10 Commandments of Debt Reduction

debt reduction
by sunlightfoundation

10 Commandments of Debt Reduction

In order you to be able to live debt free you should learn and live by the ten commandments of debt reduction. By following them you will assure yourself that you only spend what is needed.

1.) Thou shall know the difference between a need and a want!

- By knowing the difference between the two, you will only spend what you actually need and not spend money on what you want and you really don’t need. This will reduce drastically your monthly expenses. You will have enough money left over to actually save some each month!

2.) Thou shall not use the plastic known as credit cards to buy expensive items!

- If you avoid buying high price items with your credit card, you wont have to pay interests on them. Credit card interests can be high, as high as 30%. Would you want to pay $ 1,300 for a $ 1,000 item? How about realistically, would you want to pay $ 130 for an item that costs $ 100? See why you shouldn’t buy expensive items with your credit card.

3.) Thou shall make a budget and strictly follow it!

- By setting a budget for your self, you will not spend more than what you have budgeted for. Creating a budget allows you to safely spend the amount you have carefully calculated. This will help you stay out of debt and reduce your over all expenses.

4.) Thou shall not desire your neighbors house, luxury car or big screen HDTV!

- If you find yourself desiring them, you will find yourself using your credit card and violating commandment #2. You don’t want to do that, it is bad for debt reduction.

5.) Thou shall save money for emergencies!

- Face it, you never know when an emergency might occur. I am not talking strictly about medical emergencies, I mean emergencies such as lay offs! If you get laid off and don’t have some money saved up, what will you do until you find a new job? See the importance of saving money for emergencies?

6.) Thou shall not spend more money than what you make!

- People make a habit of spending more money than what they make.

This happens typically to people who abuse of commandments #2 and #4. Avoid spending more than what you make. Ideally, you should save 25% of what you make and WISELY spend the rest and save any extra that might be left over.

7.) Thou shall not live beyond your means!

- This means that you shouldn’t impress other people by buying items you know you can’t afford. You want to show high class by buying a mink coat when you’re making $ 8 an hour. You know that is out of your means and you shouldn’t engage in such actions. It is bad for your ultimate goal of debt reduction.

8.) Thou shall not apply for more credit cards!

- The credit cards themselves are not evil. You’re the evil one as you will be tempted in using them and getting into more debt! Just don’t do it.

9.) Thou shall teach your children to manage money wisely!

- You don’t like being in the position you are with high debt and you will much less like seeing your children with high amounts of debt. Teach them from a young age how to manage debt and they will grow up with a better understanding of debt management.

10.) Thou shall never make late payments!

- Making late payments ruins your credit. You take a big hit on your credit score and you should look out for credit all the times.

5 Popular Debt Reduction Strategies

In order you to be able to live debt free you should learn and live by the ten commandments of debt reduction. By following them you will assure yourself that you only spend what is needed.

1.) Thou shall know the difference between a need and a want!

- By knowing the difference between the two, you will only spend what you actually need and not spend money on what you want and you really don’t need. This will reduce drastically your monthly expenses. You will have enough money left over to actually save some each month!

2.) Thou shall not use the plastic known as credit cards to buy expensive items!

- If you avoid buying high price items with your credit card, you wont have to pay interests on them. Credit card interests can be high, as high as 30%. Would you want to pay $ 1,300 for a $ 1,000 item? How about realistically, would you want to pay $ 130 for an item that costs $ 100? See why you shouldn’t buy expensive items with your credit card.

3.) Thou shall make a budget and strictly follow it!

- By setting a budget for your self, you will not spend more than what you have budgeted for. Creating a budget allows you to safely spend the amount you have carefully calculated. This will help you stay out of debt and reduce your over all expenses.

4.) Thou shall not desire your neighbors house, luxury car or big screen HDTV!

- If you find yourself desiring them, you will find yourself using your credit card and violating commandment #2. You don’t want to do that, it is bad for debt reduction.

5.) Thou shall save money for emergencies!

- Face it, you never know when an emergency might occur. I am not talking strictly about medical emergencies, I mean emergencies such as lay offs! If you get laid off and don’t have some money saved up, what will you do until you find a new job? See the importance of saving money for emergencies?

