Debt Management

If you’re reading this page it’s probably because you have debt problems and you’re looking for an easy way to clear your debts.

Well, thankfully, getting debt free is easy, but it will take time. But here are some debt solutions that you can start using today.

Debt elimination requires 3 steps:

1. Stop Acquiring more debt
2. Keep an emergency cash fund
3. Pay off all your debts

So to implement the first part of the plan you have to – really, really have to – stop over-spending. About 80% of the things we buy are ‘wants’ rather than ‘needs’, so if you don’t need it, don’t buy it.

In fact, for the next few months only buy the bare essential groceries and nothing else.

Next look at your outstanding bills. If you owe money for gas, electricity, telephone, etc, pay them off. Then arrange Direct Debit payments for all your bills so that they can be paid automatically every month. This will also help with budgeting.

Next, cancel any unnecessary recurring payments such as a gym membership, golf club membership or magazine subscriptions. For now you’ll just have to do without them.

Then set yourself up with an emergency fund of $1,000. Open a savings account and keep putting money in until you’ve got the minimum amount saved.

But remember that this is for emergencies only such as medical treatment or necessary car repairs. It’s not for extra beer or a deposit on a new car.

Then have a good clear out at home and sell anything you don’t need any more. You can have a garage sale or sell items in your local free ads in the newspaper or on eBay or Amazon.com. And you can put the money towards your emergency fund savings.

Next you need to make sure you’ve got enough insurance so that whatever happens, you can cope financially. Make sure you’ve got adequate and up-to-date home insurance, contents insurance, car insurance and personal insurance. Now comes the hard part. Take out all your credit cards and cut them up. Don’t kid yourself that you need them as a safety net. You don’t. You have your emergency savings for that.

Having credit cards will only make you over-spend, so emotionally detach yourself from them and cut them up.

Now write down a list of how much money you owe on each of these cards and arrange the amounts from lowest to highest. Start reducing what you owe by paying as much as you can every month on the lowest amount and only paying the minimum on the rest. This will help you feel as though you’ve achieved something faster as one-by-one, the debts disappear.

Then as you pay each one off, cancel the card.

By now you’ll have taken the three steps so there’s only one thing left to do.

Go to your local library and borrow a book on money management to help you to learn even more about reducing debts and staying debt free.

Remember that every tiny step you take towards eliminating your debts, moves you one step closer to wealth.

© Copyright 2008