Simplifying Debt

Debt, one of the greatest hindrances to an individual’s ability to thrive

financially. For the most part, people are familiar with debt. In fact, almost all people currently have debt or have had it in the past. It is however understood that some debt is unavoidable, for instance: an emergency situation where we find ourselves or a loved one making an unexpected appearance to the local medical facility. In addition to that we also have the debt that makes up our long term investments (e.g. house, college tuition, or vehicle). Whichever way we want to view these circumstances, the important part is that we get a firm grasp on it. Getting rid of debt altogether or at the very least being able to manage debt needs to be the pinnacle of our new beginning, and thus the start of our financial futures.

Here is a little advice for those that don’t know (my 2 cents, if you please…). Your initial action should be taking care of outstanding bills, but easier said than done right? Before you can ever move forward, you have to identify what it was that led you here, and then we will discuss the following steps of getting you out of debt. Do you monitor your daily spending habits? Accountability needs to be a priority and keeping track of such habits. If you stop by the gas station every morning to grab a soda pop or get some coffee, it needs to be written down somewhere. Every single dollar that leaves your pocket has to be accounted. There are apps you can download if you don’t want to carry a notebook around with you (i.e. “Evernote,” or “Mint”).

The next important step is to set a budget and stick to it. The $5 foo foo drink can be saved via buying a coffee maker, soda pops can be purchased in bulk (or cut off completely, it’s not healthy), and the big one is eating out, start doing some home cooking. Go to the grocery store and purchase food to cook later, there are tons of those little videos or “how to” on Facebook if you’re not a home chef. I am not suggesting you go to the extreme and buy ramen noodles, but shopping smart can save you loads of money.

Then there’s the credit cards, the debt that has been chasing you around forever. As soon as you pay one off, there’s two more with those high interest rates, thus taking you right back to the first one. Use those things as little as possible; walk away from buying foolish stuff and put that money somewhere else. Also, know that paying off the minimum balance is only prolonging the torture, and making those companies a lot of money. Dave Ramsey actually has an interesting theory/method on dealing with debt, he calls it the “Debt Snowball.” Essentially you take all your debt from the most expensive to the least expensive and you put any and all additional funds into the smallest bill. Once that is paid in full, use the additional funds from the previous bill and put it into the next smaller one, and so on and so forth.

Another option you can do for your credit cards would be to contact the providers and ask them if they will lower the interest rate. I personally have done this before and they were more than obliged to do it. Keep in mind that canceling your card completely is not always a good idea either (once it is paid in full, that is). Again, this is something that I did and it can actually hurt your credit. You may need the credit history or the length of time (having the credit) to help with your credit score. I recommend you either cut the card up and throw it away or put it in a safe place until the end of time. Also get your credit report, it’s free and it should be viewed at least once a year from all 3 agencies (annualcreditreport.com). If you see something on there that isn’t correct, or if you just want to see if the company will remove your bad history, you can contact them with the information provided on the report.

All of this is necessary so you can start your journey to financial freedom, or just take it as free financial education (however you want to look at it). I had a good buddy who would ask me: “How do you eat an elephant?” His response: “One bite at a time.” So start taking your bites, or nibbles, but moving forward is better than moving backwards or even lying dormant. “Sometimes common sense isn’t so common.” (Voltaire)

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