6.) Thou shall not spend more money than what you make!

- People make a habit of spending more money than what they make.

This happens typically to people who abuse of commandments #2 and #4. Avoid spending more than what you make. Ideally, you should save 25% of what you make and WISELY spend the rest and save any extra that might be left over.

7.) Thou shall not live beyond your means!

- This means that you shouldn’t impress other people by buying items you know you can’t afford. You want to show high class by buying a mink coat when you’re making $ 8 an hour. You know that is out of your means and you shouldn’t engage in such actions. It is bad for your ultimate goal of debt reduction.

8.) Thou shall not apply for more credit cards!

- The credit cards themselves are not evil. You’re the evil one as you will be tempted in using them and getting into more debt! Just don’t do it.

9.) Thou shall teach your children to manage money wisely!

- You don’t like being in the position you are with high debt and you will much less like seeing your children with high amounts of debt. Teach them from a young age how to manage debt and they will grow up with a better understanding of debt management.

10.) Thou shall never make late payments!

- Making late payments ruins your credit. You take a big hit on your credit score and you should look out for credit all the times.

Debt reduction has become a top concern for many Americans. The fallout from the economic recession has left millions of people facing overwhelming financial crisis. The unprecedented wake-up call has forced consumers to drastically reduce spending and reassess personal finance strategies.

To successfully achieve debt reduction, consumers should first determine which strategy best suits their needs. The type of debt help required depends on the type of debts owed. Most debtors can benefit from using one strategy, but those with staggering debt loads may need to incorporate two or more tactics to achieve their goals.

Popular ways to reduce debt include debt settlement, debt consolidation, credit counseling, budgeting, and bankruptcy. Each requires debtors to adhere to certain protocol and commit to reducing expenses until debts are eradicated.

Debt settlement is best suited for debtors carrying high levels of debt. Debt settlers negotiate with creditors to reduce outstanding balances or interest rates. Many debt settlement companies claim they can slash debt by as much as 60-percent. However, consumers must pay monthly maintenance fees which often amount to nearly the same amount as the reduction.

Debtors should calculate the true costs of services before entering into a contract with debt settlers. Debtors may want to attempt creditor negotiation on their own. Creditors are sometimes willing to accept less than the full balance if debtors offer a lump sum cash payment and reasonable payment plan.

Deb consolidation can be a good choice for individuals who own real estate. Using this debt reduction strategy, property owners take out a home equity loan using their property as collateral.

Banks assess a substantially lower rate of interest on real estate loans which can save borrowers a considerable amount of money. However, using a home equity loan to pay off credit cards can place real estate at risk for foreclosure.

Borrowers must have sufficient equity and credit rating to qualify for a home equity loan. Debtors should contact creditors to negotiate a reduced payoff before applying for a home equity loan. If creditors are willing to accept less, borrowers can borrow less money and pay less for interest.

Nearly everyone can benefit from credit counseling, but this debt reduction option is particularly helpful to borrowers drowning in debt. Credit counselors can help debtors develop a get-out-of-debt plan and might be able to assist with creditor negotiations.

Individuals considering personal bankruptcy should obtain credit counseling through a U.S. Trustee approved credit counseling agency. New bankruptcy laws require debtors to obtain credit counseling before receiving protection through the court. Oftentimes, credit counseling can help debtors avoid bankruptcy altogether.

The U.S. Trustee program is governed by the Department of Justice. Many of the approved credit counselors are non-profit organizations offering low- or no-cost services.

Bankruptcy should be used as a last resort as it is expensive and causes serious harm to credit scores. Bankruptcy is reflected on credit reports for 7 years and can prevent borrowers from obtaining credit for several years.

The most affordable option for obtaining debt relief is budgeting. The concept is simple; spend less than is earned. To succeed with budgeting, debtors must commit to sticking to their budget regardless of temptations.

Individuals unfamiliar with budgeting should spend time conducting research. The Internet and public libraries are great sources for learning how to create a household budget. Two trusted sources for obtaining accurate personal finance information are Suze Orman and Dave Ramsey. Both professionals have published books and offer a wealth of information via their websites.

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