Having been down the road of debt, which ended up in me filing for bankruptcy, I can provide some insights into preventing you from reaching such circumstances. The first hurdle to overcome is being able to acknowledge the problem. If you are in debt, you’re not alone. The average family owes upwards of $9,900 just on credit cards. If your monthly expenses, including debt, exceed 65 percent of your income, you should be very aware of what’s going on and take a hard look at your finances. The best advice I can give is to not ignore the problem. The bills are not going away so you must face the problem and solve it.
An issue I had was thinking about the daunting task of digging myself out of this hole. To me it seemed like a process that was going to take years to fix. Advice that I give now is that you might not be able to become debt free in 30 days but stop spending for 30 days. Stay away from the plasma TV that is being offered interest free for 12 months and do not even bother going to the mall.
In those 30 days you should be looking to see if you could get your mortgage at a more favorable rate. This will lower your monthly payment to free up some cash to tackle other debts. Credit cards should be consolidated if possible or at least transferred to another card of yours with the lower interest rate. One mistake people make though is that they close the accounts with $0 balances. You should keep these accounts open. Closing them can actually hurt your FICO score. On the flip side, do not go out and open a bunch of accounts either, as this will also hurt your FICO score. If all your credit cards currently have high interest rates just pick up the phone and give them a call to see if you can get lowered. You will be amazed at how cooperative they can be.
Once you have freed up some cash do not fall into the trap that now you can go and spend. This is not a shift-debt strategy but a zero debt strategy.
With this blog I hope to share some of my experiences as well as methods to become debt free and stay debt free.
Related Posts: