It’s very obvious that we now live in a credit world. There are lots of banking institutions offering different forms of credit from credit card to personal loans. The amount of people with credit cards is rising very fast. Apart from that, lots of people can hardly do without credit.

Because of lack of enough financial education and discipline on the part of most of these consumers they often find themselves in bad credit situations like court judgement, bankruptcy, and loan default which often make it difficult for them to get any credit at all in future. You may now want to ask – what exactly is credit?

Credit means that you are getting a service or cash grant to use for your own purpose. You are often bound with a contract or agreement to repay in future as agreed with lender or service provider. Credit exists in different forms like loan, mortgage, or credit card.

Before you can get credit from any financial institution or lending agency, they will first check your credit history. If you have default on loan before or have bad credit history you will find it almost difficult to get credit any time you apply for it.

However, it’s possible for you to improve your credit history or build a new good credit history by repairing your credit, thus re-establishing your credit-worthiness. This process is called credit repair. It’s the process in which consumers with unfavorable credit histories attempt to re-establish their credit-worthiness.

Though there are lots of credit repair companies nowadays that promises repairing your credit for you, if you can follow simple guide, it’s very possible for you to do it yourself – afterall it’s your credit.

If you repair your credit it will make it easy for you to get low interest credit, car or home loans. However, with poor credit rating you may not be able to get loan or be subjected to high interest rates and several other unnecessary conditions. So it’s very important that you repair your credit if you have bad credit. You will get lots of tips on how to do this easily if you follow the next dozen posts or so here on my blog

So keep a look out for the next installment coming soon.

Detailed Below I have highlighted some bullet points for you to consider.

1-  Stop all your credit card and keep only one for emergencies. Always use cash instead. And for the one you keep, be sure to choose one with the lowest interest rate and best credit facilities. If you search you find. If you are a student, look for student plans with zero monthly fees and very low interests and also a low renewal fee.

2-  Cancel all of your credit lines and request a lower interest rate on the debt you have left. 

3-  If you have multiple credit cards, transfer the debts to the card with the lowest interest rate or get a debt-consolidation loan from a bank at a very lower rate. 

4-  Use cash! And buy what you really need only! 

5-  Pay off the debts with the highest interest rate first. 

6-  Add an extra payment on the next debt by taking the payment you made on the first debt and adding it to the current debt. 

7-  Always have you notepad or PDA with you and invest in personal finance software to track your spending. Search the web and you will find great software for competitive prices. Also invest in debt-reduction software, it will help you calculate and create a debt reduction plan.

8-  If you have investments that are paying lower percent then the credit card interest rate, cash out your investments and pay off your debt. 

9-   Use consumer credit agencies to arrange repayment of debt. Many are free. 

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To get rid of the debt stress, you will have to give up many things you consider needs. Believe it you can live without new clothes for a while, without buying the latest smart phone, the cable TV, the higher bandwidth internet connection, and much more, believe it or not. You have to face the responsibility and the consequences.
Luxury items and things you want will be more valuable to you, when you really can afford them with cash up front, or using credit in a wise way.

If you are an employee, be willing to work overtime, get a part-time home job or something similar, there is plenty of websites that offer home job opportunities. Get a better income will help you to get out of debt. When you are free, take an hour just to think and think, try to have new fresh idea that might help you in improving your income and/or reducing your expenses. Search and search, for example you can buy the same item with 30% less price from a different store.

Do not be fooled with brand name, a xyz mouse for your computer will work the same than a xyz2 mouse. It is a mouse! Why do you need to spend double the price for a brand name!

When you have the same item with different brand names and both of them have a 2 years guarantees. In such situation, do not look for the brand name, look for the cheapest. There are thousands of tricks and ways to save! Always search and save!

If you can buy directly from the factory do it, stores are buying from resellers and resellers from the factory so the fees are double or triple sometimes.
 

