your balance.
Divide the total balance by 12, and see what youâve got. If you can swing that monthly payment thatâs staring you in the face from your calculator, than youâre in business. Set up an automatic monthly draft of that amount, click the green button, and whatever you do, stick to it! It might mean having to do without that drive to the grocery store for ice cream, but once youâre free of those bad debts, youâll be able to better understand how to keep yourself away from debts of those sorts. It just takes a few minutesâ time, a little self control, and the ability to see yourself living debt-free by the end of the year!