Methods to get out of debt |
By David Pilley on August 31, 2011
.jpg.aspx) Getting out of debt can be a multi-faceted undertaking. Some actions may be big and some may be small, but action is better than inaction. If you can organize your thoughts and stay focused, you can do a number of things to improve your situation.
For one, you need to know the minimum monthly payments on all of your credit cards. These numbers are usually only about 2% of the outstanding balance, and the interest rates make it seem like even less. Banks want you to pay the minimum because they’ll be making more money from the larger amount of interest you pay. The simple solution is to pay more than the minimum. If your minimum payment is $100, make it $200. You don’t have to do it every month, but doing it more often than not will shrink your debt much faster.
If dealing with each card is not your style, you might consider a wintry term to tackle one card at a time. This idea might be tempting in the sweltering days of summer, but it’s a metaphorical term, not literal. The term is the “snowball method,” and it deals with multiple credit cards. Basically, you line up your cards in order of their interest rate, and you attack the one with the highest rate. While still paying the minimum monthly payment on the rest of your cards, apply as much as you can to each monthly payment on the card with the highest rate. When the card’s balance finally reaches zero, move to the next highest interest rate and repeat.
The above paragraphs dealt with debt on a macroeconomic level, but there are some actions you can take to deal with the micro level. These involve your every-day spending habits, and you can choose any or all of them, if you like. One of the best things to do is avoid fees. This may mean going to the store instead of making online purchases. Purchase movie tickets at the theater instead of the cinema’s website. Some ATMs charge a small fee for every withdrawal. One time is a small amount, but the amount lost to fees can be a substantial amount after multiple transactions. Make it a habit of going into the bank and making withdrawals there. Making a lifestyle change might help, too. Skip dessert. Take the bus to work. Make your own meals instead of going out. These actions don’t need to be taken all the time, but try them every once in a while and you may discover a little more money that can decrease your debt woes.
As always, bankruptcy is a last resort. There is a myriad of things you can do, big or small, to lower your debt. If you find something that works, tell your friends and family about it. Write a blog to tell people what you’ve done and how they can also get rid of their debts. Ignorance is not bliss when it comes to debt, and hearing what other people have done may be the kick start you need to take action.
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