When your debts are high and your monthly income is not enough to cover the payments, there are ways to solve your debt problem. But the road to financial recovery takes a total commitment. You must decide you want to be debt-free. You have to discipline yourself to take the necessary action to pay back your debts. Only you can determine if you are willing to make the necessary sacrifices to achieve this goal.

Finally, it is inadvisable to take out new loans to pay off old ones. So-called consolidation loans are often offered at very high interest rates, quite often all they do is saddle people with new debts they can ill afford just follow the get out of debt plan and you should be okay.

Nowadays, everyone carries a mobile phone or a PDA (Personal digital assistant) or a pocket pc. Carry them with you all the time, and record your purchases whether by writing a note or downloading a free or paid financial management software, it wont cost you more then 30 bucks. If you are only using notes, write down the amount and what it was for. That way you can really see how much you are frittering away each month. This is the best way, to keep records of your financial life in your pocket every time and everywhere.

So it would be better to carry your PDA or small notebook rather than your credit card(s). When you need to buy something take a look at your notes, and see your total debt or purchases and the budget that you can really work with. You do not really need to buy an item or whatever product unless you really cannot live without it. In most cases, you spend money for something with less priority while you can save this money for something with higher priority or to pay existing debts.

Always make a monthly budget for yourself, if possible do it weekly or even daily; being financially organized is the key to success. You must include details in your budget. Add foods, bills, entertainment, transportation, shopping, miscellaneous and other and this way you will see how much you really need to spend and which is higher in priority… If you can make changes to your way of life and save some money, do so. Use that money to pay back debts and in the meantime you should stop adding to your borrowing by surviving only on cash or debit cards

Are you a student? An employee? Bring everything with you to school/university or to work. Have your lunch, snacks and even your drink. It is better than buying from a machine. You will save even with a small amount but you are SAVING.

For example, you can save between 1 and 3 dollars every day if you avoid using machines, this way you have around 60 dollars each month saved. 

Instead of saying that something only costs one dollar, say if I don’t buy it that is one dollar that I can put away for a rainy day or put toward debt.

Look at your monthly income based on the net amount. Deduct taxes, health plans, social security etc… and you will have the net income.

If you are in debt, it is a given that you are spending more money than you make. You are in the red. There is no way to play games with yourself about it.

Live within your means. If you can’t afford to pay cash, you can’t afford to have it. Pay off highest interest debts first.

Usually, when you have less free time, you spend less money on nights out or shopping. When you are in debt, do not go out for shopping or for entertainment until you are managing your financial life the good way. Find something beneficial to do with your rather than going to the mall. This way, you’re reducing your debt, and most importantly, not adding more to your debt. If you cannot keep up, you may enter a debt consolidation program. Do not ever work with private forms or lawyers with these issues. There are plenty of non-profit agencies who are glad and ready to help you anytime by negotiating maybe a lower interest rates or by plans on improving you financial situation.

Even though you do not like to have an third party agency help you get our of trouble, remember it is 100% better than bankruptcy and you will have a debt-free date to look forward to.

Take this advice from someone who work in the credit card industry; pay your bill every single month, whether you have a due payment or not. Look at how much you’re late and over limit fees are. You could be racking up with monthly fees which are added to your principal balance and are then charged interest on the next month.

If you’re a real shopaholic, go to the thrift stores. They are often charity run and often don’t take credit cards, so you have to pay cash. Keep you living within your means and you can find great stuff there. Go to the well-heeled neighborhoods early for the best stuff. You can get great items if you keep your eyes open. Would you rather have a big credit card bill you can’t pay or a few scuffs on furniture or appliances that has lots of life left?
It’s a real high to find the things you need and still stay out of debt.

Be honest with yourself, this way you are on the road to freedom. Ask yourself how this happen to me and why it happen.
You will need to really assess all the debts.
Look at all your statements. Cut up and cancel all the cards and accounts, except the one with the highest remaining credit available.

You should keep one account open for an emergency; we are not saying that you must live without a credit card.

In the next post I will be doing the 3rd and final part of your Get Out Of Debt Plan

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There is always a way to get out of debt especially if you organize your money and know how to and when to pay.

