Monday, December 11

The Ten Best Tips to Get You Out of Debt

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In this world of economic crisis it is becoming increasingly difficult for people to save money and some are falling into debt. Here are my top ten tips for getting you out of debt. Some are easier to follow than others, but all are designed to help alleviate the problem:

1. The first thing you should do if you are unfortunate enough to find yourself in debt is to create a realistic monthly budget for expenses. You will need to list all your monthly bills and necessities and ensure that they can all be covered by your monthly income. Allow only what money you have remaining to be spent elsewhere. Make sure you stay within your budget guidelines.

2. Pay off the balance on the credit card with the highest interest rate first (unless the balance on any card exceed 50 percent of your credit limit). Firstly you need to pay all balances to get below 50 percent of the card limit because balances above this level cause your credit score to decrease. Next you will need to pay off the balance on your credit card that has the highest interest rate. Next month you will need to do the same with the card that has the next highest rate. Continue to do follow this plan until you reach the credit card with the lowest interest rate. You will then need to use this as your preferred account. You need only four open accounts to establish a positive credit history.

3. If you want to escape debt you will need to learn to swap your credit cards for cash. You need only have one primary credit card that you must only use in case of emergency or for major necessities. Put your credit card in a safe place, not available for everyday use. Also, do not accept increases on your credit card limit above an amount you can easily pay off within three months.

4. You should use direct deposit for your paychecks. You should also have a limit on how much you will allow yourself to withdraw each week and month.

5. Cut down on an discretionary expenses. These included such activites as dining out, visiting the cinema or overusing your cell phone.

6. You should evaluate your living situation. Your housing costs should be no more than 33 percent of your household income, this also includes any mortgage payments, property tax, and both property and homeowner’s insurance. You can shop around for lower insurance rates, refinance your home mortgage, and look for more economical utility plans.

7. Avoid borrowing money to get out of debt, especially consolidation loans. Many people think this is a way of helping them get out of debt. However, consolidation loans are simply a means of combining debt. You could end up losing everything because you’ve tied it all up in one loan. If you must borrow, see if a friend or family member can lend you money, since the interest rates should be low or nonexistent.

8. Contact your creditors and try to work out repayment plans. Some creditors will be willing to work with you in a manner that will help them get their money without having to call the debt collectors.

9. You will need to become a savvy shopper. You will need to look for deals, bargains, and savings. You’d be surprised at how much you can save if you take the time to shop around. Check out the price comparison Web sites to help you find the best deals.

10. Look for extra ways to make some money. From part-time work to a garage sale to taking in a boarder, there are many ways to bring in some additional income. You can also join sites such as bukisa or triond to help bring in some more money. If you are successful it could begin to net you between $100 and $500 a month eventually.

If all else fails though I advise you to seek out help from a debt reduction specialist or counsellors who can help you formulate a plan for you getting out of debt and staying out. Ensure you check the service before hand however, as some companies are preying on those in debt and charging them through the roof.

I hope these help.

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