As a financial professional a lot of people come to me for advice about money and decisions involving money. However, I wish more people asked about debt.
I have noticed that most people are looking for a fast way out of debt, like consolidation, etc. but in my experience there isn’t really a magically door to Narnia, where the debt you once had just vanishes. No matter what solution you choose, you will have to pay what is owed. Ahem! (student loans) I believe most people do realize that getting out of debt takes some work and that it’s all about discipline, so they tend to avoid it. And this is where it gets bad. Think about it, if you have a bully, will they just leave you alone if you ignore them? Or will they continue on with the torment until they get a reaction from you? It’s the same with debt, the more you put it off or ignore it, the interest just continues to build; the bill gets larger, the extra charges add onto that bill, and sooner or later you have this massive two-headed dragon that you are petrified of. Trust me, I know this all too well because that was once me!
So what steps can we take to chip away at this tree called debt?
- Get a free credit report from one of the major credit reporting agencies. See what is hurting your credit, so you can properly address the problem.
- Create a bi-weekly (or however often you get paid) budget! And add the minimum payments of your debt to that budget.
- Sprint to $1000 in emergency savings! This is the best time of year to start that as well, since it’s tax return season.
- Having an emergency account will help relieve the pressure of using credit cards in the event Uncle Murphy pays you a visit.
- Last but not least, make a decision to live in cash (debit card is fine as well) and relinquish the use of credit cards to accelerate your debt freedom date.
If you have any questions feel free to comment and I’ll do my best to reply and delve even deeper into this subject if need be. This isn’t the complete guide to debt freedom but it is a great start!