By: Samantha Buck
These debt management tips will show you how to:
* Tell if you have 'good' or 'bad' debt
* Pay off all your debt
* Enjoy living debt free
When you're buried in debt, the thought of paying off debt seems nearly impossible. But, if you have an organized plan to get yourself out of debt, you'll be living debt free easier and faster than you can imagine.
What kind of debt do you have?
Before you begin to develop a plan to pay off your debt, you first need to know what type of debt you have - good or bad. Good debt increases your net worth over time. Bad debt on the other hand does not increase your net worth. Bad debt is usually credit cards used to purchase consumer goods that typically decrease in value. An example of a good debt would be student loans. Student loans allow you to obtain a college education, which will allow you to obtain a better job, so they are considered good debt to have. Another bonus is the interest paid on student loans is tax deductible. A mortgage is also a good debt since houses typically increase in value over time.
As mentioned above, credit cards with excessive balances are considered bad debt as are consumer loans with excessive balances. The goods purchased on this type of credit typically decline in value, or even wear out, or are lost before you have paid them off!
But, what about a car loan, is that bad debt? A car loan is somewhere in between good and bad debt. It's bad in that a car decreases in value the minute you drive it off the car lot. But, not many people have the cash to buy a car so, it is necessary to take out loan to purchase a car most of the time. And, a car loan can be viewed as a good debt in that it allows you to get to work everyday to earn a living.
Your best bet is to limit or get rid of credit card debt altogether. So, let's talk about debt management tips that will allow you to pay off your "bad" debt and eventually your good debt too.
Pay off debt and enjoy living debt free
You'll want to develop an organized plan to pay off your bad debt first.
First, write all of your bad debt down and include balances, creditors, interest rates, and the monthly minimum payments.
Second, contact each creditor and explain your situation requesting a reduction in the interest rate.
Third, organize your debt pay off list developed in the first step in descending order with the highest interest rate debt first.
Fourth, tighten your belt and limit any extra expenses and use the money saved to begin paying off your debt.
Fifth, take the money from the fourth step and make a payment to the debt with the highest interest rate while paying the minimum payment on the other debt.
Sixth, once that debt is paid off then take that payment and apply it to the next debt on the list.
Seven, repeat over and over until all of the bad debt is gone.
Once you're done paying off your bad debt, then work on paying off any car loan(s) the same way by applying payments you were making on all the other bad debt to the car loan(s).
Once that's done, move onto the good debt like student loans and pay those off in the same manner. Then move onto paying off your mortgage! Yes, it can be done.
Just think, one day soon, with these debt management tips, you'll enjoy living debt free!
About The Author:
Samantha Buck is a Professional Organizer and Editor of www.LifeOrganizeIt.com/debt-management-tips.html where you can find solutions to life's organizing dilemmas even debt management tips. Subscribe to the free organizing magazine "Organize It Mom!" at www.LifeOrganizeIt.com/free-e-zine.html. Not just for moms, this magazine will help anyone get organized!
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