How people get into debt
To be in debt, by definition, means that you borrow money to pay for what you could not otherwise afford and not be able to pay it back. Such a thing can happen for various reasons. Somebody may take out a payday loan, the kind where they assume that their next paychecks will be enough to pay it back, only to lose their job or be demoted. (Such loans are actually illegal in some places.) They may rely on investments that they have made to cover the debts, but the companies in which they have invested may fail. Whatever the case, you have a sum of money that needs to be paid by a certain time, and that’s not going to go away by itself. There are those who gamble so much that they get in way over their heads into debt. If you are reading this article, then you are probably in debt right now and would like more than anything else to get out of it. Read on to find out how.
The three essential steps
The process of debt elimination may be long and laborious one, but it can be broken down into three basic steps:
- not getting yourself any further into debt than you are already
- not spending more money than your salary can cover
- using the difference to pay off your debts
Following all three of these steps ensures that you will eventually be free of debt. Let us now look at some of the pitfalls of which you need to beware.
The first of these is debt consolidation companies. Debt consolidation is when you take out a single loan in order to pay off others, often in the hopes of having to pay lower interest rates. The problem with this approach is that it most often provides nothing more than short-term relief without addressing the root cause of the person’s debt problems.
Debt Cures “They” Don’t Want You to Know About
This book by Kevin Trudeau claims to help people to end their debt, but it does not really live up to that claim. The “magic cure” of the title, for instance, is to claim disputed items on your credit card bill as identity theft. Furthermore, Trudeau never actually interviewed any of the people whom he cites in order to lend credibility to what he said. The fact is that practically all of the useful information contained in the book could be found online.
Making a record of your debts
Okay, now let’s get down to the business of telling you what you should do to end your debt problem. The first thing that you want to do is to find out exactly how much money you owe to which sources and when each is due. Using a computer program such as Microsoft Excel, make a separate column for each of your creditors, the principle, the interest, the due dates and any special notes you have. Then apply the “divide and conquer” approach. These means that you make a separate schedule for each creditor, paying them back in installments if necessary.
Analyze all of your sources of income and place them against your necessary expenses such as utilities, groceries and taxes. Set aside a certain portion of your income to paying off each creditor. In the meantime, do not spend any money on anything unnecessary such as CDs, DVDs or games. That will only delay the point where you become debt-free. Above all, once you have made a plan to get yourself out of debt, remain committed to it.
If you are living alone, getting out of debt is a relatively simple matter. But for the married person, things are somewhat different. Your spouse needs to be able to see “eye to eye” with you when it comes to finances if you are to manage your debts. One of you may be in charge of all of both your finances, but when taking care of debts both of you need to take part. Visit the Find How website for more tips and tricks and resources to help you get out of debt!