Be in Debt For Less With These Tips
“Can you be in debt and still be financially free?” This is the common question asked by many people seeking freedom from their debt burdens. The answer to this question is an unequivocal “yes”. In fact you could easily be out of debt and still be financially free, as long as you choose wisely in choosing how to manage your debt.
Financial Freedom and Debt Most people who are interested in financial freedom think that there are only two possible scenarios: you either owe no money or you owe a lot of money. The truth is, the average household in the US does not owe a lot of money but does owe some form of debt, depending on what that debt is and how extensive the problem is. Financial Freedom and Debt When you are striving towards financial freedom, regardless of how large your debts are, your goal should be to pay off those debts in as short a time frame as possible. By doing this you will be putting yourself back into a position of being debt free, instead of being trapped in the debt cycle. This would be only the positive side of becoming debt free, and you still wouldn’t be in debt at all.
Debt Consolidation to a Lower Monthly Payment If you are paying off many debts with a high interest rate, then consolidating them into one lower interest rate loan would be a good idea. This will also help you pay down your principal balance, which will further reduce your monthly payments. By consolidating your loans into one monthly payment, you will also be reducing the stress and hassle associated with remembering to make each individual payment. As a result, your overall financial situation will improve, freeing up more time for you to be spendable with family and friends. However, if you are only trying to make a few extra dollars here and there, this can be a bad idea, as it won’t improve your Net Worth and could leave you even more stressed.
Kiplinger Baskets – Get a Good Debt Consolidation Plan Even if you don’t have too much money to work with. You will still want to try to get your debts paid off by using the kiplinger method. With the kiplinger technique you compare the amount you are likely to owe with the amount you currently owe on your credit cards. This is where most people go wrong and end up worse off than they were before. The reason why is because they used the kiplinger formula to determine their monthly payment amount and use that to calculate their debt to income ratio.
Unfortunately, if you currently owe more on your credit cards and car loan than you have saved (as well as the amount you currently owe that you could easily pay off in 30 days) then the kiplinger formula is not going to work for you. This is because the monthly payment you would be able to make on those accounts, would be greater than the amount you currently owe. In this case, it might be wise to open a separate checking account and put some money into it. Then, when you have extra money that you don’t have to use immediately, you can begin to make those payments to the new account.
If you cannot get a consolidation loan or qualify for an unsecured personal loan to pay off your current debts, then you need to look at getting a debt consolidation loan. Typically, student loans are secured and are good at saving borrower’s a lot of money. However, many people end up paying way too much interest and fees just because they did not look at the big picture. A student loan is great while you are in school, but once you graduate you should be paying it back.
If you want to be in debt only for a few years, then do what is necessary to get out of debt. Put your student loans into an interest-free savings account and use the funds to pay off any other debts. Some people even get a second job to supplement their income. After you are done paying off your student debt, save the money. This money is then used to pay off any high interest credit cards. If you have an average income, you should be able to easily make your monthly payments to eliminate the amount you owe.
To prevent future student loan debt, you need to start by cutting back on your expenses. It would be best if you could cut back on your credit card and utility bill expenses. You need to make sure that you do not spend more than 30% of your take-home pay on any type of entertainment, meals, or clothing. Be sure to get rid of any unpaid medical bills. If you have any unpaid medical bills, they need to be paid as soon as possible.