If you follow the steps below, you can help yourself by 90% to become debt free.

1- KNOW what you owe.

You must know and identify clearly what you owe; the best way is to create a debt list with details for example:

And identify which payment has the highest rate thus allocate the highest priority to it.

2- Avoid creating new Debts. When you are already in debt, do NOT create a new debt. Try your best to create savings strategies for the expenses that you do not pay monthly, for example some bills are paid quarterly. Even though, this bill is paid quarterly, keep aside the amount aside each month.

3- Decrease your expenses by developing a clear strategy and try to increase your income.

4- Do not always use your credit card.

5- Always create a list of items you plan to purchase and know the amount you are planning to spend. 

6 – As soon as you develop a plan with your monthly income and expenses, you can set the good amount for paying your debts. Remember, as we discussed previously, adding an extra amount to your monthly debts payment can decrease the interest payment and save time. When you have money with you, and you really do not need them as an advice add this amount to your monthly payments.

7- Being debt free is not only, a way to manage your money, but also a negotiation part. Try to find the alternate with a lower rate. Use negotiations, pretend to your current creditor that you’ve got lower rates with another one; this might help reducing rates to keep you as a customer.

8- Think before you buy! Sometimes you buy for an item and later on identify that you do not really need it at the moment. Think well before planning to buy. Ask yourself “do I really need this item?”

9- As we mentioned in an earlier post, we have good and bad debts, stay away from bad debt. Stay away from:

     – High interest credit cards

- High interest items

- Big mortgage

10- Do not buy a brand new car when you cannot afford to pay it. As an advice get a used one and keep it for many years.

11- Be smart and reasonable.

Those are some steps toward being debt free, but getting out of debt is challenging but for sure it can be done especially with dedication and perseverance.

When you are asked to decrease your expenses, cancel your credit cards, develop a plan, etc… you are changing the way you live, and especially the way you think. Following the steps mentioned above is not a rule to follow, you must change the way you think to be convinced with that.

Saving one dollar every day or any very small amount of money can be useful for a rainy day or to help in your debts.

Always pay off the smallest bills at first, this way you will save some money and add it to the highest bill. This works in most cases when you have for example 5 bills. You pay the small then allocate an extra payment from the saved amount into the higher bill.

Again and again, we repeat the same messages, keep your credit card for emergencies, do not carry the card with you, and have cash in your pocket unless you really and urgently need it. Get out of troubles, and put your credit card at home. Hide it somewhere out of your eyes. 

Take this into consideration; the credit card business is very competitive. When you always make your payments on time, call and ask to lower your interests, this is a right for you.

In the next post we shall continue with our plan so look in soon.

Do you realize that if you owe $5,600 on a credit card with a 18% interest rate, and you only make $100 payment each month that you will owe on this account for 124 months and pay a total of  $6,708.54  in principle and and  paying % 54.5031 of interest for the payment. That is just plain crazy, so you need to understand some of this so you know how to get out of debt.

Real examples are usually the best tool to demonstrate a theory. Let’s take few examples:

Lets just imagine you have 3 debts:

-      Home Loan

-      Credit Card

-      Car Loan

Home loan has an amount of $36.000 with %14 of interest rate, $3500 for the credit card with %18 of interest and $21.000 for the car loan with %10 of interest.

Most people unfortunately, do not summarize their debts correctly. They simply follow the debt period/time and payoff their debts without having a clear status of what is really happening behind the scene.

This Blog, is not written to simply explain theories; you will learn how to calculate your debts and how to recreate a payment plan to avoid huge interest rates and hence cutting down your debts and/or becoming debt free.

As an advice, take your calculator, have a paper and do at the same time these examples and you will notice how drastically you can cut down your interests and save time and money!

