Wednesday, March 27, 2013

Best Advice to Get out of Your Debt

Number of people are facing debt, and for some it can turn into a nightmare. Although the debt can be a positive thing, it can also quickly mutate into vicious circle that will push you to develop a funding plan for all your purchases. So I would like to present my principles to get out of debt. Stop funding your purchases and stop keep accumulating new debt. Someone who is in debt should not continue to invest either in bank accounts at risk or in new or objects. An increase in the debt does not usually get out of your debt (at least not in the context of personal finances). If you have a credit card that allows you to have a negative balance, get rid of it and ask your bank to a card that does not allow negative balances.

Stop your recurring payments:

Your subscriptions for cable, mobile phones (especially phones last generation) and contributions to gym classes or others which weigh a lot in your monthly budget. I suggest you delete any subscription "useless" (type gym, cable or magazine) and try to reduce the burden of subscriptions called "essential" as the phone (internet package or unlimited time options are most can happen) or the Internet.

Build an emergency fund:

Unfortunately, being in debt does not mean you are immune to mishaps. At any time, an unexpected expense can come fill your budget dedicated to paying off your debt (step detailed in the following section) and you jeopardize your opposite banks, insurance companies and other creditors. Note that the process of creating an emergency fund can take several months.

Pay off your debts:

Like the previous, this step may take several months or even years depending on the amount of your debt. You must first establish a monthly repayment to spend. There is no fixed value for that amount and it all depends on the total value of your debt, your income and the time you have to make the repayment. The first step to begin the repayment of your debts begins by taking a second job. Although this option is not valid for everyone, I think especially to parents who keep their children, or some may be working too much to spend time on a second job. The fact is that this solution is very effective to increase substantially the share of your income devoted to paying off your debts. You will then need to establish a method to repay your debts. Some say that we must first repay debts that cost you the most in interest. Others think it is better to start with the smaller debts worth to get rid of them one by one and more quickly. I find this second solution most suitable for each canceled debt cancellation generates interest. So you can add to your monthly value of the interest on the debt previously canceled. Accumulated small amounts added to your monthly payment will allow you to increase significantly. Now you just have to start clearing your debt. The process can be long and difficult, but this task will dramatically change your outlook a financial point of view.


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