Here are a few things to think about if you are considering eliminating your debt.
I will not talk about “Debt Management” or “Debt Reduction” as those two phrases will still leave you with debt.
Debt is a tool, something to use in order to help you get something now, that you can’t/don’t want to save up for. A good example of this is a house or a car.
Yet all too often what happens is that we start to rely on debt to live. We get used to making those monthly payments and just start piling on debt to get ever more stuff.
I have said it before, and I will say it again, the most dangerous position to be in is where you are just treading water.
Treading water is when you are making your payments and you are not falling behind, yet you are not getting ahead either.
Credit cards and lines of credit are good examples of this kind of debt, as with them there is no end in sight; you just keep paying and paying.
With a mortgage or vehicle loan, there is an end date. Yet most of us keep moving from one house to another and/or trade in the car once we pay it off . . . WHY?
So let’s say you want to eliminate your debt, or at least the rotating debt (lines of credit/credit cards).
Let me just say that I think that you should keep the credit cards and lines of credit, but pay them off and don’t use them (unless you have to). Why?
Credit is something you get when you don’t need it, so you have it when you do. This is because when you do need credit, “they” won’t give it to you . . . because you need it (and are therefore a bad risk).
The first thing you need to do (if you haven’t already) is to stop the bleeding. Find a way to balance your budget. (If you don’t have a budget, make one, and stick to it.)
You can only do two things (or a combination thereof) to deal with fiscal problems. One is to increase your Income and the other is to decrease your Expenses.
While it is possible to increase your income, you are unlikely to double it anytime soon. The more effective thing to do is to decrease your expenses.
We have all done some cost cutting, so this is nothing new. The trick this time is to look at everything you are spending on and ask yourself if you really need it and could you do without it? (Or do with less of it.)
To really get out of debt will require a radical downgrade of your lifestyle. Perhaps not living an RV, but certainly making do with less.
To help you picture what this will require, imagine for a moment that your income was cut in half. Take a look at your budget with that in mind.
What would you have to do, be forced to do, in order to survive on half of your income? This may take a bit of time, (and a few heated discussions) but you will find a solution.
It doesn’t matter what you make, there are people out there right now living on half of what you make. Their lifestyle may not be as nice as yours, but they are surviving.
Now that you have determined a game plan on how you could live on half of your income you need to ask yourself the big question . . . could you actually do it?
Again this is not a permanent downgrade of your lifestyle, just a temporary one. A short term measure, say a few years, in order to get yourself out of debt.
If you need a bit of motivation, think for a moment how freeing it would be to be out of debt?
As always: keep your head up, your attitude positive, and keep moving forward!