Let’s now start to summarize these debts:

Summary for your current debts:

-      $60.500 is the total amount of the debts we have. ($36.000 + $3500 + $21.000)

-      12.8% is the interest rate we are paying. (Weighted average for 14%, 18% and 10%)

-      $850 is your current monthly payment. ($500 + $100 + $250)

-      $647.50 is the amount of interest you are paying each month. ($60.500 x 12.842% / 12)

-      76.1% is the percent of your monthly payments on all your debts.

If you continue to make the current minimum payments on all your debts, you will be in debt for:

13 years and 2 months

During this time you will pay a total of $59,766.10 in interest which is 98.7% of your current debt!

Can you imagine this huge number! 98.7% of interest!!!

This is the current debt status; this is the nightmare if you do not follow a debt free plan. Shocking numbers!

● Your Home loan needs 13 years and 2 months to be paid off

● Your Car loan needs 12 years and 2 months to be paid off.

● Your Credit card needs 4 years and 3 months to be paid off.

Total: $60.500

Interest: $59.766.10

Can you imagine paying interest approximately the same amount of owe? Unbelievable!

You will be paying for this $120.266, by simply recreating a repayment plan (following steps of Chapter 5), you will save this money! And save time too! And make life easier and let the dream come true, by understanding this you can hopefully start to see how to get out of debt simply by having a greater understanding about how interest works and make it work for you.!

If you were to pay off your debts by paying either the minimum amount or the payment amount of a 15 year amortization, you would have to pay a total of $59,766.10 in interest and would not pay off your debts for 13 years and 2 months and in the next post I shall be looking at how to make a debt plan.

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Are you drowning in debt? Or would you just like to be free of the debts you have and finally become debt free?

This little blog will help you summarize your debts and create a Debt Reduction Plan that will show you how to pay off all your debts much sooner than you would by paying only the minimums.

After reading my next few posts, you will be able to reduce or/and eliminate your debts in as little time and/or with as little interest payment as possible. Believe it or not, you will succeed to let the dream come true.

This post will be followed with real-life examples, on how to reduce debt for a given payment.

Keep in mind one word: “Interest”.

Interest is a magical tool, interest makes you rich or poor. Creditors always use it to their advantage. Remember! It can also work in your favour if you really followed the articles in this blog. Let the interest be working FOR YOU instead of AGAINST YOU.

However, getting out of debt and becoming debt free will require patience, commitment, and consistency. The most important part of this step is to restructure the way you pay bills and set priorities.

We know very well that everyone is excited about getting a fresh start especially upon graduation, and unfortunately in most cases this start is at the same time the beginning of debts!

You will accumulate loans, credit card bills, and miscellaneous expenses and costs. These debts you are building will unfortunately stay with you a very long time if you do not know how to manage and get rid of them in the shortest time by paying the least interests. Debts and interest charges can eat you alive!

The first advice to become debt free is to pay attention on how you are spending your money, the second advice is to summarize your debts and get a debt reduction plan work at it and become debt free.

So, if you’re in debt, the trick is to get yourself out of it, and set yourself on the road to becoming Debt Free. Its not going to be easy but wouldn’t you want to put some work in to live a Debt & Stress Free Life.

And that programme starts here.

To get out of debt, you need to shed the luxuries.

You buy only what’s needed and you live within your means.

You drop the flying lessons, your personal trainer and you stop eating out 4 and 5 times a week. You try to recycle your left over food into another meal, you buy cheaper food, you cut out the alcohol, you cancel your excessive subscriptions and you make significant cuts wherever you can. Every bit you can save will be able to go towards your debt program.

Yes, I know it’s unpalatable and heavy medicine, but you most probably got yourself into a mess with your own liberality and now you’ve got to take the steps that are necessary to get you out of the pickle you’re in.

So, sit down now and make two lists.

Take a sheet of A4 paper and fold it vertically in half, that’s side to side, not top to bottom.

Now you’ve got two columns, one on either side of the fold.

In the left hand column write “Must Haves”

In the right hand column write “Don’t Need”.

Now, take a moment to think about your life.

What must you have to enjoy your life and what can you sacrifice to get out of debt?

