How can I eliminate my debt?
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How can I eliminate my debt?

Stop wasting your money ...

 
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For most people, the best way to reduce debt is a three-pronged program:
1. Reduce expenses.
2. Increase income.
3. Pay off each bill one by one.

That are not steps to take one at a time. You must focus on all three - day by day and month by month.

Pare your expenses down to necessities. You need to buy food; you don't need to eat out at a restaurant. You need to pay your rent or mortgage; you don't need to take weekend trips to expensive resorts or hotels. You need to buy gas to drive to work; you don't need to cruise around the mall.

Shop on a cash/debit card only, "pay as you go" basis. You can't get out of debt by borrowing more money.

Many financial experts advise you to spend a week writing down everything you spend money on. This is meant to shock you into realizing just how much money you are wasting. When you're reaching for your wallet or purse, ask yourself, "Is this really a necessity?" You can wake up without spending $5 for a supercaffeinated drink (and your heart will thank you). You can wear some of the clothes already hanging in your closet instead of buying a new pair of slacks or a dress. You can wear shorts and a t-shirt around your house instead of keeping your air conditioning turned down to 60 degrees.

Think about how hard you work for your money on your job. Do you fight rush hour traffic every morning and put up with your boss just so you can throw your money away? What sense does that make?

Reducing your expenses can also include reducing the interest you pay on your credit card balances. If you're receiving offers from credit card companies competing for your business, it's okay to take advantage of lower interest rates by transferring balances from one card to another. Yes, the teaser rate will go up to a normal rate in a few months, but you've saved some money those first few months. Just don't charge more money to any of your cards, and continue with your entire debt reduction program. You goal is to eliminate all credit card debt no matter what interest rate you're being charged.

As you stop wasting your current income, think about how to increase that income.

Clean out your basement and garage, then sell everything you don't need on eBay. Then redirect your shopping expertise to finding bargains that you can resell on eBay for a profit. Thousands of people make a part-time income on eBay, and for more people than you realize, it's a full-time, upper-middle class income.

Can you get more overtime on your job? Can you work part-time in your field? Can you work a part-time job? Do you have some skill you can practice on a part-time, freelance basis? There're many ways to make money online in a business or by providing a service.

Marketing consultant Jay Abraham advises people to sit down and make lists: everybody you know, all your accomplishments, all your skills, and all your interests. Then think about how you can help other people. You may well find that this step not only helps you pay off your current debts, but launches you into a venture that enables you to quit your current job and, eventually, makes you wealthy.

The more you reduce your expenses and increase your income, the more money you have available to pay down your debts. Make only the minimum monthly payments on all your bills, except one.

Choose the one debt (usually this will be a credit card) with the highest interest rate and the lowest balance. Every month, pay as much on this card as you can until it's paid off. Then focus on the next most expensive card or next lowest balance. Once you've paid off all credit cards, focus on medical bills and student loans. Then save enough money to pay off your car note.

Celebrate your achievements, but don't allow yourself to go back to spending more money than you make.

If you have adverse personal circumstances that prevent you from taking these actions (medical, financial or other hardships) it may be to your advantage to: Go to your local Consumer Credit Counseling Service and ask them to negotiate with your creditors on your behalf. Contact your creditors, explain your circumstances, and ask if they will write off your debts or accept a compromise offer (all financial institutions maintain a fund for uncollectible loans). Or file bankruptcy (see an attorney for legal advice.)

Focus on how happy you'll feel when you're debt-free! (don)
 
 
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