Financial Information
What is the best way to pay off debt and get out and stay out of it!?
Question : What is the best way to pay off debt and get out and stay out of it!?
best way to get out of debt
Best answer:
Answer by prosephina_s
Work towards consolidating your debt into one credit card or loan that has the smallest rate. Don’t spend any more on credit cards and try to pay double or triple of the minimum payment. In the future, don’t carry your credit cards with you, as it may be too tempting to spend money on them. Or when you want to spend money on your credit card, ask yourself if you’d purchase this item with cash in your hand? If the answer is no, then you shouldn’t pay with credit card either.
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#2 written by wibrwibr 1 year ago
First, tell yourself that you don’t have a debt problem. You have a SPENDING problem. Admit that everything is your fault and that you’re the reason you got yourself into a financial mess.
After that, just stop spending on anything except necessary items. Pay off debts as fast as you can and live within your means.
It’s as simple as that.
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#3 written by northernbornsoutherner 1 year ago
If you don’t want to consolidate debt but rather want to wean yourself off credit altogether, try this:
1. Gather all your bills and put in order from lowest balance to highest balance.
2. Plan a realistic and do-able budget, for your mortgage/rent, utilites, insurance, food, and transportation expenses.
2. After you figure out what to cut back on, calculate the extra money you would be able to apply to one of the credit card payments.
3. Take the lowest balance card, and pay the extra money in addition to the minimum balance. Do it every month until it’s paid off.
4. When the first card is paid off, apply the extra money, the monthly total you were paying on the first card, plus the minimum balance of the second card. Do that every month until it’s paid off.
5. Repeat step 4 with each card, applying the previous card’s payment in addition to a minimum balance. This “Power Payoff” is a great way to get out of debt quicker than you could imagine.
Good luck to you! -
#6 written by MoneyMonkey 1 year ago
Buy a copy of Dave Ramsey’s book, Total Money Makeover, and read it twice. Follow the steps for having an emergency fund, paying off debt, stop using credit cards, and live within your means. You must develop mature and long-lasting spending and saving habits, and learn to say “no” to yourself, and those in your family who drain the money. Manage your money, instead of letting it manage you. Use an envelope system for paying for things (groceries, clothes, entertainment) and get on a written budget. You can do it! Just wanting to get out of debt is a great first step, so good luck!!
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While I’m sure Dave Ramsay has helped a lot of people, paying off the smallest debt first will not get you out of debt faster, (unless it’s the highest interest rate). Paying the debt with the highest interest rate off first WILL, because every cent you put on the highest interest rate debt will save you the most interest, maximising the effect of your payments, and shortening the length of time it takes to clear the debt. It’s just a simple mathematical truth.
Pay off the debt first. Go to your bank and set up a special ‘savings’ account. Go to your employer and have them put at least 15% of your income into this account on payday, so you have 85% of your income to live on. That should allow you to cover your bills. If 15% isn’t enough to pay well over the minimum on all your repayments, then increase the amount. You will soon get used to living on a smaller income.
On pay day, go to the bank, and transfer that money onto your debts. Pay the minimum on each debt, and extra on the highest interest rate debt. This will save you the most money, even though it won’t necessarily give you the ‘victory’ sensation of clearing a debt.
Putting all your effort into a debt that’s costing you 3% per annum, when you have another costing you 15%, is just ridiculous. If you could put an extra $ 1000 on a choice of a 3% rate debt, or a 15% rate debt, that $ 1000 would save you $ 150 a year, while the smaller rate debt would only save you $ 30. If you want to get out of debt quick, you have to bite the bullet and get smart about it. There is no quick fix.
Once you have cleared the debts, continue having your employer pay the money into the other account. By making it a higher interest account, like a passbook account, you will earn interest on your savings, (an incentive to keep it there) and you will find it harder to access if it’s only available over the counter (passbook). This means that if you are tempted to make a purchase you might not need, you have to walk all the way to the bank. If you can’t be bothered, you’ll save your money.
This money will become your ‘emergency’ money, or your “get Stuffed” money (if you ever need to tell your boss to “Get Stuffed!” you can live on this for a while!) It stands in the place of a credit card, and covers you if you need emergency car repairs, or a new hot water service. You should aim for about 2-3 months worth of wages in this account for that reason. When you start getting more, you can invest it.
To invest it, just go see a financial planner. Often they’re at your bank and you can see them as a free service. They can provide you with information about investment products which can make your money work really hard for you, so you don’t have to. I
f you have a little invested (earning you money) and some emergency savings, you will never need to go into bad debt again. Bad debt is debt used to by pointless consumer goods that depreciate in value, like cars, televisions, and clothes. In fact, you can start thinking about going into GOOD debt (buying something with debt that increases in value, like a house) which can be a great motivator. Just start looking at the Real Estate section of the newspaper and you’ll start to get excited about it.
Best wishes.