2 Steps to Reduce your Debt

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There is a way to control your debt and finally become debtfree, it is not as hard as it seems, in-fact it might sound silly, but the only reason why you are in debt is because of one silly rule that we tend to forget, which is,

We spend more than we earn

To control this debt monster you have to start making small changes to your household expenses, and you will soon notice a difference, you do not have to do any thing that is drastic, just have a plan that you can implement TODAY and each week you will start having more disposable income in your pocket. Do not go and spend this extra cash, use it to cancel more of your debt.

To get your self out of your mountain of debt, 3 things have to be in place.

have a plan - an expense and a payment plan.
start paying off your debt.
start saving plan, (emergency fund).

You have to learn to get your finances under control, it is crucial to plan your spending, and because we never know when an emergency could arise you need to create an emergency fund.

One of the most important steps, as mentioned above, is that you need to find a way of increasing your income in multiple ways, in a series of steps designed to get your finances in better shape and to pay off debt faster.
Living within your budget should be the first thing you do, It is vitally important. But it’s only a part of the equation — spending less only gets you part of the way. Earning more gets you the rest of the way.

How can you increase your income? Sure, anyone can create a blog, write an ebook, freelance, write a print book. But it doesn’t always work out for everyone.

The key is to find something you’re passionate about, and pursue that with all of your heart. That might mean educating yourself, and learning new skills. That might mean finding mentors, and starting at the bottom. But when you’re passionate about something, you’re more motivated to learn and to succeed. Really pour yourself into it, and you’ll find a way.

It’s also important to seek new opportunities, and don’t let good ones get away. If the opportunity doesn’t work out, well, drop it … but at least you gave it a shot. And who knows? One or more of those opportunities might turn into pure gold.

Start implementing this 2 step approach now, to start decreasing your debt and work towards becoming DEBT FREE.

Step 1 : Resolve to spend less than you make
Realize once and for all that if you can’t pay for it today — you can’t afford it.

Work out your Debt.

Sit down and work out how exactly how much you owe and who you owe it to. Be honest or you’ll only store up more problems for the future. If your debt repayments take more than 20% of your net monthly income you are entering a danger zone and must take steps to cut back.

Understanding how much debt you’ve accumulated is the first step toward reducing it. Use a Debt Checker Calculator to determine the total amount of your debt. It can be difficult to confront that total, but it’s critical that you do. so you know exactly how much you owe to the world. Put them in a spreadsheet, with monthly payments, interest amounts, balances, and a running grand total of all your balances. Update it monthly as you pay off debt, and watch the overall amount go down slowly.

Create Your Plan

Put the plan for reaching your goal on paper. The Debt-to-Income Ratio Worksheet and Debt Goal Worksheet may help you set targets for monthly expenses such as utilities, groceries, medical costs, household needs, and transportation. Set realistic targets and then try to spend even less. Make hard decisions about how to squeeze more of what you earn from your budget to pay off your debt. Don’t forget to budget for the unexpected, such as replacing a broken hot water heater or emergency medical treatment.

Step 2. Distinguish between Bad Debt and OK Debt
OK Debt has an interest rate well under 10% — preferably with some tax advantages to boot. In the best case, what you bought with borrowed funds will appreciate in value. Home mortgages and student loans are examples of OK Debt. Automobile loans are on the border: They often satisfy the low-rate piece, but automobiles almost never appreciate in value. Bad Debt is everything else — from your Gold credit card to the 29% loan from Lenny’s Kwik Kash.

Cut up store cards
Store cards charge by far the highest rates for credit, so if you’re finding it hard to manage these debts throw away your cards now to avoid temptation.
You’ll pay well over the odds for most store cards - it’s better to pay cash if you can. For those items you can’t pay cash for, shop around for the best deals - the market is competitive, so there are some excellent interest free credit offers around. It is also worth taking a look on the internet as many products are offered there more cheaply.

Cancel the credit card.

Cancelling your credit card is crucial in getting out of debt, credit cards are extremely tempting, and with the high interest, they can be very dangerous. It is possible to use them wisely and even profit from using them - however, most people don’t use them that way, so it’s better to just cancel the card.

Eliminate non-essential expenses.

You need to cut back on luxuries, eliminate everything you do not need: cable TV, eating out, going to the movies (except on rare occasions), alcohol, cigarettes, buying new clothes (except when really needed), etc. Re-learn what it is like to live frugally. This is an important aspect of being debt Free.

Create a spending plan.

Most people don’t like to use the word “budget” so use a more neutral term like “spending plan”, because it conjures images of creating a plan to achieve a goal, taking action, and doing something about your problems. Nevertheless, both concepts are essential the same: figure out how much you make, and consciously decide how much you want to spend this month.

Instead of doing a monthly budget try a paycheck budget, it is much more specific, you then can see exactly how far your paycheck can stretch.

Anyway, the spending plan is essential. You have to decide where your money is going to go before you actually spend it. Remember it was spending without a plan that got you into trouble. A plan should be flexible, and have a little manoeuvre, because life changes.

Finally
Always Track Your Spending—Using the plan you’ve developed, track your spending carefully so you can look for additional ways to save. The more money you can apply to your debt each month, the sooner you should be out of debt. If you need more help with your Debt, please see the following list of Debt Advice Centres, which can really be beneficial in getting rid of your Debt Monster.

saving money