Friday, December 9, 2011

Debt Relief Programs Aren't the Only Option for Debt

By Bill Stoppard

Debt is a way of life for many Americans. We owe money on our homes, our cars, our possessions, and our education. Many Americans are so stuck in debt they aren't even sure exactly how much they owe and to whom, not only that they sometimes don't even remember just what caused their debt.

See where you could scale back on your outgoing costs. Look at cutting back on little luxuries such as eating out at lunch each day instead of taking sandwiches to work with you. Likewise, reduce any avoidable expenditures, such as subscriptions and memberships that may not be of much use to you. It is amazing how much you can cut back through a number of small savings each month, and this can then be applied towards your smaller debts such as credit and store cards in order to clear them quicker.

Look at all your secured debts such as mortgage and car loan. How much are the repayment for each month? What exactly are the interest rates? Then, list down all the fixed expenses such as power, phone, insurance, food, etc. What are the total costs for these expenses?

Try and clear your overdrafts. If you have an overdraft with your bank, and you find yourself reaching the limit every month, one small transaction is all it will take to push you over the limit - and of course this means hefty bank charges being added to your account. By ensuring that you keep your overdraft at a sensible level rather than teetering at the brink of exceeding the limit you can avoid these hefty charges. Follow by examining your credit card debts. Get all your credit card statement and write down the amount you owe for each card and their interest rate. Finally, write down all your other expendables; these are your optional expenses such as entertainment, gym, membership, dinners at restaurant along with other impulsive purchases.

Consolidate your debts as far as possible. You can achieve this in a number of ways. One option is simply shifting balances from one credit card to another with a lower rate, but be aware of transfer fees before selecting this option. Another possibility, if you own your own property, is to take out a home loan or line of credit that ought to have a lower interest rate than most credit cards may offer as well as offering tax deductions. Last of all, you can also think about a secured loan offering the value in another form of property, your car or truck for example.

Don't compromise on your retirement savings. Obviously, paying off your debt should be a high financial priority but cutting what you save for retiring to do so may not be the wisest course , especially when that becomes a long term habit or if you are losing out on your employer's matching funds as a result. Perhaps you may be able to borrow against (or from) your retirement funds at a lower interest rate which will allow you to continue to save for retirement while also getting out from under your debt.

Finding yourself owing a lot of money is not the end of the trail and you can stop the pattern of debt by taking proactive steps to break the cycle.

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