Living in debt is one of the worst ways to spend your life. The constant worry and stress can lead to adrenal failure, hair loss, divorce and worse. Most people cite stress about money as the number one worry in their life.
Debt adds to that worry. Most people got into debt by trying to live an MTV lifestyle on a CMT budget. What that means is failing prey to great marketing tactics and teaser rates from credit cards and banks that are designed to hook the uneducated consumer and then tag them with fees and charges so they debt becomes a permanent state of being. The banks and large corporations don’t want the consumer to be debt free, because then they couldn’t charge outrageous fees to pay out millions in bonuses to executives.
The best way for the consumer to take charge of their lives is to quit charging their lifestyle, and remove almost all debt. A combined effort by millions of consumers to do this would force the banks and lending institutions to ratify their policies, and in turn would put the consumer in charge of consumer spending. To take charge of your charge it lifestyle, the first thing you should do is examine how you spend your money.
Create a monthly budget that outlines every expense using your bank and credit card statements. Be honest and track everything, even if you went to the ATM to draw out cash: where did you spend it? Write it all down on a spreadsheet so you can keep up. A computer program like Quicken can do all of this automatically for you, and makes debt reduction very simple to follow. Note I said simple and not easy. Debt reduction requires changing habits and consumers are notoriously slow to shift habits.
Once you see where you spend your money you may be surprised at how much goes to disposable items, like eating out, or drinks, or just fun. These are the areas that you’re going to have to rein in for a few months while you eliminate debt. Line up all of your bills that aren’t “needs.” A need is the mortgage and utility bills. The rest are what you can live without. You need shelter, and food, water, and electric. You need one credit card for emergencies, preferably with a high limit.
Once you have lined up your credit card bills, write out the total balance for each and the minimum payment for each. Include the interest rate. Then select the smallest balance card, and as you cut your disposable income from eating out and other junk expenses, apply it to the lowest balance card to pay it off. Once the smallest balance card is paid off, apply what you were paying toward it to the next smallest balance card. Each month you will be making the minimum payments on each card except the one with the lowest balance. That card will get as much as you can pay toward it until it’s paid off.
As you pay off the cards the companies will hit you with welcome back teaser rates. Use these to your advantage by calling the company and asking if you can transfer a larger balance to the card at the teaser rate, then move your biggest balance over. If you are paying sixteen percent (the industry average) you can save almost $100 every month by moving a large balance to a zero percent introductory rate on another card. That’s $100 extra dollars you can save to pay down the balance. Just be sure to keep track of when the terms expire or you can lose all the money you saved in a simple glitch of the calendar.
Keep paying down the debt until it’s gone, and once it’s gone stay in the habit for a month or two (or longer) and you can build up your savings to reward yourself for your diligence. But keep the habit of being debt free to be sure you keep the stress out of your life.