Write them all down. And be hard on yourself. This is no time to cut corners or make excuses. If it has to go – get rid of it!

You’d be surprised even if you only look at a typical month’s expenditure how much you can save if you really think about it.

But saving it on paper really isn’t much good.

The money you save in the right hand column by cutting out unnecessary extravagances must be used to attack, reduce and pay off your debt.

If you can save yourself £50 a week, then you can afford to pay off an additional £200 of credit card debt each month. Take that small step and you’ll see you credit card debt start to tumble.

Be focused. It won’t be easy and you will have to make sacrifices. But it will be worth it and you’ll soon see the effect in your pocket and in your smile.

If you’re to get out of debt, what you’ve got to do is take stock of exactly where you stand financially.

You’ve got to see and understand where you are haemorrhaging money and you’ve got to work out what you can do to stem the flow.

That way, you gain control and that’s what managing your debt is all about – you regaining control of your own money.

You see, at the moment, you don’t control your options with the money you earn. Your debt does.

That is the position we have to change.

We have to put you right back in control so that you decide who gets the money and where it goes.

And, pretty soon, you’ll have squared your debts & become Debt Free and be in a position, perhaps, to invest some of your money in a business that could make you seriously wealthy.

Now from where you’re sitting, wouldn’t that be something worth shouting about?

Stay tuned for the next post as we take the next step to becoming debt free.

Unfortunately, and based on studies, people do not deal very well with and take debt seriously, this leads to huge bills and debts accumulation and long term interest payments, one of the main villans here is Credit Card Debt.

Take the following few advices to avoid debts:

-       If you have credit card debts, which is in most cases the biggest source and the most serious of debts accumulation especially for students and newly graduates people, you must pay off as quickly as possible to avoid long term debts. Take this advice seriously, because ignoring or delaying any payment can become a nightmare and eat you alive.

-          Learn and learn how to calculate interest, I will explain step by step how to perform these calculations shortly.

-          ALWAYS check the interest rate. You must ASK first, you must receive clarifications before choosing a credit card. Always assume that you have the lowest interest rates.

-          Having multiple cards is like owning multiple weapons and you will risk injuring yourself. Keep one or maximum two credit cards with you. This way you can handle your debts easily

-          Educate yourself on how credit cards calculate interest. Then, check the interest rate on your credit cards.

-          Know what you want to pay! Never use your card for something you cannot pay for with cash. When you have a checking account and have a debit card, use it. This card is very useful for small items rather then even paying interest for small items. Credit cards make paying money easy. They also make going into debt easy

-          Always have a plan to pay back your debts. If you need to buy something, think first “how can I pay it back?”

-          I could write a whole book on this subject alone but hopefully some of the above will get you started on your road to becoming Debt Free.

In the last post we looked at what debt is,now we understand that I’m going to talk about why people get into debt in the first place and with that in mind lets get started.Let’s take a simple example; you do not have enough money and you want to live, you need food, clothes… this is life! Serious reasons can be related to circumstances changes, you lost your job, health problems and you cannot afford to pay for the treatments etc so you start to borrow money and end up in debt.

There are hundreds of reasons to get into debt. But most people do not use debts to their advantage.

People suffer lot of troubles with debts mainly because it is easy to borrow. Also people are sometimes fooled. For example some credit cards do not offer interest rate for a limited time but when that period is over, logically speaking you end up paying double the main rate.

Another very frequent reason about falling into debts, people especially young, pretend or believe that they are managing their debts in the good way by paying the minimum amount every month without recognizing that paying the minimum leads to years and years to pay off a small amount that can be paid in few months.

Thus, the aim of this Blog is to show how to manage and create a debt reduction plan and become debt free.

The above is by no means an exhaustive list you may have lost your job, been made redundant, marriage break up, divorce and many more besides

Take this advice, do not ignore debts, it will only get much worse, much worse. I use to ignore my debts, thinking that a magical solution would appear tomorrow.

Well, tomorrow always came and went but no magical solution appeared.