Financial trouble is no laughing matter. Once you land yourself in debt, there is a lot of hard work required to get out of it. You need a definite plan of action and concrete steps to evaluate your future options. It’s important to sit down, talk with your significant other or family members and actively consider the financial issues plaguing you. The main issue in solving many of the financial problems is the lack of a firm decision to do so. The first step you need to take is to actually make a decision that you want to change your economic condition and climb out of debt. A lot of people talk about how to change their financial lives but never touch on the fact that if you or your family isn’t ready to change, it isn’t going to happen. You have to want to change.
Once you’ve made a decision to change, you should decide not to incur any more consumer debt.
- No credit cards and home equity lines of credit
- No more high-interest automobile loans
- No expensive appliances or gadgets
- No store credit cards
- No more debt-period!
The next steps deal more directly with paying off your existing debt. The steps are generalized and can be customized according to your financial background and debt profile. Just visit Solution2Debt for a personalized plan. Use the general information and the steps described to make a change in the way you consider money.
Getting Rid of Existing Debt
When you have sworn off credit cards, the next step is taking stock of your existing financial resources. After accumulating a small emergency fund one of the very first things you’ll be doing is working on paying off all of your debt.
“Debt Snowball” is a method many financial advisers swear by. Basically, you order your debts from smallest to largest, and pay them off in that order. By doing this you can optimize the effect of getting quick victories by paying off the smaller debts faster. But this is derided by many other financial advisers, as the larger debts usually have bigger collaterals and higher stakes on non-payment. They suggest a Debt Avalanche method, in which the biggest debts are paid first.
You can use either of these strategies or even some sort of a hybrid debt repayment plan where you pay off some of your smaller debts first and then re-arrange your higher dollar debts to pay them off in the order of higher interest first. Whatever you do to pay off your debt, it’s important to make a plan of some sort, make a budget and stick to it.
Try to invest the remaining funds in future betterment activities such as emergency savings, investment, and college savings, as well as portfolio expansion. You can build wealth very easily from your existing income and not live under the sword of debt any longer. You will also be able to give more to others. Both financially and psychologically.
Save, Invest, Buy
Set a goal of saving a 3-6-month emergency fund which should be enough money to cover just about any emergency that could come up from a broken down car to a job loss. After you’ve set up a contingency plan for the present, look at the future. Buy mortgages or different assets. Set up a new venture or invest in national economy, investing 15% of your income into pre-tax retirement accounts would be most prudent. After doing all those other things, you should just continue building wealth and giving away a percentage of what is left over to the community.
The process of planning for the present through emergency funds, paying off debts incurred in the past, and then planning for your own and your family’s future is the most efficient. The ideas behind it are sound and giving back is the principle we operate upon. Contact our representatives to know more!